Investment in Kansas City Southern

12 Months Ended

Dec. 31, 2024

Equity Method Investments and Joint Ventures [Abstract]

On April 14, 2023, the Company assumed control of KCS and derecognized its equity method investment in KCS (see Note 10). 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 10), 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 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 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 were carried at cost subject to an assessment for impairment.

For the period 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 an 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 was net of the Company's associated purchase accounting basis differences and tax.

The following table presents 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
Total revenues	$	1,351	$	4,390
Total operating expenses	888		2,794
Operating income	463		1,596
Other(2)	83		(119)
Income before income taxes	380		1,715
Net income	$	280	$	1,287

(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 and for the year ended December 31, 2022 of $1.00 USD = $1.30 CAD.

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