2021
Annual
Financial
Results
Independent auditor’s report
To the Shareholders of AutoCanada Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of AutoCanada Inc. and its subsidiaries (together, the Company) as at December 31,
2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards
Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of comprehensive income (loss) for the years ended December 31, 2021
and 2020;
the consolidated statements of financial position as at December 31, 2021 and 2020;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2021. These matters were
PricewaterhouseCoopers LLP
Stantec Tower, 10220 103 Avenue NW, Suite 2200, Edmonton, Alberta, Canada T5J 0K4
T: +1 780 441 6700, F: +1 780 441 6776
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Impairment recoveries of intangible assets in
the Canadian Operations segment
Our approach to addressing the matter included the
following procedures, among others:
Refer to note 3 – Significant accounting policies,
note 5 – Critical accounting estimates and
note 21 – Goodwill and intangible assets to the
consolidated financial statements.
The Company had intangible assets of $548,249
thousand as at December 31, 2021, of which a
portion pertains to the Canadian Operations
segment. Management performs an impairment test
annually, or more frequently if events or changes in
circumstances indicate that the carrying value may
not be recoverable. An impairment assessment is
conducted at the level of a cash generating unit
(CGU), which is the lowest level for which there are
separately identifiable cash flows. An impairment
loss is recognized if the carrying amount of a CGU
exceeds its recoverable amount. The recoverable
amount of each CGU is based on the greater of fair
value less costs to dispose (FVLCD) and value in
use (VIU). Impairment losses, other than those
relating to goodwill, are evaluated for potential
reversals of impairment when events or changes in
circumstances warrant such consideration.
Under the FVLCD approach, fair value is calculated
based on an applicable multiple applied to
projected earnings before interest, taxes,
depreciation and amortization (EBITDA). In arriving
at the FVLCD, management considers projected
operating margins, growth rates and EBITDA
multiples as significant assumptions. Under the VIU
approach, the discounted cash flow (DCF) method
is used, which involves projecting cash flows and
converting them into a present value equivalent
through discounting. Significant assumptions used
in the VIU approach include projected operating
margins, growth rates and discount rates. Based on
the impairment assessment, management
● Tested how management determined the
recoverable amount for certain CGUs in the
Canadian Operations segment for which
events or changes in circumstances have been
identified, which included the following:
Tested the appropriateness of the
approaches used and the mathematical
accuracy of FVLCD and VIU calculations.
Tested the reasonableness of the
projected operating margins and growth
rates applied by management in the
applicable calculations by comparing them
to the budget, management’s strategic
plans approved by the Board, available
third party published economic data and
the results historically achieved by the
respective CGUs.
Professionals with specialized skill and
knowledge in the field of valuation assisted
in testing the reasonableness of the
discount rates applied by management
based on available data of comparable
companies and in testing the
reasonableness of the EBITDA multiples
by comparing to market data, as well as
assessing the valuation methodologies
used.
Tested the accuracy and completeness of
underlying data used in the FVLCD and
VIU calculations.
● Tested the disclosures made in the
consolidated financial statements, including the
sensitivity of the significant assumptions used.
Key audit matter
How our audit addressed the key audit matter
recognized impairment recoveries of $39,846
thousand in the Canadian Operations segment
allocated to intangible assets.
We considered this a key audit matter due to (i) the
significance of the intangible asset balances and (ii)
the significant judgment made by management in
determining the recoverable amounts of the CGUs,
including the use of significant assumptions. This
has resulted in a high degree of subjectivity and
audit effort in performing audit procedures to test
the significant assumptions. Professionals with
specialized skill and knowledge in the field of
valuation assisted us in performing our procedures.
Valuation of indefinite-life intangible assets
relating to franchise rights acquired in the
Autopoint Group business acquisition
Refer to note 3 – Significant accounting policies,
note 5 – Critical accounting estimates and
note 13 – Business acquisitions to the consolidated
financial statements.
On December 1, 2021, the Company completed the
acquisition of substantially all of the assets of the
Autopoint Group for a total purchase consideration
of $132,404 thousand. The fair values of the
identifiable assets acquired included $88,215
thousand in intangible assets relating to indefinite-
life franchise rights associated with the respective
dealerships. Management applied significant
judgment in estimating the fair values of the
intangible assets. Management estimated the fair
values of the intangible assets relating to indefinite-
life franchise rights based on the multi-period
excess earnings method, using discounted cash
flow models. The determinations of the estimated
fair values involved significant assumptions
regarding projected operating margins, terminal
growth rates and discount rates.
We considered this a key audit matter due to the
significant judgment applied by management in
Our approach to addressing the matter included the
following procedures, among others:
● Tested how management estimated the fair
values of the indefinite-life intangible assets
relating to franchise rights, which included the
following:
Read the purchase agreements.
Tested the underlying data used by
management in estimating the fair values
of the indefinite-life intangible assets
relating to franchise rights.
Evaluated the reasonableness of
significant assumptions developed by
management related to projected operating
margins and terminal growth rates by
comparing them to the acquisition plan
approved by the Board, available third
party economic and industry data and
results historically achieved by the
respective dealerships.
Professionals with specialized skill and
knowledge in the field of valuation assisted
in evaluating the appropriateness of the
multi-period excess earnings method and
the discounted cash flow models and in
Key audit matter
How our audit addressed the key audit matter
testing the reasonableness of the discount
rates.
estimating the fair values of the intangible assets
relating to indefinite-life franchise rights, including
the development of significant assumptions. This, in
turn, led to a high degree of auditor judgment,
subjectivity and effort in performing procedures and
evaluating audit evidence relating to the significant
assumptions developed by management. The audit
effort involved the use of professionals with
specialized skill and knowledge in the field of
valuation.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Richard Probert.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Edmonton, Alberta
March 2, 2022
Consolidated Financial Statements
For the year ended December 31, 2021
AutoCanada Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended
(in thousands of Canadian dollars except for share and per share amounts)
Revenue (Note 6)
Cost of sales (Note 7)
Gross profit
Operating expenses (Note 8)
Operating profit before other income (expense)
Lease and other income, net (Note 10)
(Loss) gain on disposal of assets, net (Note 10)
Recoveries (impairment) of non-financial assets (Note 21)
Operating profit
Finance costs (Note 11)
Finance income (Note 11)
(Loss) gain on redemption liabilities (Note 15)
Other losses
Net income (loss) for the year before tax
Income taxes (Note 12)
Net income (loss) for the year
Other comprehensive gains and (losses)
Items that may be reclassified to profit or loss
Foreign operations currency translation
Change in fair value of cash flow hedge (Note 26)
Income tax relating to these items
Other comprehensive income (loss) for the year, net of tax
Comprehensive income (loss) for the year
Net income (loss) for the year attributable to:
AutoCanada shareholders
Non-controlling interests
Comprehensive income (loss) for the year attributable to:
AutoCanada shareholders
Non-controlling interests
Net income (loss) per share attributable to AutoCanada shareholders:
Basic
Diluted
Weighted average shares
Basic (Note 31)
Diluted (Note 31)
December 31,
2021
$
4,653,415
(3,819,232)
834,183
(612,609)
221,574
9,035
(387)
39,846
270,068
(35,189)
810
(14,116)
(353)
221,220
54,021
167,199
December 31,
2020
$
3,329,494
(2,782,168)
547,326
(461,663)
85,663
7,386
1,370
(24,207)
70,212
(72,505)
808
762
(482)
(1,205)
5,418
(6,623)
(2,069)
8,880
(2,392)
4,419
171,618
164,207
2,992
167,199
168,626
2,992
171,618
5.98
5.60
(2,089)
(10,938)
2,836
(10,191)
(16,814)
(7,455)
832
(6,623)
(17,646)
832
(16,814)
(0.27)
(0.27)
27,474,106
29,305,292
27,313,140
27,313,140
The accompanying notes are an integral part of these consolidated financial statements.
Approved on behalf of the Company
Paul W. Antony, Director
Barry L. James, Director
Page 1 • AutoCanada
AutoCanada Inc.
