Investment in Kansas City Southern

12 Months Ended

Dec. 31, 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. The carrying amount of the Company's equity investment in KCS reported in the Consolidated Balance Sheets prior to derecognition reflected the total of the consideration paid to acquire KCS (see Note 11), the offsetting asset recorded on recognition of a deferred tax liability computed on an outside basis (see Note 6), the subsequent recognition of equity income recorded in "Equity (earnings) loss of Kansas City Southern" and "Other comprehensive Income (loss) from equity investees", the receipt of dividends from KCS, and foreign currency translation based on the period-end exchange rate.

The Company estimated approximately $30.0 billion of basis differences between the consideration paid to acquire KCS and the underlying carrying value of the net assets of KCS as at December 14, 2021. While the Company accounted for its investment in KCS using the equity method of accounting from December 14, 2021 until April 13, 2023, the basis difference was amortized and recorded as a reduction of the Company's equity earnings of KCS. The basis differences that related to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt were amortized over the related assets' remaining useful lives, and the remaining terms to maturity of the debt instruments. The remainder of the basis differences, relating to non-depreciable property, plant and equipment, intangible assets with indefinite lives, and equity method goodwill, were not amortized and carried at cost subject to an assessment for impairment.

For the period from January 1 to April 13, 2023, the Company recognized $230 million of equity earnings of KCS (year ended December 31, 2022 - $1,074 million), and received dividends from KCS of $300 million (year ended December 31, 2022 - $1,157 million). The foreign currency translation of the investment in KCS totalled a FX loss of $578 million (year ended December 31, 2022 - an FX gain of $2,891 million). Included within the equity earnings of KCS recognized for the period from January 1 to April 13, 2023 was amortization (net of tax) of basis differences of $48 million (year ended December 31, 2022 - $163 million). Equity earnings of KCS recognized for the year ended December 31, 2022 also included KCS's gain on unwinding of interest rate hedges of $212 million, which is net of the Company's associated purchase accounting basis differences and tax.

The following tables present summarized financial information for KCS, on its historical cost basis:

Consolidated Statements of Income


(in millions of Canadian dollars)(1)	For the period January 1 to April 13, 2023		For the year ended December 31, 2022(3)		For the period December 14 to December 31, 2021
Total revenues	$	1,351	$	4,390	$	178
Total operating expenses	888		2,794		287
Operating income (loss)	463		1,596		(109)
Less: Other(2)	83		(119)		12
Income (loss) before income taxes	380		1,715		(121)
Net income (loss)	$	280	$	1,287	$	(106)

(1) Amounts translated at the average FX rate for the period from January 1 to April 13, 2023 of $1.00 USD = $1.35 CAD, for the year ended December 31, 2022 of $1.00 USD = $1.30 CAD, and for the period from December 14 to 31, 2021 of $1.00 USD = $1.28 CAD.

(2) Includes Equity in net earnings of KCS's affiliates, Interest expense, FX loss, Gain on settlement of treasury lock agreements, and Other income, net.

(3) Certain 2022 comparative figures have been revised to conform with current year's presentation regarding translation of KCS's historical results from U.S. dollars to Canadian dollars.

Consolidated Balance Sheet


(in millions of Canadian dollars)(1)	As at December 31, 2022
Assets
Current assets	$	1,441
Properties	12,680
Other non-current assets	340

Liabilities
Current liabilities	$	1,748
Long-term debt	4,232
Other non-current liabilities	1,987
Non-controlling interest	448

(1) Amounts translated at the December 31, 2022 year-end at FX rate of $1.00 USD = $1.35 CAD.