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The Company uses a variety of derivative financial instruments to reduce its exposure to risks associated with fluctuations in foreign exchange rates, energy costs, and interest rates. At March 31, 2013, the fair value of derivative financial instruments was a net asset of $0.7 million (December 31, 2012 - net asset of $0.1 million). The fair value of these financial instruments was determined based on prevailing market rates for instruments with similar characteristics.
The following table summarizes the gain (loss) on derivative financial instruments for the three month periods ended March 31, 2013 and 2012:
3 months ended March 31,(millions of Canadian dollars) 2013 2012---------------------------------------------------------------------------Foreign exchange collars and forward contracts $ 0.7 $ 1.2Crude oil collars 0.1 0.1Interest rate swaps (0.1) ---------------------------------------------------------------------------- $ 0.7 $ 1.3------------------------------------------------------------------------------------------------------------------------------------------------------
The following table summarizes the fair value of the derivative financial instruments included in the balance sheet at March 31, 2013 and December 31, 2012:
As at As at March 31, December 31,(millions of Canadian dollars) 2013 2012---------------------------------------------------------------------------Foreign exchange collars and forward contracts $ 0.7 $ -Crude oil collars 0.1 0.1Interest rate swaps (0.1) ----------------------------------------------------------------------------Total current asset, net $ 0.7 $ 0.1------------------------------------------------------------------------------------------------------------------------------------------------------
6. Income Taxes
Income tax expense for the three months ended March 31, 2012 includes current tax expense on income subsequent to the exchange on March 2, 2012. Prior to the Exchange, taxes were minimal reflecting the non-taxable status of the Partnership (Note 11).
3 months ended March 31,(millions of Canadian dollars) 2013 2012---------------------------------------------------------------------------Current $ (5.3) $ (1.7)Deferred 1.2 0.9---------------------------------------------------------------------------Income tax expense $ (4.1) $ (0.8)------------------------------------------------------------------------------------------------------------------------------------------------------
The reconciliation of income taxes calculated at the statutory rate to the actual income tax provision is as follows:
3 months ended March 31,(millions of Canadian dollars) 2013 2012---------------------------------------------------------------------------Income tax expense at statutory rate 2013 - 25.0% (2012 - 25.0%) $ (3.8) $ (2.7)Add (deduct): Permanent difference from capital gains and other non-deductible items (0.3) 0.1 Permanent difference - exchange transaction - 0.9 Tax included in equity - exchange transaction - 0.9---------------------------------------------------------------------------Income tax expense $ (4.1) $ (0.8)------------------------------------------------------------------------------------------------------------------------------------------------------