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
ASSETS
Current assets
Cash and cash equivalents (Note 16)
Trade and other receivables (Note 17)
Inventories (Note 18)
Other current assets (Note 22)
Assets held for sale (Note 19)
Property and equipment (Note 20)
Right-of-use assets (Note 25)
Other long-term assets (Note 22)
Deferred income tax (Note 12)
Intangible assets (Note 21)
Goodwill (Note 21)
LIABILITIES
Current liabilities
Trade and other payables (Note 23)
Revolving floorplan facilities (Note 24)
Current tax payable
Vehicle repurchase obligations (Note 27)
Indebtedness (Note 24)
Redemption liabilities (Note 15)
Lease liabilities (Note 25)
Other liabilities (Note 28)
Long-term indebtedness (Note 24)
Long-term lease liabilities (Note 25)
Long-term redemption liabilities (Note 15)
Derivative financial instruments (Note 26)
Other long-term liabilities (Note 28)
Deferred income tax (Note 12)
EQUITY
Attributable to AutoCanada shareholders
Attributable to non-controlling interests
December 31,
2021
$
December 31,
2020
$
102,480
132,913
737,299
9,572
—
982,264
248,109
370,998
17,211
40,881
548,249
50,961
2,258,673
189,731
708,561
3,119
3,584
—
21,673
25,602
1,167
953,437
285,908
427,215
659
8,299
9,932
53,814
1,739,264
493,411
25,998
519,409
2,258,673
107,704
118,650
699,200
8,931
1,039
935,524
203,525
308,897
14,337
29,713
399,633
25,734
1,917,363
137,510
761,943
5,030
4,526
65
7,557
24,079
2,176
942,886
197,166
363,850
435
22,146
8,428
19,632
1,554,543
341,874
20,946
362,820
1,917,363
Commitments and contingencies (Note 29)
The accompanying notes are an integral part of these consolidated financial statements.
Page 2 • AutoCanada
AutoCanada Inc.
Consolidated Statements of Changes in Equity
For the Years Ended
(in thousands of Canadian dollars)
Balance, January 1, 2021
Net income
Other comprehensive (loss)
income
Dividends declared by
subsidiaries to non-controlling
interests (Note 15)
Reorganization of non-
controlling interests (Note 15)
Forward share purchase (Note
28)
Settlement of share-based
awards (Note 30)
Issuance of executive and
employee advances (Note 30)
Deferred tax on share-based
payments
Shares settled from treasury
(Note 31)
Share-based compensation
(Note 30)
—
—
—
—
—
—
—
—
—
—
—
(3,631)
(2,570)
213
—
(18,422)
—
—
—
(4,570)
—
9,084
—
3,685
(3,685)
—
—
3,345
Share
capital
$
510,606
Treasury
shares
$
(2,494)
Attributable to AutoCanada shareholders
Cumulative
translation
adjustment
$
OCI hedge
reserve
$
Contributed
surplus
$
9,995
(3,036)
(12,637)
Retained
earnings
$
Total
capital
$
(160,560) 341,874
Non-
controlling
interests
$
20,946
Total
equity
$
362,820
—
—
—
164,207
164,207
2,992
167,199
—
(2,069)
6,488
—
4,419
—
4,419
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(79)
(79)
(538)
(538)
2,139
1,601
—
(6,201)
—
(6,201)
—
(18,209)
—
(18,209)
—
(4,570)
—
(4,570)
—
9,084
—
9,084
—
—
—
—
—
3,345
—
3,345
Balance, December 31, 2021
510,819
(2,440)
(6,823)
(5,105)
(6,149)
3,109
493,411
25,998
519,409
The accompanying notes are an integral part of these consolidated financial statements.
Page 3 • AutoCanada
AutoCanada Inc.
Consolidated Statements of Changes in Equity
For the Years Ended
(in thousands of Canadian dollars)
Share
capital
$
Treasury
shares
$
Attributable to AutoCanada shareholders
Cumulative
translation
adjustment
$
Contributed
surplus
$
OCI hedge
reserve
$
Accumulated
deficit
$
Total
capital
$
Non-
controlling
interests
$
Total
equity
$
Balance, January 1, 2020
Net (loss) income
Other comprehensive loss
Dividends declared on common
shares (Note 31)
Reorganization of non-
controlling interests (Note 15)
Non-controlling interests arising
on acquisition (Note 13)
Acquisition of non-controlling
interest (Note 15)
Recognition of redemption
liability granted to non-
controlling interests (Note 15)
Treasury shares acquired (Note
31)
Dividends reinvested (Note 31)
Settlement of share-based
awards (Note 30)
Shares settled from treasury
(Note 31)
Share-based compensation
(Note 30)
510,606
—
—
—
—
—
—
—
—
—
—
—
—
(716)
—
—
—
—
—
—
—
(2,081)
(3)
—
6,463
—
(947)
—
(4,535)
—
(157,264) 353,607
14,492
(7,455)
(7,455)
368,099
(6,623)
832
—
(2,089)
(8,102)
—
(10,191)
—
(10,191)
—
—
—
—
—
—
—
(191)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,743)
(2,743)
—
(2,743)
—
—
—
12,524
12,524
—
1,071
1,071
7,973
7,973
(7,973)
—
(1,071)
(1,071)
—
(1,071)
—
—
—
—
(2,081)
(3)
(191)
—
—
—
—
—
(2,081)
(3)
(191)
—
—
4,029
—
4,029
(3,036)
(12,637)
(160,560) 341,874
20,946
362,820
306
(306)
—
4,029
9,995
Balance, December 31, 2020 510,606
(2,494)
The accompanying notes are an integral part of these consolidated financial statements.
Page 4 • AutoCanada
AutoCanada Inc.
Consolidated Statements of Cash Flows
For the Years Ended
(in thousands of Canadian dollars)
Cash provided by (used in):
Operating activities
Net income (loss) for the year
Adjustments for:
Income taxes (Note 12)
Amortization of deferred financing costs
Amortization of note premium
Depreciation of property and equipment (Note 20)
Depreciation of right-of-use assets (Note 25)
Amortization of terminated hedges (Note 26)
Loss (gain) on disposal of assets, net (Note 10)
Share-based compensation - equity-settled (Note 30)
Share-based compensation - Used Digital Retail Division (Note 30)
Loss on extinguishment of debt (Note 11)
Loan forgiveness (Note 24)
Unrealized fair value changes on interest rate swaps (Note 26)
Unrealized fair value changes on foreign exchange forward contracts (Note 26)
Unrealized fair value changes on embedded derivative (Note 11)
Revaluation of redemption liabilities (Note 15)
Loss on settlement of redemption liabilities (Note 15)
Income taxes (paid) recovered
(Recoveries) impairment of non-financial assets (Note 21)
Settlement of share based awards (Note 30)
Issuance of executive and employee advances (Note 30)
Net change in non-cash working capital (Note 36)
Investing activities
Business acquisitions, net of cash acquired (Note 13)
Purchases of property and equipment
Proceeds on sale of property and equipment
Proceeds on divestiture of dealerships
Financing activities
Proceeds from indebtedness
Repayment of indebtedness
Treasury shares settled, net (Note 31)
Settlement of share based awards (Note 30)
Forward share purchase (Note 28)
Dividends paid on common shares
Dividends paid to non-controlling interests
Acquisition of non-controlling interests without a change in control (Note 15)
Acquisition of non-controlling interests from business acquisition (Note 13)
Principal elements of lease payments
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year (Note 16)
Cash and cash equivalents at end of year (Note 16)
The accompanying notes are an integral part of these consolidated financial statements.
