Future Accounting Policy Changes
IFRS 9, Financial Instruments, replaces the multiple classification and measurement models in IAS 39, Financial Instruments: Recognition and Measurement, with a single model that has only two classification categories: amortized cost and fair value. This standard is in effect for accounting periods beginning on or after January 1, 2015, with earlier adoption permitted.
IAS 19, Employee Benefits, was revised to eliminate the option to defer recognition of gains and losses, known as the "corridor method", and to enhance disclosure requirements for defined benefit plans. As the Company did not choose the corridor method in accounting for its defined benefit plans, there is no impact on its financial statements as a result of the elimination of this option.
Application of this standard will also impact the calculation of finance costs, resulting in an increase to Production expense in the Statement of Earnings, which will be fully offset by an increase in Defined benefit plan actuarial gains (losses) in the Statement of Comprehensive Income. Prior to this standard, the impact of defined benefit plans on Net earnings included an interest cost on the obligation using the discount rate (based on current bond yields), and a credit on the plan assets using the expected rate of return (based on long term expected bond and equity returns). Under the new standard, the credit on plan assets will no longer recognize the equity risk premium and will be based on the discount rate only.
This standard is in effect for accounting periods beginning on or after January 1, 2013.
As at the reporting date, no assessment has been made of the impact of these standards on the Company's financial statements other than the effect of the elimination of the corridor method.
The standard-setting bodies that set IFRS have significant ongoing projects that could impact the IFRS accounting policies selected. Specifically, it is anticipated that there will be additional new or revised IFRS or IFRIC standards in relation to financial instruments and leases currently on the International Accounting Standards Board agenda.
ACQUISITION OF RAYONIER'S WOOD PRODUCTS BUSINESS
On January 21, 2013, the Company reached an agreement to acquire the assets of Rayonier Inc.'s Wood Products Business ("Rayonier Acquisition") for US$73.9 million plus working capital. The transaction is scheduled to close on March 1, 2013.
Rayonier's Wood Products Business, headquartered in Baxley, Georgia, consists of three sawmills located in Baxley, Swainsboro and Eatonton, Georgia, with a combined annual capacity of 360 million board feet of southern pine dimension lumber. The acquisition is consistent with Interfor's strategy of adding capacity in attract ive regional markets and will bring Interfor's annual capacity to more than 2 billion board feet.
The acquisition will be financed from Interfor's existing credit lines and is expected to be accretive from the outset.
DEBT FACILITY MODIFICATIONS
On January 24, 2013, the Company obtained a financing commitment from its lenders to increase and extend its syndicated credit facilties. The Revolving Term Line will increase from $200 million to $250 million, conditional upon completion of the Rayonier Acquisition. The existing Operating Line remains unchanged. The financing is scheduled to close on February 27, 2013.
The maturity dates of both the Operating Line and the Revolving Term Lines will be extended to a four year term. All other terms remain substantially unchanged except for a reduction in pricing.
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