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Notes

  1. Cameco Corporation
  2. Significant accounting policies
  3. Accounting standards
  4. Determination of fair values
  5. Use of estimates and judgments
  6. Acquisitions
  7. Accounts receivable
  8. Inventories
  9. Property, plant and equipment
  10. Goodwill and intangible assets
  11. Long-term receivables, investments and other
  12. Equity-accounted investees
  13. Accounts payable and accrued liabilities
  14. Short-term debt
  15. Long-term debt
  16. Other liabilities
  17. Provisions
  1. Share capital
  2. Employee benefit expense
  3. Finance costs
  4. Other expense
  5. Income taxes
  6. Per share amounts
  7. Statements of cash flows
  8. Share-based compensation plans
  9. Pension and other post-retirement benefits
  10. Financial instruments and related risk management
  11. Capital management
  12. Segmented information
  13. Group entities
  14. Joint operations
  15. Related parties
  16. Subsequent event

10. Goodwill and intangible assets

  • A. Reconciliation of carrying amount

      Goodwill Contracts Intellectual property Patents Total
    Cost
    Beginning of year $ – $ – $118,819 $8,697  $127,516 
    Additions [note 6] 87,460 86,627 – –  174,087 
    Effect of movements in exchange rates 6,538 6,475 – 601  13,614 
    End of year 93,998 93,102 118,819 9,298  315,217 
    Accumulated amortization
    Beginning of year – – 33,694 721  34,415 
    Amortization charge – 79,609 3,246 494  83,349 
    Effect of movements in exchange rates – 3,351 – 71  3,422 
    End of year – 82,960 36,940 1,286  121,186 
    Net book value at December 31, 2013 $93,998 $10,142 $81,879 $8,012  $194,031 
     
    Intellectual property Patents Total
    Cost
    Beginning of year $118,819 $8,890  $127,709 
    Effect of movements in exchange rates – (193) (193)
    End of year 118,819 8,697  127,516 
    Accumulated amortization
    Beginning of year 29,735 246  29,981 
    Amortization charge 3,959 484  4,443 
    Effect of movements in exchange rates – (9) (9)
    End of year 33,694 721  34,415 
    Net book value at December 31, 2012 $85,125 $7,976  $93,101 

  • B. Amortization

    The intangible asset values relate to intellectual property acquired with Cameco Fuel Manufacturing (CFM), patents acquired with UFP Investments LLC (UFP) and purchase and sale contracts acquired with NUKEM. The CFM intellectual property is being amortized on a unit-of-production basis over its remaining life. Amortization is allocated to the cost of inventory and is recognized in cost of products and services sold as inventory is sold. The patents acquired with UFP are being amortized to cost of products and services sold on a straight-line basis over their remaining life which expires in July 2029. The NUKEM purchase and sale contracts will be amortized to earnings over the remaining terms of the underlying contracts, which extend to 2022. Amortization of the purchase contracts is allocated to the cost of inventory and is included in cost of sales as inventory is sold. Sale contracts are amortized to revenue. The approximate amount of pre-tax earnings (in USD) relating to the amortization of the fair value allocated to the NUKEM contracts is as follows:

    2014  2015 2016 2017 2018 2019 2020 2021 2022 Total
    $(694) 1,933 2,897 994 1,091 975 871 777 692 $9,536

  • C. Impairment test

    For the purpose of impairment testing, goodwill is attributable to NUKEM, which is considered a CGU.

    The recoverable amount of NUKEM was estimated based on a value in use calculation, which involved discounting the future cash flows expected to be generated from the continuing use of the CGU. The estimated recoverable amount of NUKEM exceeded its carrying amount by approximately $70,500,000 (US) and therefore no impairment loss was recognized.

    Five years of cash flows were included in the discounted cash flow model. Any cash flows expected to be generated beyond the initial five-year period were extrapolated using a terminal value growth rate. The projected cash flows included in the calculation were based upon NUKEM’s approved financial forecasts and strategic plan, which incorporate NUKEM’s current contract portfolio as well as management’s expectations regarding future business activity. The key assumptions used in the estimation of the value in use were as follows:

      2013
    Discount rate (pre-tax) 11.6%
    Discount rate (post-tax) 8.8%
    Terminal value growth rate 2.5%

    The discount rate was determined based on NUKEM’s internal weighted average cost of capital, adjusted for the marginal return a market participant would expect to earn on an investment in the entity. It represents a nominal, post-tax figure. The terminal value growth rate was determined based on management’s expected average annual long-term growth in the uranium industry. The rate represents a nominal figure, and it is consistent with forecast economic growth rates observed in the market.

    Other key assumptions include uranium price forecasts and perpetual cash flows. Uranium prices applied in the calculation were based on approved internal price forecasts, which reflect management’s experience and industry expertise. These prices are consistent with expected long-term prices observed in the market. Perpetual cash flows have been determined based on management’s expectation of future business activity.

    Cameco has validated the results of the value in use calculation by performing sensitivity tests on its key assumptions. Holding all other variable constant, the decreases in recoverable amount created by marginal changes in each of the key assumptions are as follows:

      Change in assumption Amount of decrease
    Discount rate 1% increase $19,344
    Terminal value growth rate 1% decrease 12,847
    Uranium prices $1/lb decrease 4,220
    Perpetual annual cash flow $1 Million (US) decrease 11,331

    As a result of these tests, the Company believes that any reasonably possible changes in the key assumptions would not result in NUKEM’s carrying amount exceeding its recoverable amount.