December
31, 2021
$
December
31, 2020
$
167,199
(6,623)
54,021
1,896
(1,253)
17,272
26,420
3,268
387
3,345
224
1,128
(6,728)
(8,412)
539
(29,306)
14,116
—
(25,276)
(39,846)
(18,075)
(4,570)
(43,407)
112,942
(183,197)
(34,576)
2,399
—
(215,374)
353,957
(231,180)
3,685
173
(3,631)
—
(79)
—
—
(25,922)
97,003
205
(5,224)
107,704
102,480
5,418
1,300
—
17,372
24,759
2,308
(1,370)
4,029
435
4,002
—
3,175
(366)
—
(2,108)
1,346
(10,984)
24,207
—
—
70,965
137,865
(18,445)
(26,344)
8,986
683
(35,120)
226,882
(245,505)
(1,778)
—
—
(2,743)
—
(8,250)
1,071
(20,692)
(51,015)
419
52,149
55,555
107,704
Page 5 • AutoCanada
AutoCanada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2021 and 2020
(in thousands of Canadian dollars except for share and per share amounts)
1
General information
AutoCanada Inc. (“AutoCanada” or the “Company”) is incorporated in Alberta, Canada with common shares
listed on the Toronto Stock Exchange (“TSX”) under the symbol of “ACQ”. The business of AutoCanada, held in
its subsidiaries, is the operation of franchised automobile dealerships and related businesses in the Provinces of
British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and New Brunswick, and in
the State of Illinois in the United States. The Company offers a diversified range of automotive products and
services, including new vehicles, used vehicles, vehicle leasing, vehicle parts, vehicle maintenance and
collision repair services, extended service contracts, vehicle protection products and other after-market
products. The Company also arranges financing and insurance for vehicle purchases by its customers through
third party finance and insurance sources. The address of its registered office is 200, 15511 123 Avenue NW,
Edmonton, Alberta, Canada, T5V 0C3.
2
Basis of presentation
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Canadian
Generally Accepted Accounting Principles (“GAAP”) as set out in the CPA Canada Handbook - Accounting
(“CPA Handbook”).
The preparation of consolidated financial statements in accordance with IFRS requires the use of certain critical
accounting estimates. The areas where assumptions and estimates are significant to the consolidated financial
statements are described in Note 5.
These consolidated financial statements were approved by the Board of Directors on March 2, 2022.
3
Significant accounting policies
The significant accounting policies used in the preparation of these consolidated financial statements are as
follows:
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for the
revaluation of certain financial assets and financial liabilities to fair value, including derivative instruments and
redemption liabilities.
Principles of consolidation
The consolidated financial statements comprise the financial statements of AutoCanada and its subsidiaries.
Subsidiaries are all entities over which the Company has control. For accounting purposes, control is
established by an investor when it is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity. The Company uses judgment
in determining the entities that it controls and therefore consolidates. Judgment is applied in determining
whether the Company controls the entities in which it does not have full ownership rights. Most often,
judgment involves reviewing contractual rights to determine if rights are participating (giving power over one
entity) or protective rights (protecting the Company’s interest without giving it power). Subsidiaries are fully
consolidated from the date control is transferred to the Company, and are no longer consolidated on the date
control ceases.
Non-controlling interests represent equity interests in subsidiaries owned by outside parties. The share of net
assets of subsidiaries attributable to non-controlling interests is presented as a component of equity.
Intercompany transactions, balances, income and expenses, and gains or losses on transactions are eliminated.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
accounting policies adopted by the Company.
Page 6 • AutoCanada
Business combinations
Business combinations are accounted for using the acquisition method of accounting when the acquired set of
activities and assets meet the definition of a business and control is transferred to the Company. This involves
recognizing identifiable assets (including intangible assets not previously recognized by the acquiree) and
liabilities (including contingent liabilities) of acquired businesses at fair value at the acquisition date. The
excess of acquisition cost over the fair value of the identifiable net assets acquired is recorded as goodwill. If
the acquisition cost is less than the fair value of the net assets acquired, the fair value of the net assets is re-
in the Consolidated Statements of
assessed and any remaining difference
Comprehensive Income (Loss). Transaction costs are expensed as incurred.
is recognized directly
Contingent consideration is classified as either equity or a financial liability. Any subsequent change to the fair
value of contingent consideration is recognized in the Consolidated Statements of Comprehensive Income
(Loss).
Non-controlling interests
Non-controlling interests are measured initially at their proportionate share of the acquiree’s or entity's
identifiable net assets at the date of acquisition or date the interest was granted. Certain arrangements contain
a vesting component where the non-controlling interest vests over a specified period. Changes in the
Company’s interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions.
Non-controlling interests are issued in subsidiaries of the Company at their proportionate share at the date of
issuance. Subsequent measurement of the carrying value of the non-controlling interests is the value at
acquisition plus the non-controlling interest portion of profit and loss, as governed by the individual
agreements.
Revenue recognition
(a) New and Used Vehicles
The Company sells new and used vehicles at its franchised dealerships and related businesses. The
transaction price for a vehicle sale is determined with the customer at the time of sale. Customers often
trade in their own vehicle and apply the value against the purchase price of a new or used vehicle. The
trade-in vehicle is considered non-cash consideration and is measured at fair value, based on external and
internal market data, and applied toward the contract price for the purchased vehicle.
When a vehicle is sold, control is transferred at a point in time upon delivery of the vehicle to the customer,
which is generally at time of sale. The Company does not directly finance customers’ vehicle purchases or
leases, however, in many cases, third party financing is arranged for the sale or lease of vehicles to its
customers in exchange for a fee paid to the Company by the third party financial institution. The Company
receives payment directly from the customer at the time of sale or from the third party financial institution
(referred to as contracts-in-transit or vehicle receivables, which are part of the Company's receivables from
contracts with customers) within a short period of time following the sale.
(b) Parts, service and collision repair
The Company sells parts and services related to customer-paid repairs and maintenance, repairs and
maintenance under manufacturer warranties and extended service contracts, and collision-related repairs.
Each automotive repair and maintenance service is a single performance obligation that includes both the
parts and labour associated with the service. Payment for automotive service work is typically due upon
completion of the service, which is generally completed within a short period of time from contract
inception. The transaction price for automotive repair and maintenance services is based on the parts used,
the number of labour hours applied, and standardized hourly labour rates. The Company satisfies its
performance obligations, transfers control, and recognizes revenue over time for repair and maintenance
services because it is creating an asset with no alternative use and has an enforceable right to payment for
performance completed to date.
The transaction price for retail counter parts sales is determined at the time of sale based on the quantity
and price of each product purchased. Payment is typically due at the time of sale, or within a short period of
time following the sale. Control is generally considered to transfer at the point of sale or when the products
are shipped, which typically occurs the same day as or within a few days of the sale.
(c) Finance and insurance commissions and fees
The Company arranges financing for customers through various financial institutions and receives a
commission from the lender based on the difference between the interest rate charged to the customer and
the interest rate set by the financing institution, or a flat fee.
Page 7 • AutoCanada
The Company also receives commissions for facilitating the sale of third-party insurance products to
customers, including credit and life insurance policies and extended service contracts. These commissions
are recorded as revenue at the time the customer enters into the contract and the Company is entitled to
the commission. The Company is not the obligor under any of these contracts. In the case of finance
contracts, a customer may fail to pay their contract, thereby terminating the contract. Customers may also
terminate extended service contracts, which are fully paid at purchase, and become eligible for refunds of
unused premiums. In these circumstances, a portion of the commissions the Company receives may be
charged back to the Company based on the terms of the contracts. These chargebacks are a form of
variable consideration and the Company only recognizes commission revenue at the estimated amount of
consideration to which it ultimately expects to be entitled. This estimate is based on historical chargeback
experience arising from similar contracts, including the impact of refinance and default rates on retail
finance contracts and cancellation rates on extended service contracts and other insurance products.
For the majority of finance and insurance product sales, the Company’s performance obligation is to arrange
for the provision of goods or services by another party. This performance obligation is satisfied when the
finance and insurance product is delivered to the end-customer, generally at the time of the vehicle sale. As
an agent, revenue is recognized as the net amount retained after paying the third party provider for the
goods or services that party is responsible for fulfilling.
Finance income
Finance income comprises of finance lease income and interest income on short term deposits. Finance
income is recognized in profit or loss as they accrue using the effective interest method.
Taxation
(a) Deferred tax
Deferred tax is recognized on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated statements of financial position. Deferred tax is calculated
using tax rates and laws that have been enacted or substantively enacted at the end of the reporting period,
and which are expected to apply when the related deferred income tax asset is realized or the deferred
income tax liability is settled.
Deferred tax liabilities:
● are generally recognized for all taxable temporary differences; and
● are not recognized on temporary differences that arise from goodwill which is not deductible for tax
purposes.
