Business Acquisition

3 Months Ended

Mar. 31, 2022

Business Combinations [Abstract]

Business Acquisition

Business acquisition

Kansas City Southern

The Company accounts for its investment in KCS using the equity method of accounting while the United States Surface Transportation Board's ("STB") considers the Company's application to control KCS. The STB review of CP's proposed control of KCS while KCS is in the voting trust is expected to be completed in the first quarter of 2023. The investment in KCS of $41,626 million at March 31, 2022 includes $198 million of equity earnings of KCS for the first quarter of 2022, offset by a dividend received of $334 million on January 27, 2022. Included within the $198 million of equity earnings of KCS in the first quarter of 2022 is $40 million amortization (net of tax) of the approximately $30 billion basis difference, representing the difference in value between the consideration paid to acquire KCS and the underlying carrying value of the net assets of KCS as at December 14, 2021, immediately prior to the acquisition by CP. The basis difference is related to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt, and is amortized over the related assets' remaining useful lives, and the remaining terms to maturity of the debt instruments.

During the three months ended March 31, 2022, the Company incurred $20 million in acquisition-related costs, recorded within "Purchased services and other" in the Company's Interim Consolidated Statements of Income. Acquisition-related costs of $13 million incurred by KCS during the three months ended March 31, 2022 are included within "Equity earnings of Kansas City Southern" in the Company's Interim Consolidated Statements of Income.

During the three months ended March 31, 2021, the Company incurred $36 million in acquisition-related costs, of which $33 million was recorded within "Purchased services and other" and $3 million was recorded within "Other income" including the amortization of financing fees associated with new credit facilities. Total financing fees paid for a bridge facility associated with the KCS acquisition during the three months ended March 31, 2021 were $33 million, presented under Cash used in financing activities in the Company's Interim Consolidated Statements of Cash Flows.