Telus 2010 Annual Report Download - page 170

166 . TELUS 2010 annual report
Common Share and Non-Voting Share equity
Accumulated
other
Common Non-Voting Contributed Retained comprehensive
As at December 31, 2009 (millions) Shares Shares surplus earnings income (loss) To t a l
Under Canadian GAAP $ß2,216 $ß3,070 $ß181 $ß2,159 $ß (72) $ß7,554
Adjustments:
Merger of BC TELECOM and TELUS (a), (c), (d) 1,733 883 – (1,508) (829) 279
Share-based compensation (b) 10 53 31 (94) – –
Acquisition of Clearnet Communications Inc.
Goodwill (d) – 131 – (8) – 123
Convertible debentures – (3) (1) 4 – –
Under U.S. GAAP $ß3,959 $ß4,134 $ß211 $ 553 $ß(901) $ß7,956
Share-based compensation: Both Canadian GAAP and U.S. GAAP
require the use of the fair value method of accounting for share-based
compensation for awards made after 2001 and 1994, respectively.
On a prospective basis, commencing January 1, 2006, there is no
longer a difference between Canadian GAAP and U.S. GAAP share-
based compensation expense recognized in the results of operations
arising from current share-based compensation awards accounted
for as equity instruments. As share option awards granted subsequent
to 1994 and prior to 2002 are captured by U.S. GAAP, but are not
captured by Canadian GAAP, differences in owners’ equity accounts
arising from these awards will continue.
Substantially all of the Company’s outstanding share option awards
that were granted prior to January 1, 2005, have a net-cash settlement
feature; the optionee has the choice of exercising the net-cash settlement
feature. The affected outstanding share option awards largely take on
the characteristics of liability instruments rather than equity instruments;
the minimum expense recognized for the affected share option awards
will be their grant-date fair values. Under U.S. GAAP, the grant-date
fair values of affected outstanding share option awards granted subse-
quent to 1994 affected the transitional amount whereas Canadian
GAAP only considered grant-date fair values for affected outstanding
share option awards granted subsequent to 2001; for the year ended
December 31, 2010, this resulted in the U.S. GAAP expense being greater
than the Canadian GAAP expense by $2 million (2009 – $1 million).
(c) Operating expenses –
Amortization of intangible assets
As TELUS’ intangible assets on acquisition have been recorded at their
fair value (see (a)), amortization of such assets, other than for those with
indefinite lives, needs to be included under U.S. GAAP; consistent with
prior years, amortization is calculated using the straight-line method.
(a) Merger of BC TELECOM and TELUS
The business combination between BC TELECOM and TELUS
Corporation (renamed TELUS Holdings Inc., which was wound up
June 1, 2001) was accounted for using the pooling of interests
method under Canadian GAAP. Under Canadian GAAP, the application
of the pooling of interests method of accounting for the merger of
BC TELECOM and TELUS Holdings Inc. resulted in a restatement of prior
periods as if the two companies had always been combined. Under U.S.
GAAP, the merger is accounted for using the purchase method.
Use of the purchase method resulted in TELUS (TELUS Holdings Inc.)
being acquired by BC TELECOM for $4,662 million (including merger
related costs of $52 million) effective January 31, 1999.
(b) Operating expenses – Operations
Future employee benefits: Under U.S. GAAP, TELUS’ future employee
benefit assets and obligations have been recorded at their fair values
on acquisition. Accounting for future employee benefits under Canadian
GAAP changed to become more consistent with U.S. GAAP effective
January 1, 2000. Canadian GAAP provides that the transitional balances
can be accounted for prospectively. Therefore, to conform to U.S. GAAP,
the amortization of the transitional amount needs to be removed from
the future employee benefit expense.
Unlike Canadian GAAP, U.S. GAAP requires the full recognition
of obligations associated with employee future benefit plans. Under
U.S. GAAP, the funded states of the Company’s plans are shown gross
on the consolidated statements of financial position and the difference
between the net funded plan states and the net accrued benefit assets
or liabilities are included as a component of accumulated other com-
prehensive income.
The incremental amounts recorded as intangible assets arising from the TELUS acquisition above are as follows:
Accumulated Net book value
As at December 31 (millions) Cost amortization 2010 2009
Intangible assets subject to amortization
Subscribers – wireline $ß1,950 $ 543 $ß1,407 $ß1,457
Intangible assets with indefinite lives
Spectrum licences(1) 1,833 1,833 – –
$ß3,783 $ß2,376 $ß1,407 $ß1,457
(1) Accumulated amortization of spectrum licences is amortization recorded prior to 2002 and the transitional impairment amount.