Deferred tax assets:
● are recognized to the extent it is probable that taxable profits will be available against which the
deductible temporary differences can be utilized; and
● are reviewed at the end of the reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial
recognition of assets and liabilities acquired other than in a business combination.
Deferred tax assets and liabilities are not recognized in respect of temporary differences between the
carrying amount and tax bases of investments in subsidiaries where the company is able to control the
timing of the reversal of the temporary differences and it is probable that the differences will not reverse in
the foreseeable future.
(b) Current tax
Current tax expense is based on the results for the period as adjusted for items that are not taxable or not
deductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at
the end of the reporting period. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. Provisions are
established where appropriate on the basis of amounts expected to be paid to the tax authorities.
Manufacturer incentives and other rebates
Various incentives from manufacturers are received based on achieving certain objectives, such as specified
sales volume targets. These incentives are typically based on units sold to retail or fleet customers. These
manufacturer incentives are recognized as a reduction of new vehicle cost of sales when earned, generally at
the latter of the time the related vehicles are sold or upon attainment of the particular program goals.
Page 8 • AutoCanada
Manufacturer rebates to the Company's dealerships and assistance for floorplan interest are reflected as a
reduction in the carrying value of each vehicle purchased by the Company. These incentives are recognized as
a reduction to the cost of sales as the related vehicles are sold.
Manufacturer advertising rebates that are reimbursements of costs associated with specific advertising
expenses are earned in accordance with the respective manufacturers’ reimbursement-based advertising
assistance programs, which is typically after the corresponding advertising expenses have been incurred, and
are reflected as a reduction in advertising expense included in administrative costs as an operating expense in
the Consolidated Statements of Comprehensive Income (Loss).
Financial instruments
Financial assets and financial liabilities are recognized on the Consolidated Statements of Financial Position
when the Company becomes a party to the contractual provisions of the financial instrument. All financial
instruments are required to be measured at fair value on initial recognition. The Company’s own credit risk and
the credit risk of the counter party are taken into consideration in determining the fair value of financial assets
and financial liabilities.
Financial assets are recognized on the settlement date, which is the date on which the asset is delivered to or
by the Company. Financial assets are derecognized when the rights to receive cash flows from the instruments
have expired or were transferred and the Company has transferred substantially all risks and rewards of
ownership.
The Company’s financial assets, including cash and cash equivalents and trade and other receivables are
measured at amortized cost. The contractual cash flows received from these financial assets are solely
payments of principal and interest and are held within a business model whose objective is to collect
contractual cash flows. The financial assets are initially recognized at fair value plus transaction costs and
subsequently carried at amortized cost using the effective interest method.
The Company’s financial liabilities include trade and other payables, revolving floorplan facilities, vehicle
repurchase obligations, current and long-term indebtedness, derivative financial instruments, redemption
liabilities and lease liabilities. Financial liabilities are measured at amortized cost except for redemption
liabilities, non-hedge interest swaps, and contingent consideration, which are carried at fair value through
profit or loss. Transaction costs associated with the establishment of indebtedness or amendment of loan
facilities are recorded against proceeds and recognized in the Consolidated Statements of Comprehensive
Income (Loss) over the term of the borrowings using the effective interest rate.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, highly liquid investment grade short-term investments with
maturities of three months or less and other liquid deposits held with financial institutions.
Trade and other receivables
Trade and other receivables are amounts due from customers, financial institutions and suppliers that arise
from providing services or sale of goods in the ordinary course of business. Trade and other receivables are
recognized initially at fair value and subsequently measured at amortized cost using the effective interest
method. The Company applies the simplified approach to measuring expected credit losses ("ECL"), which uses
a lifetime expected credit loss allowance for all trade receivables. The carrying amount of the asset is reduced
through the use of an allowance account, and the amount of the loss is recognized in the Consolidated
Statements of Comprehensive Income (Loss) within operating expenses.
When a trade and other receivable is uncollectible, it is written off against the allowance account for trade and
other receivables. Subsequent recoveries of amounts previously written off are credited against operating
expenses in the Consolidated Statements of Comprehensive Income (Loss).
Inventories
New, used and demonstrator vehicle inventories are recorded at the lower of cost and net realizable value, with
cost determined on a specific item basis. Parts and accessories inventories are carried at the lower of cost and
net realizable value. Inventories of parts and accessories are accounted for using the “weighted-average cost”
method.
In determining net realizable value for new vehicles, the Company primarily considers the age of the vehicles
along with the timing of annual and model changeovers. For used vehicles, the Company considers recent
market data and trends such as loss histories along with the current age of the inventory. Parts inventories are
primarily assessed considering excess quantity and continued usefulness of the part. The risk of loss in value
related to parts inventories is minimized since excess or obsolete parts can generally be returned to the
manufacturer.
Page 9 • AutoCanada
Assets held for sale
Non-current assets and associated liabilities are classified as assets held for sale when their carrying amount is
to be recovered principally through a sale transaction, rather than continuing use, and a sale is highly probable.
Assets designated as held for sale are held at the lower of carrying amount at designation and fair value less
costs to sell.
Depreciation is not charged against property and equipment classified as held for sale.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and any accumulated impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Residual values,
useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year-end.
Land is not depreciated. Other than as noted below, depreciation of property and equipment is provided for
over the estimated useful life of the assets on a declining balance basis at the following annual rates:
Machinery and equipment
Furniture, fixtures and other
Company and lease vehicles
Computer equipment
20 %
20 %
30 %
30 %
Buildings are depreciated on a straight-line basis over the estimated useful lives of the buildings ranging from
10 to 45 years. Useful lives are determined based on independent appraisals.
The useful life of leasehold improvements is determined to be the lesser of the lease term or the estimated
useful life of the improvement. Leasehold improvements are depreciated using the straight-line method over
the useful life of the asset.
Depreciation of leased vehicles is based on a straight-line depreciation of the difference between the cost and
the estimated residual value at the end of the lease over the term of the lease. Leased vehicle residual values
are regularly reviewed to determine whether depreciation rates are reasonable.
Intangible assets and goodwill
(a) Intangible assets
Intangible assets consist of rights under franchise agreements and certifications with automobile
manufacturers (“dealer agreements”). The Company has determined that dealer agreements will continue to
contribute to cash flows indefinitely and, therefore, have indefinite lives due to the following reasons:
● Specific dealer agreements continue indefinitely by their terms; and
● Specific dealer agreements and certifications have limited terms, but are routinely renewed without
substantial cost to the Company.
Intangible assets are carried at cost less accumulated impairment losses. When acquired in a business
combination, the cost is determined in connection with the purchase price allocation based on their
respective fair values at the acquisition date. The fair value is determined based on the the multi-period
excess earnings method, using the discounted cash flow model. When market value is not readily
determinable, cost is determined using generally accepted valuation methods based on revenues, costs or
other appropriate criteria.
(b) Goodwill
Goodwill represents the excess of the consideration transferred, the amount of any non-controlling interest
in the acquirees, and the acquisition date fair value of any previous equity interest in the acquirees over the
fair value of the identifiable net assets of the acquired subsidiary at the date of acquisition. Goodwill is
carried at cost less accumulated impairment losses.
Impairment
Impairments are recorded when the recoverable amounts of assets are less than their carrying amounts. The
recoverable amount is the higher of an asset’s fair value less costs to dispose or its value in use. Impairment
losses, other than those relating to goodwill, are evaluated for potential reversals of impairment when events or
changes in circumstances warrant such consideration.
Page 10 • AutoCanada
(a) Non-financial assets
The carrying values of non-financial assets with finite lives, such as property and equipment and right-of-use
assets, are assessed for impairment whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. For the purposes of assessing impairment, assets are grouped as
cash generating units (CGUs), the lowest levels for which there are separately identifiable cash flows.
(b) Intangible assets and goodwill
The carrying values of all intangible assets with indefinite lives and goodwill are reviewed for impairment
whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Additionally, the carrying values of identifiable intangible assets with indefinite lives and goodwill are tested
annually for impairment. Specifically:
● Our dealer agreements with indefinite lives are subject to an annual impairment assessment. For
purposes of impairment testing, the fair value of the Company's dealer agreements is determined
using a combination of a discounted cash flow approach and earnings multiple approach.
