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
obtains the advice of its external counsel in determining the likely outcome and estimating the
expected costs associated with lawsuits. Further information regarding lawsuits in progress, that have
not been recognized, is disclosed in Note 21, Commitments and Contingencies.
(q) Leases
Embedded Leases
The Company may enter into an arrangement that does not take the legal form of a lease but conveys a
right to use an asset in return for a payment or series of payments. Arrangements in which a party
conveys a right to the Company to use an asset may in substance be, or contain, a lease that should be
accounted for as either a finance or operating lease. Determining whether an arrangement is, or
contains, a lease requires an assessment of whether fulfilment of the arrangement is dependent on the
use of a specific asset; and whether the arrangement conveys a right to use the asset. The right to use
an asset is conveyed if the right to operate or control physical access to the underlying asset is
provided or if the Company consumes substantially all of the output of the asset and the price paid for
the output is neither contractually fixed per unit of output nor equal to the current market price.
Finance Leases
Leases where substantially all of the benefits and risk of ownership rest with the Company are
accounted for as finance leases. Finance leases are recognized as assets and liabilities at the lower of
the fair value of the asset and the present value of the minimum lease payments at the date of
acquisition. Finance costs represent the difference between the total leasing commitments and the fair
value of the assets acquired. Finance costs are charged to net income over the term of the lease at
interest rates applicable to the lease on the remaining balance of the obligations. Assets under finance
leases are depreciated on the same basis as property, plant and equipment or over the term of the
relevant lease, whichever is shorter.
Operating Leases
Leases where substantially all of the benefits and risk of ownership remain with the lessor are
accounted for as operating leases. Rental payments under operating leases are expensed to net income
on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an
incentive to enter into an operating lease are recognized as an integral part of the total lease expense
and are recorded on a straight-line basis over the term of the lease.
(r) Taxes
The Company pays local government taxes and grants in lieu to municipalities and regional districts.
As a Crown corporation, the Company is exempt from Canadian federal and provincial income taxes.
(s) Jointly Controlled Operations
The Company has joint ownership and control over certain assets with third parties. A jointly
controlled operation exists when there is a joint ownership and control of one or more assets to obtain
benefits for the joint operators. The parties that have joint control of the arrangement have rights to the
assets, and obligations for the liabilities, related to the arrangement. Each joint operator takes a share
of the output from the assets for its own exclusive use. These consolidated financial statements include
the Company’s share of the jointly controlled assets. The Company also records its share of any