NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Transaction Costs
We defer transaction costs associated with issuing long-term debt and
direct costs we pay to lenders to obtain revolving credit facilities, and
amortize them using the effective interest method over the life of the
related instrument.
Provisions
We record a provision when a past event creates a legal or constructive
obligation that can be reasonably estimated and is likely to result in an
outflow of economic resources. We recognize a provision even when
the timing or amount of the obligation may be uncertain.
We make significant estimates when measuring a provision for a
present obligation, basing the provision on the amount we estimate will
be required to settle it, using the most reliable evidence available at the
reporting date and including the risks and uncertainties associated with
the obligations. We then discount our expected future cash flows to the
date of the consolidated statements of financial position at a pre-tax
rate that reflects current market assessments of the time value of
money and the risks specific to the liability.
Decommissioning and Restoration Costs
We use network and other assets on leased premises in some of our
business activities. We expect to exit these premises in the future, so we
make provisions for the costs associated with decommissioning the
assets and restoring the locations to their original standards when we
have a legal or constructive obligation to do so. We calculate these
costs based on a current estimate of the costs that will be incurred,
project those costs into the future based on management’s best
estimates of future trends in prices, inflation and other factors, and
discount them to their present value. We revise our forecasts when
business conditions or technological requirements change.
When we record a decommissioning liability, we record a
corresponding asset in property, plant and equipment and depreciate
the asset based on its useful life following our depreciation policies for
property, plant and equipment. We record the accretion of the liability
as a charge to finance costs in the consolidated statements of income.
Restructuring
We make provisions for restructuring when we have approved a
detailed and formal restructuring plan, and either the restructuring has
started or management has announced the plan’s main features to the
employees affected by it.
Onerous Contracts
We make provisions for onerous contracts when the unavoidable costs
of meeting our obligation under the contract exceed the benefits we
expect to realize from it. We measure these provisions at the present
value of the expected cost of terminating the contract or the expected
cost of continuing with the contract (whichever is lower). We recognize
any impairment loss on the assets associated with the contract before
we make the provision.
See note 17 for a breakdown of our provisions.
Employee Benefits
Pension Benefits
We offer contributory and non-contributory defined benefit pension
plans that provide employees with a lifetime monthly pension on
retirement.
We separately calculate our net obligation for each defined benefit plan
by estimating the amount of future benefits that employees have
earned in return for their service in the current and prior years, and
discounting those benefits to determine their present value.
We accrue our pension plan obligations as employees provide the
services necessary to earn the pension. We use a discount rate based on
market yields on high quality corporate bonds at the measurement date
to calculate the accrued pension benefit obligation. Remeasurements of
the accrued pension benefit obligation are determined at the end of the
year, and include actuarial gains and losses, return on plan assets and
any change in the effect of the asset ceiling. These are recognized in
other comprehensive income and retained earnings.
The cost of pensions is actuarially determined and takes into account