● For the purpose of impairment testing, goodwill is allocated to CGUs based on the level at which
management monitors it, which is not higher than an operating segment before aggregation.
Goodwill is allocated to those CGUs that are expected to benefit from the business combination in
which the goodwill arose.
Trade and other payables
Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business. Trade and other payables are recognized initially at fair value, subsequently measured at
amortized cost, and classified as current liabilities if payment is due within one year.
Provisions represent liabilities for which the amount or timing is uncertain. Provisions are recognized when the
Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow
of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are
not recognized for future operating losses. Provisions are measured at the present value of the expected
expenditures to settle the obligation using a discount rate that reflects current market assessments of the time
value of money and the risks specific to the obligation. The increase in provisions due to passage of time is
recognized as interest expense.
Leases
(a) The Company as a lessee
The Company leases various properties. Lease agreements range from 1 to 20 years but may have extension
options as described below. Lease terms are negotiated on an individual basis and contain a wide range of
different terms and conditions.
The Company recognizes a right-of-use asset and a corresponding lease liability at the date at which the
leased asset is available for use by the Company. Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period.
The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities
include the net present value of fixed payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that are based on an index or a rate, amounts expected to be
payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee
is reasonably certain to exercise that option, and payments of penalties for terminating the lease if the lease
term reflects the lessee exercising that option. The lease payments are discounted using the interest rate
implicit in the lease, if that rate can be determined, or the Company’s incremental borrowing rate.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability
and any lease payments made at or before the commencement date less any lease incentives received, any
initial direct costs, and restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line
basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-
value assets comprise IT equipment and office furniture.
(b) The Company as a lessor
Lease obligations are classified as either operating or finance, based on the substance of the transaction at
inception of the lease. Classification is reassessed if the terms of the lease are changed.
Page 11 • AutoCanada
(i) Finance leases
Leases in which substantially all the risks and rewards of ownership are transferred are classified as
finance leases.
When assets are leased out under a finance lease, the present value of the lease payments is recognized
as a receivable. The difference between the gross receivable and the present value of the receivable is
recognized as unearned finance income.
The method for allocating gross earnings to accounting periods is referred to as the “actuarial method”.
The actuarial method allocates rentals between finance income and repayment of capital in each
accounting period in such a way that finance income will emerge as a constant rate of return on the
lessor’s net investment in the lease.
(ii) Operating leases
Leases in which a significant portion of the risks and rewards of ownership is retained by the lessor are
classified as operating leases.
When assets are leased out under an operating lease, the asset is included in the Consolidated Statements
of Financial Position based on the nature of the asset. Lease income on operating leases is recognized
over the term of the lease on a straight-line basis.
Redemption liabilities
The potential cash payments related to put options issued by the Company over the equity of subsidiary
companies are accounted for as financial liabilities when such options are to be settled in cash or a variable
number of shares. The amount that may become payable under the option on exercise is initially recognized at
fair value within redemption liabilities with a corresponding charge directly to equity attributable to
AutoCanada shareholders or share-based compensation. Subsequently, if the Company revises its estimates,
the carrying amount of the redemption liability is adjusted and the adjustment will be recognized as income or
expenses in the Consolidated Statements of Comprehensive Income (Loss). Options that are not exercisable for
at least one year from the Consolidated Statements of Financial Position date are presented as non-current
liabilities.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary
shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group company
purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s
shareholders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued,
any consideration received, net of any directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the Company’s shareholders.
Dividends
Dividends on common shares are recognized in the Company’s consolidated financial statements in the period
the dividends are declared by the Company’s Board of Directors.
Earnings per share
Basic earnings per share is computed based on the weighted average number of common shares outstanding
during the period. Diluted earnings per share is computed using the treasury stock method, which assumes that
the cash that would be received on the exercise of options is applied to purchase shares at the average price
during the period and that the difference between the number of shares issued on the exercise of options and
the number of shares obtainable under this computation, on a weighted average basis, is added to the number
of shares outstanding. Antidilutive options are not considered in computing diluted earnings per share.
Share-based payments
The Company operates a number of share-based compensation plans for the benefit of certain employees and
Company directors, as described in Note 30.
The accounting for a share-based payment plan is based on whether the arrangement is classified as equity-
settled or cash-settled. Equity-settled arrangements are those in which the Company receives services as
consideration for its own equity instruments. Cash-settled arrangements arise where the Company pays the
employee cash amounts based on the value of the Company’s shares.
Page 12 • AutoCanada
The fair value of equity-settled awards is recognized as an expense over the vesting period with a
corresponding increase in equity or redemption liabilities. The total amount to be expensed is determined by
reference to the fair value of the options at the grant date.
Foreign currency translation
The financial results of the dealerships that operate in the United States (U.S.) are translated from the functional
currency (USD) into the reporting currency (CAD) upon consolidation. Assets and liabilities have been
translated to the reporting currency (CAD) using the exchange rates in effect on the Consolidated Statements
of Financial Position dates. Revenue and expense accounts are translated using the average exchange rate
during the period. The cumulative translation adjustments associated with the net assets of foreign subsidiaries
are recorded in accumulated other comprehensive income in the Consolidated Statements of Changes in
Equity.
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and
liabilities of the foreign operation and translated at the closing rate.
Derivative financial instruments
Derivatives are recognized initially at fair value on the date of contract inception and are subsequently re-
measured to current fair value at the end of each reporting period. The accounting for subsequent changes in
fair value depends on whether the instrument is designated as a hedging instrument and, if so, the nature of the
item being hedged. The Company currently designates certain derivatives as hedges of the interest rate cash
flow risk associated with the cash flows of variable rate loans, and does not hold any derivatives for trading or
speculative purposes.
At the inception of the hedge relationship, the Company documents the economic relationship between the
hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking
hedge transactions. The effective portion of changes in the fair value of qualifying hedging derivatives is
recognized as a reserve within equity. The gain or loss relating to any ineffective portion is recognized
immediately in profit or loss. The periodic net settlement of the interest rate swap is recognized in profit or loss
within finance costs at the same time as the interest expense on the hedged borrowings.
Upon the expiry, sale, or termination of a hedging instrument, any cumulative deferred gain or loss and
deferred costs of hedging remain in equity until the the original hedged transactions occur.
Further information on the Company’s risk management and hedge accounting is presented in Note 26.
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognized immediately in profit or loss and are
included in Revenue and Finance costs, as disclosed in Note 26.
The full fair value of a derivative instrument is classified as a non-current asset or liability when the remaining
maturity of the hedged item is greater than one year.
Segment reporting
Operating segments are components of an entity that engage in business activities from which they earn
revenues and incur expenses, the operations for which can be clearly distinguished and for which the operating
results are regularly reviewed by a chief operating decision maker to make resource allocation decisions and to
assess performance.
The Company’s Chief Operating Decision Maker (CODM) is identified as the Chief Executive Officer (CEO) and
will serve as the function of the CODM. The CEO is responsible for allocating resources and assessing the
performance of each dealership. In the absence of the CEO, the Executive Chairman will serve the function of
the CODM. Supporting the CODM will be the President, Canadian Operations and the President, U.S.
Operations, both of whom report to the CODM. As each of these individuals, with support from their respective
management teams, report to the CODM, the Company will report segmented information by Canadian
Operations and U.S. Operations. Each reportable operating segment is comprised of retail automobile
dealerships, which have been aggregated based on their economic similarities.
The Company's CODM measures the performance of each operating segment based on operating profit, which
is defined as income before income taxes, net finance costs and other income (expense). The segmented
information is set out in Note 37.
Government assistance
Government assistance received by the Company for the purpose of subsidizing specific expenses is
recognized in profit or loss on a systematic basis in the periods in which the expenses are recognized, as
further described in Note 8. Government assistance received by the Company in the form of a loan is
recognized as indebtedness until the criteria for forgiveness are met (Note 24).
