Investment in KCS

9 Months Ended

Sep. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

On April 14, 2023 the Company assumed control of KCS and subsequently derecognized its previously held equity method investment in KCS of $44,402 million as of April 13, 2023 (December 31, 2022 - $45,091 million).

For the period January 1 to April 13, 2023, the Company recognized $230 million of equity earnings of KCS (nine months ended September 30, 2022 - $627 million), and received dividends from KCS for the period January 1 to April 13, 2023 of $300 million (nine months ended September 30, 2022 - $593 million). The foreign currency translation of the investment in KCS for the period January 1 to April 13, 2023, totaled a loss of $578 million (nine months ended September 30, 2022 - gain of $3,445 million). Included within the equity earnings of KCS recognized for the period January 1 to April 13, 2023 was amortization (net of tax) of basis differences of $48 million (nine months ended September 30, 2022 - $121 million). These basis differences relate to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt, and are amortized over the related assets' remaining useful lives and the remaining terms to maturity of the debt instruments.

The following table presents summarized financial information for KCS, on its historical cost basis:

Statement of Income


(in millions of Canadian dollars)(1)	For the period January 1 to April 13, 2023		For the three months ended September 30, 2022		For the nine months ended September 30, 2022
Total revenues	$	1,351	$	1,152	$	3,216
Total operating expenses	888		728		2,024
Operating income	463		424		1,192
Less: Other(2)	83		67		164
Income before income taxes	380		357		1,028
Net income	$	280	$	263	$	748

(1) Amounts translated at the average FX rate for the three months ended September 30, 2022 of $1.00 USD = $1.30 CAD. Also, for the period January 1 to April 13, 2023 and nine months ended September 30, 2022 of $1.00 USD= $1.35 CAD and $1.00 USD = $1.28 CAD, respectively.

(2) Includes Equity in net earnings of KCS's affiliates, Interest expense, FX loss, and Other income, net.