BRITISH COLUMBIA HYDRO AND POWER AUTHORITY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016 AND 2015
British Columbia Hydro and Power Authority
reclassified to net income in the periods in which net income is affected by the variability in the
cash flows of the hedged item. When hedge accounting is discontinued the cumulative gain or loss
previously recognized in accumulated other comprehensive income remains there until the
forecasted transaction occurs. When the hedged item is a non-financial asset or liability, the amount
recognized in accumulated other comprehensive income is transferred to the carrying amount of the
asset or liability when it is recognized. In other cases the amount recognized in accumulated other
comprehensive income is transferred to net income in the same period that the hedged item affects
net income.
Hedge accounting is discontinued prospectively when the derivative no longer qualifies as an
effective hedge, the hedging relationship is discontinued, or the derivative is terminated or sold, or
upon the sale or early termination of the hedged item.
(l) Investments Held in Sinking Funds
Investments held in sinking funds are held as individual portfolios and are classified as held to
maturity. Securities included in an individual portfolio are recorded at cost, adjusted by amortization
of any discounts or premiums arising on purchase, on a yield basis over the estimated term to
settlement of the security. Realized gains and losses are included in sinking fund income.
(m) Deferred Revenue – Skagit River Agreement
Deferred revenue consists principally of amounts received under the agreement relating to the Skagit
River, Ross Lake and the Seven Mile Reservoir on the Pend d’Oreille River (collectively, the Skagit
River Agreement).
Under the Skagit River Agreement, the Company has committed to deliver a predetermined amount of
electricity each year to the City of Seattle for an 80 year period ending in fiscal 2066 in return for
annual payments of approximately US$22 million for a 35 year period ending in 2021 and
US$100,000 (adjusted for inflation) for the remaining 45 year period ending in 2066. The amounts
received under the agreement are deferred and included in income on an annuity basis over the
electricity delivery period ending in fiscal 2066.
(n) Contributions in Aid of Construction
Contributions in aid of construction are amounts paid by certain customers toward the cost of property,
plant and equipment required for the extension of services to supply electricity. These amounts are
recognized into revenue over the term of the agreement with the customer or over the expected useful
life of the related assets, if the associated contracts do not have a finite period over which service is
provided.
(o) Post-Employment Benefits
The cost of pensions and other post-employment benefits earned by employees is actuarially
determined using the projected accrued benefit method prorated on service and management’s best
estimate of mortality, salary escalation, retirement ages of employees and expected health care costs.
The net interest for the period is determined by applying the same market discount rate used to
measure the defined benefit obligation at the beginning of the annual period to the net defined benefit
asset or liability at the beginning of the annual period, taking into account any changes in the net