Page 13 • AutoCanada
4 New and amended accounting standards adopted in 2021
COVID-19 Related Rent Concession beyond 30 June 2021 Amendments to IFRS 16 Leases
In May 2020, the IASB published an amendment to IFRS 16 that provides an optional practical expedient for
lessees from assessing whether a rent a concession related to COVID-19 is a lease modification. Lessees can
elect to account for such rent concession in the same way as they would if they were not lease modifications.
This practical expedient is applied to leases with similar characteristics and circumstances with changes in
lease payments recognized in the Consolidated Statements of Comprehensive Income (Loss)
The amendment was intended to apply until June 30, 2021, but as the impact of the COVID-19 pandemic is
continuing, on March 31, 2021, the IASB extended the period of application of the practical expedient to June
30, 2022. The amendment applies to annual reporting periods beginning on or after April 1, 2021.
Leases that do not meet the criteria for the optional exemption are treated as a lease modification (Note 25).
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7, and IFRS 16)
For the year ended December 31, 2021, the Company adopted the amendments to IFRS 9, IAS 39, IFRS 7, and
IFRS 16 Interest Rate Benchmark Reform - Phase 2, as issued in August 2020. In accordance with the transition
provisions, the amendments have been adopted retrospectively to hedging relationships and financial
instruments.
Comparative amounts have not been restated, and there was no impact on the opening reserves in the
comparative period upon adoption.
Hedge relationships
The ‘Phase 2’ amendments address issues arising during interest rate benchmark reform, including specifying
when the ‘Phase 1’ amendments will cease to apply, when hedge designations and documentation should be
updated, and when hedges of the alternative benchmark rate as the hedged risk are permitted.
The Company has adopted the following hedge accounting reliefs provided by ‘Phase 2’ of the amendments:
● Hedge designation: When the Phase 1 amendments cease to apply, the Company will amend its hedge
designation to reflect changes which are required by IBOR reform, but only to make one or more of
these changes:
•
•
•
designating an alternative benchmark rate (contractually or non-contractually specified) as a
hedged risk;
amending the description of the hedged item, including the description of the designated
portion of the cash flows or fair value being hedged; or
amending the description of the hedging instrument.
The Company will update its hedge documentation to reflect this change in designation by the end
of the reporting period in which the changes are made. These amendments to the hedge
documentation do not require the Company to discontinue its hedge relationships. The Company
has not made any amendments to its hedge documentation in the reporting period relating to IBOR
reform.
● Amounts accumulated in the cash flow hedge reserve: When the Company amends its hedge
designation as described above, the accumulated amount outstanding in the cash flow hedge
reserve is deemed to be based on the alternative benchmark rate (for example, when the Canadian
Overnight Repo Rate Average (CORRA) replaces CDOR, which has been announced but not
approved, as of December 31, 2021). For discontinued hedging relationships, when the interest rate
benchmark on which the hedged future cash flows were based is changed as required by IBOR
reform, the amount accumulated in the cash flow hedge reserve is also deemed to be based on the
alternative benchmark rate for the purpose of assessing whether the hedged future cash flows are
still expected to occur.
● Risk components: The Company is permitted to designate an alternative benchmark rate as a non-
contractually specified risk component, even if it is not separately identifiable at the date when it is
designated, provided that the Company reasonably expects that it will meet the requirements within
24 months of the first designation and the risk component is reliably measurable. The 24-month
period applies separately to each alternative benchmark rate which the Company might designate.
During the period, the Company has not designated any risk components of alternative benchmark
rates in any hedge relationships during the period.
Note 26 provides the required disclosures of the uncertainty arising from the IBOR reform for hedging
relationships for which the Company applied the reliefs.
Page 14 • AutoCanada
Revolving floorplan and term facilities
‘Phase 2’ of the amendments requires that, for financial instruments measured using amortized cost
measurement, changes to the basis for determining the contractual cash flows required by interest rate
benchmark reform are reflected by adjusting their effective interest rate. No immediate gain or loss is
recognized. The practical expedient is only applicable to changes that are required by interest rate benchmark
reform, which is the case if, and only if, the change is necessary as a direct consequence of interest rate
benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to
the previous basis (that is, the basis immediately preceding the change).
Where some or all of a change in the basis for determining the contractual cash flows of a financial liability does
not meet the criteria above, the above practical expedient is first applied to the changes required by interest
rate benchmark reform, including updating the instrument’s effective interest rate. Any additional changes are
accounted for in the normal way (that is, assessed for modification or derecognition, with the resulting
modification gain/loss recognized immediately in profit or loss where the instrument is not derecognized).
Syndicate revolving floorplan and term facilities bear CDOR-based interest rates. Revolving floorplan facilities
with Ally Financial bear interest rates based on the Ally Prime Rate. For the year ended December 31, 2021, the
Company has not applied the practical expedients provided under ‘Phase 2’ to amendments as the applicable
interest rates are still in effect. Refer to Note 24 for further detail regarding the applicable interest rates on
revolving floorplan and term facilities.
5
Critical accounting estimates
The preparation of consolidated financial statements requires management to make estimates about the future.
Estimates are continuously evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates. Critical estimates and assumptions were used to determine the
value of the following assets and liabilities.
Intangible assets and goodwill
Intangible assets and goodwill generally arise from business combinations. The Company applies the
acquisition method of accounting to these transactions, which involves the allocation of the cost of an
acquisition to the underlying net assets acquired based on their respective estimated fair values. As part of this
allocation process, the Company must identify and attribute values to the intangible assets acquired.
Management applies significant judgement in estimating the fair value of the intangible assets. These
determinations involve significant estimates and assumptions regarding projected operating margins, terminal
growth rates and discount rates.
These estimates and assumptions determine the amount allocated to intangible assets and goodwill. If future
events or results differ significantly from these estimates and assumptions, the Company may record
impairment charges in the future.
The Company tests, at least annually or more frequently if events or changes in circumstances indicate that
they may be impaired, in accordance with its accounting policies. The recoverable amounts of CGUs have been
estimated based on the greater of fair value less costs to dispose and value in use calculations (Note 21).
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the consolidated statement of
financial position cannot be measured based on quoted prices in active markets, their fair value is measured
using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are
taken from observable markets where possible, but where this is not feasible, a degree of judgement is required
in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and
volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial on
instruments. See Note 26 for further disclosure.
Inventories
Inventories are recorded at the lower of cost and net realizable value with cost determined on a specific item
basis for new and used vehicles. In determining net realizable value for new vehicles, the Company primarily
considers the age of the vehicles along with the timing of annual and model changeovers. For used vehicles,
the Company considers recent market data and trends such as loss histories along with the current age of the
inventory. The determination of net realizable value for inventories involves the use of estimates.
Page 15 • AutoCanada
Redemption liabilities
Redemption liabilities arise during business combinations where non-controlling interest shareholders have the
right to require the Company to redeem their equity interests in certain non-wholly owned subsidiaries (refer to
Note 15). The redemption amounts are determined with reference to the future profitability generated by those
subsidiaries and their operating businesses. The Company will initially recognize a financial liability at the
present value of the estimated redemption amount and, at the end of each subsequent reporting period, the
Company will revisit its estimates. If the Company revises its estimates, the Company will adjust the carrying
amount of the financial liability to reflect revised estimated profitability and the adjustments will be recognized
as income or expenses in the Consolidated Statements of Comprehensive Income (Loss).
Leases
i. Critical judgments in determining the lease term
Extension and termination options are included in a number of property leases held by the Company. In
determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods
after termination options) are only included in the lease term if the lease is reasonably certain to be
extended (or not terminated). Potential future cash outflows have not been included in the lease liability if it
is not reasonably certain that the leases will be extended.
The assessment is reviewed if a significant event or a significant change in circumstances occurs that
affects this assessment and that is within the control of the lessee.
ii. Estimation uncertainty arising from variable lease payments
Certain leases contain variable payment terms that are linked to the consumer price index.
Restructuring charges
The Company has assumed it will not be able to sublet or otherwise realize any economic benefit from specific
vacated premises. Should these circumstances change, some or all of the provision pertaining to the
committed premises costs could be reversed in a future period.
Deferred taxes
The extent to which deferred tax assets are recognized is based on estimates of future profitability.
