Telus 2010 Annual Report Download - page 80

76 . TELUS 2010 annual report
The Company is supporting Bell Canada’s request to the CRTC to
review and vary the determination of interest, since consumer group
court appeals and the extended Commission review process for
communities proposed by the ILECs for broadband expansion con-
tributed to the delay in the CRTC’s decision on the disposition of
the deferral account balance.
The CRTC directed TELUS to rebate approximately $54 million
to residential customers in non-high cost serving areas (urban areas),
allowing the Company flexibility in the method of rebate, including
promotional offerings for related or unrelated products or services
of greater value than a cash rebate – such promotions to be con-
cluded by the end of February 2011. The CRTC also approved that
the remaining deferral account balance of $111 million be used to:
(i) expand broadband services to 159 rural and remote communities
in Alberta, British Columbia and Eastern Quebec over a period
ending in 2014; and (ii) improve accessibility of telecommunications
services for individuals with disabilities.
.The balance of the deferral account was $162 million at December 31,
2010. The critical accounting estimates for extinguishing the balance
of the deferral account that are uncertain at the time of making the
estimate include determining over what period of time qualifying
deferred amounts will be recognized in the Company’s Consolidated
statements of income and comprehensive income. The balance of
the deferral account not rebated to customers will be used to build
and provide broadband services in remote and rural areas, as well as
for accessibility initiatives. Such amounts will be recognized in revenues
over a period extending beyond 2014, but will not be accompanied
by corresponding cash inflows. Rebates refunded to customers from
the deferral account were expected to be completed by the end of
the first quarter of 2011 and do not impact TELUS’ Net income.
.This accounting estimate is in respect of an item within the Advance
billings and customer deposits and Other long-term liabilities line items
on TELUS’ Consolidated statements of financial position. The total
deferral account balance comprised less than 1% of Total liabilities and
owners’ equity at December 31, 2010 and 2009. Based on unaudited
pro forma IFRS-IASB financial information, this accounting estimate
resides within the Advance billings and customer deposits and non-
current Provisions line items and comprises less than 1% of Total
liabilities and owners’ equity at December 31 and January 1, 2010.
Employee defined benefit pension plans
Certain actuarial and economic assumptions used in
determining defined benefit pension costs, accrued pension
benefit obligations and pension plan assets
.The Company reviews industry practices, trends, economic
conditions and data provided by actuaries when developing
assumptions used in the determination of defined benefit pension
costs and accrued pension benefit obligations. Pension plan
assets are generally valued using market prices, however, some
assets are valued using market estimates when market prices
are not readily available. Defined benefit pension costs are also
affected by the quantitative methods used to determine estimated
returns on pension plan assets. Actuarial support is obtained
for interpolations of experience gains and losses that affect the
defined benefit pension costs and accrued benefit obligations.
The timing of the reversal of the temporary differences is estimated
and the tax rate substantively enacted for the periods of reversal
is applied to the temporary differences. The carrying amounts of
assets and liabilities are based upon the amounts recorded in the
financial statements and are therefore subject to accounting esti-
mates that are inherent in those balances. The tax basis of assets
and liabilities, as well as the amount of undeducted tax losses,
are based upon the assessment of tax positions and measurement
of tax benefits as noted above. Assumptions as to the timing of
reversal of temporary differences include expectations about the
future results of operations and cash flows. The composition of
income tax liabilities is reasonably likely to change from period to
period because of changes in the estimation of these significant
uncertainties.
.This accounting estimate is in respect of material asset and
liability line items on the Company’s Consolidated statements of
financial position comprising less than 1% of Total assets and
approximately 9% of Total liabilities and owners’ equity at
December 31, 2010 and 2009. Based on unaudited pro forma
IFRS-IASB financial information, this accounting estimate is in
respect of material asset and liability line items comprising less than
1% of Total assets and approximately 9% of Total liabilities and
owners’ equity at December 31 and January 1, 2010. If the future
were to adversely differ from management’s best estimate of
the likelihood of tax positions being sustained, the amount of tax
benefit that is greater than 50% likely of being realized, the future
results of operations, the timing of reversal of deductible temporary
differences and taxable temporary differences, and the tax rates
applicable to future years, the Company could experience material
future income tax adjustments. Such future income tax adjustments
could result in an acceleration of cash outflows at an earlier time
than might otherwise be expected.
Advance billings and customer deposits /
Other long-term liabilities (Provisions under IFRS-IASB)
The accruals for CRTC deferral account liabilities
.The deferral account concept was introduced by the CRTC in 2002,
requiring the Company to maintain rates for residential basic services
provided in non-high cost serving areas, rather than lower the rates,
and defer the income statement recognition of a portion of the monies
received in a deferral account, from June 2002 to May 2006. The use
of deferral account funds was restricted and subject to a number of
court appeals including appeals to the Supreme Court of Canada by
consumer interest groups, Bell Canada and TELUS. The Supreme
Court dismissed all appeals in September 2009.
On August 31, 2010, in Telecom Decision 2010-639, the CRTC
finalized the deferral account balance for TELUS and issued its
determination on the use of the Company’s deferral account funds.
The CRTC also determined that the deferral accounts should have
continued to accrue interest in 2010, whereas TELUS had accrued
interest to May 31, 2006. This resulted in TELUS recording an addi-
tional $15 million charge in Financing costs in the third quarter of 2010.