Management has concluded that the deferred tax assets are more likely than not to be recovered using
estimated future taxable income, based on approved business plans and budgets for each segment. The
estimates will be updated in future periods, which may result in increases or decreases in the amount of
deferred tax assets recognized based on the amount judged more likely than not to be recoverable.
COVID-19 impacts
In response to the COVID-19 pandemic, global government authorities introduced various
recommendations and emergency measures to limit the spread of the pandemic, including non-essential
business closures, quarantines, self-isolation, social and physical distancing, and shelter-in-place.
Although certain jurisdictions have been removing most restrictions, these measures continue to cause
disruptions to businesses and capital markets globally, resulting in an uncertain economic environment.
Governments have reacted with significant monetary and fiscal intervention, including federal stimulus
packages such as the COVID-19 Economic Response Plan in Canada and the CARES Act in the United States.
The Company has received funds under the Canada Emergency Wage Subsidy (CEWS) in Canada (Note 8) and
the Small Business Association Paycheck Protection Program (SBA PPP) in the U.S. (Note 24).
Although the various recommendations and emergency measures introduced by government authorities have a
potential to cause disruption in the Company's results, the extent to which COVID-19 will or may impact the
Company is uncertain and these factors are beyond the Company’s control. The Company continues to monitor
the developments regarding the COVID-19 pandemic and respond accordingly, however, there are many
developing factors such as the availability of testing and vaccines, along with emerging variants that continue
to make the potential ongoing impacts unable to be predicted with any certainty. Management expects
COVID-19 related disruptions to continue, however, believes that long-term estimates and assumptions do not
require significant revisions for the year ended December 31, 2021.
Page 16 • AutoCanada
Operations
Given the Company's customer-facing retail operations, the initial uncertainty associated with the COVID-19
pandemic had an impact on the financial results of the Company. Regular operations have been impacted by
mandatory closures in certain provincial jurisdictions, unpredictable changes in customer demand, employee
availability and safety for the provision of goods and services, supply chain disruptions, as well as altered credit
and liquidity risk profiles. Management has incorporated the impact of these factors in its assessment of trade
and other receivables (Note 17) and impairment of non-financial assets (Note 21).
Impairment
The impacts of COVID-19 were incorporated into the annual impairment assessment performed as at
December 31, 2021. The recoverable amount of the Company's CGUs was compared against the carrying
values, based on updated cash flow projections reflecting management's best estimates in light of current and
anticipated market conditions. These projections are inherently uncertain due to the indeterminable
future impacts of COVID-19. Refer to Note 21 for the results of the impairment assessment.
6 Revenue
New vehicles
Used vehicles
Parts, service and collision repair
Finance, insurance and other
7 Cost of sales
New vehicles
Used vehicles
Parts, service and collision repair
Finance, insurance and other
8 Operating expenses
Employee costs (Note 9)
Government assistance 1, 2
Administrative costs 3
Facility lease costs
Depreciation of right-of-use assets (Note 25)
Depreciation of property and equipment (Note 20)
2021
$
2020
$
1,733,891
1,010,881
409,971
174,751
4,653,415 3,329,494
1,963,881
1,937,541
484,639
267,354
2021
$
1,787,466
1,796,279
217,985
17,502
3,819,232
2020
$
1,625,561
946,878
197,001
12,728
2,782,168
2021
$
389,145
(11,769)
190,730
811
26,420
17,272
612,609
2020
$
292,404
(35,464)
160,586
2,006
24,759
17,372
461,663
1 Government assistance represents the Company's eligible claim of $4,388 (2020 - $35,264) for the Canada Emergency
Wage Subsidy (CEWS) and $653 (2020 - $200) claim for the Canada Emergency Rent Subsidy (CERS) for the year ended
December 31, 2021, with $299 (2020 - $3,794) included in trade and other receivables. There are no unfulfilled conditions or
other contingencies attached to the subsidy recognized.
2 During the year ended December 31, 2021, $6,728 (2020 - nil) of the loans from the Small Business Association Paycheck
Protection Program (Note 24) were forgiven and included above as an offset to Operating expenses. There are no unfulfilled
conditions or other contingencies attached to the forgiven loans.
3 Administrative costs include professional fees, consulting services, technology-related expenses, marketing, expected
credit losses, and other general and administrative costs.
Page 17 • AutoCanada
9
Employee costs
Operating expenses incurred in respect of employees were as follows:
Wages, salaries and commissions
Withholding taxes and insurance
Employee benefits
Share-based compensation (Note 30)
Other benefits
10 Lease and other income and (loss) gain on disposal of assets, net
Lease and other income, net
Lease and rental income
Other income
(Loss) gain on disposal of assets, net
Gain on dealership divestiture (Note 14)
Loss on lease terminations, net (Note 25)
Disposals of property and equipment, net
11 Finance costs and finance income
Finance costs:
Interest on long-term indebtedness
Interest on lease liabilities (Note 25)
Loss on extinguishment of debt (Note 24)
Unrealized fair value changes on interest rate swaps (Note 26)
Amortization of terminated hedges (Note 26)
Unrealized fair value changes on embedded derivative (Note 24)
Floorplan financing
Interest rate swap settlements (Note 26)
Other finance costs
Finance income:
Interest on net investment in lease (Note 25)
Short-term bank deposits
2021
$
344,819
19,839
18,934
3,569
1,984
389,145
2020
$
251,665
14,908
16,689
4,464
4,678
292,404
2021
$
6,416
2,619
9,035
—
(427)
40
(387)
2020
$
6,491
895
7,386
135
—
1,235
1,370
2021
$
2020
$
21,900
23,062
1,128
(8,412)
3,268
(29,306)
11,640
11,910
7,023
4,616
16,200
22,189
4,002
3,175
2,308
—
47,874
17,586
3,208
3,837
35,189
72,505
16
794
810
—
808
808
Cash interest paid during the year ended December 31, 2021 is $63,625 (2020 - $56,153), which includes
$23,062 (2020 - $22,189) of cash interest paid related to interest on lease liabilities.
Page 18 • AutoCanada
12 Taxation
Reconciliation of effective income tax rate for the year ended December 31, 2021 is as follows:
Net income (loss) for the year before tax
Net income (loss) for the year before tax multiplied by the blended rate of Canadian
corporate tax of 25.4% (2020 - 25.8%)
Effects of:
Tax losses and deductible temporary differences not recognized
Adjustment in respect of prior years
Impact of non-deductible and other permanent items
Impact of (recovery)/impairment of non-financial assets
Impact of change in substantively enacted rates
Foreign and other statutory income tax rate differentials
Other, net
Income tax expense
Effective income tax rate
Segmented components of income tax:
Canada
U.S.
Current income tax expense
Canada
U.S.
Deferred income tax expense (recovery)
Total income tax expense
Components of deferred income tax:
Deferred tax asset
Deferred tax liability
Net deferred tax (liability) asset
2021
$
221,220
2020
$
(1,205)
56,190
(311)
(3,985)
2,335
1,782
(3,310)
143
722
144
2,225
(72)
1,384
930
706
568
(12)
54,021
24.4 %
5,418
(449.6) %
2021
$
24,451
319
24,770
29,251
—
29,251
54,021
2020
$
20,783
(125)
20,658
(15,240)
—
(15,240)
5,418
2021
$
40,881
(53,814)
(12,933)
2020
$
29,713
(19,632)
10,081
In the comparative period the Canadian deferred tax balances were presented as a net deferred tax liability on
the consolidated statement of financial position. As there is no right of offset at the balance sheet date, these
balances have been presented on a gross basis in the current and prior year.
Page 19 • AutoCanada
The movements of deferred tax assets and liabilities are shown below:
Deferred
income from
partnerships
$
Property
and
equipment
$
Goodwill
and
intangible
assets
$
Right-of-
use assets
net of lease
liabilities
$
Derivative
financial
instruments
$
Non-
capital
losses
$
(3,791)
2,330
(23,223)
8,804
1,650 6,543
Share-
based
payments
$
— 415
Other
$
Total
$
(7,272)
Deferred tax assets
(liabilities)
January 1, 2020
(Expense) benefit
charged to income
taxes
Amounts charged
to other
comprehensive
income
Acquisition of
subsidiaries (Note
13)
Other
December 31,
2020
(Expense) benefit
charged to income
taxes
Amounts charged
to other
comprehensive
income
Amounts charged
to contributed
surplus
Acquisition of
subsidiaries (Note
13)
Other
December 31,
2021
1,112
(464)
4,633
1,170
— 4,227
— 4,562 15,240
—
—
—
—
2,836
—
— — 2,836
—
—
(87)
—
(357)
(291)
—
—
—
—
—
—
— —
(444)
—
12
(279)
(2,679)
1,779
(19,238)
9,974
4,486 10,770
— 4,989 10,081
(11,743)
(1,073)
(8,922)
913
(8,565) 6,040
(4,547) (1,354) (29,251)
—
—
—
—
(2,392)
—
— —
(2,392)
—
—
—
—
—
—
9,084 — 9,084
—
—
(38)
—
(369)
(48)
—
—
—
—
—
—
— —
(407)
— —
(48)
(14,422)
668
(28,577)
10,887
(6,471) 16,810
4,537 3,635 (12,933)
Changes in the deferred income tax components are adjusted through deferred tax expense. Of the above
components of the deferred income tax (liability) asset, ($14,422) (2020 - $(2,679)) is expected to be recovered
within 12 months.
The recognized and unrecognized deductible temporary differences relating to the U.S. Operations are as
follows:
Total U.S. deductible temporary differences
Less:
U.S. unrecognized deductible temporary differences, other than tax losses
U.S. unrecognized tax losses
Total unrecognized deductible temporary differences
Total recognized deductible temporary differences relating to the U.S Operations
Recognized deferred tax asset
2021
$
140,159
2020
$
155,426
(46,764)
(45,608)
(92,372)
47,787
12,678
(53,350)
(54,085)
(107,435)
47,991
12,732
As at December 31, 2021, the Company has recognized the benefit of $47,787 (2020 - $47,991) of the
deductible temporary differences, relating to the U.S. Operations, as a deferred tax asset. The Company has
concluded that the recognized deferred tax assets are more likely than not to be recovered using estimated
future taxable income, based on approved business plans and budgets for the segment. This estimate will be
updated in future periods, which may result in increases or decreases in the amount of deferred tax assets
recognized based on the amount judged more likely than not to be recoverable.
Page 20 • AutoCanada
The Company's U.S. Operations have federal and state net operating losses of $45,608 and $41,610,
respectively (2020 - $54,085 and $52,886). The federal losses can be carried forward indefinitely, while the
state losses expire, between 2030 and 2032.
The Company also has Canadian non-capital losses of $72,295 (2020 - $45,372) available to reduce future
taxable income, until their expiry between 2032 and 2041.
13 Business acquisitions
During the year ended December 31, 2021, the Company completed the following business acquisitions that
have been accounted for using the acquisition method.
PG Klassic AutoBody
On April 1, 2021, the Company acquired 100% of the shares in PG Klassic AutoBody ("PG Klassic"), a collision
repair facility in Prince George, British Columbia.
Autolux MB Collision
On September 9, 2021, the Company acquired 100% of the shares in Autolux MB Collision ("Autolux"), a luxury-
brand focused collision repair facility in Montreal, Quebec.
The acquisitions of PG Klassic and Autolux support management's strategic objective of expanding the
Company's collision centre capacity.
Mark Wilson's Better Used Cars
On August 9, 2021, the Company acquired 100% of the shares in Mark Wilson's Better Used Cars ("Mark
Wilson's"), an independent used vehicle dealership in Guelph, Ontario. The acquisition forms part of
management's strategic objective of developing a Used Digital Retail Division in the Canadian pre-owned
vehicle market. The Company entered into a lease arrangement for the dealership facility with the former owner
of Mark Wilson's. The lease arrangement contains a contingent consideration arrangement that requires the
former owner of Mark Wilson's to pay the Company $2,000 if a certain performance target is not met for the
three year's ending July 31, 2024. The estimated fair value of the contingent consideration arrangement is $nil
as at the acquisition date and as at the year end December 31, 2021.
Airdrie Autobody Ltd.
On October 1, 2021, the Company acquired 100% of the shares in Airdrie Autobody Ltd. (“Airdrie Autobody”), a
collision repair facility in Airdrie, Alberta. The acquisition supports management’s strategic objectives of
expanding the Company’s collision centre capacity, and also allows the Company to leverage existing
dealerships in Alberta.
Crystal Lake Chrysler Dodge Jeep Ram (CDJR) Inc.
On November 4, 2021, the Company acquired certain franchise rights, inventories and assets to be used in the
operations of Crystal Lake Chrysler Dodge Jeep Ram (CDJR) Inc. ("Crystal Lake"), a new and used motor vehicle
dealership in Crystal Lake, Illinois. The acquisition supports management's strategic objectives of further
establishing the Company's presence in the Greater Chicago area.
Autopoint Group
On December 1, 2021, the Company completed the acquisition of substantially all of the assets of the Autopoint
Group. The completed acquisition provides geographic diversification by more than doubling AutoCanada's
Ontario footprint. Moreover, the acquisition provides brand diversification by adding three new brands to
AutoCanada's Canadian platform.
Page 21 • AutoCanada
Summary of acquisitions
The estimated provisional purchase price allocations, which are subject to the finalization of the valuation of
the acquired assets and assumed liabilities, of business acquisitions completed during the year ended
December 31, 2021 described above are summarized as follows:
Autopoint Group
$
Other Acquisitions 1
$
Total Acquisitions
$
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax receivable
Inventories
Other current assets
Property and equipment
Right-of-use assets
Intangible assets 2
Deferred income tax asset
Total assets
Current liabilities
Trade and other payables
Revolving floorplan facilities
Lease liabilities
Other liabilities
Long-term indebtedness
Lease liabilities
Deferred income tax
Total liabilities
Net identifiable assets acquired
Goodwill
Total net assets acquired
Total purchase consideration
—
130
—
23,996
154
24,280
10,203
56,354
88,215
—
179,052
729
—
1,057
—
1,786
—
55,297
—
57,083
121,969
10,435
132,404
132,404
4,574
4,749
1,403
20,151
71
30,948
8,751
25,185
20,150
83
85,117
2,347
15,528
590
754
19,219
264
24,595
490
44,568
40,549
14,818
55,367
55,367
4,574
4,879
1,403
44,147
225
55,228
18,954
81,539
108,365
83
264,169
3,076
15,528
1,647
754
21,005
264
79,892
490
101,651
162,518
25,253
187,771
187,771
1 Other acquisitions includes franchised and used dealerships, and collision centres
2 Intangible assets relate to indefinite-life franchise rights associated with the respective dealerships
The net assets recognized in the December 31, 2021 financial statements were based on provisional balances as
the final balances go through a review between the Company and the respective sellers which will impact the
final purchase price.
The Right-of-use assets acquired as part of the Autopoint Group acquisition were based on a provisional
assessment that the leases are at fair market value while the Company sought an independent appraiser to
assess the lease rates. The appraisal had not been completed by the date the financial statements were
approved for issue by the Board of Directors.
The goodwill is attributable to the workforce, synergies from combining operations of the acquirees and
profitability of the acquired businesses. Goodwill of $11,026 is deductible for tax purposes.
The results of operations of the acquired entities are included in the Company's Consolidated Statements of
Financial Position and Consolidated Statements of Changes in Equity from the date of acquisition. Such results
of operations and the related assets and liabilities at the statement of financial position date are included in the
Consolidated Statements of Financial Position.
The results of operations of the acquired entities since the acquisition dates contributed $85,328 of revenue
and $2,443 of net income to the Consolidated Statements of Comprehensive Income (Loss) for the year ended
December 31, 2021. Had the acquisitions occurred at January 1, 2021, consolidated pro-forma revenue and net
income for the year ended December 31, 2021 would have been $5,161,190 and $174,833, respectively.
Page 22 • AutoCanada
These amounts have been calculated using the subsidiary's results and adjusting them for:
● Income tax expense (recovery)
● Interest on long-term indebtedness
● leasing arrangements as if they had been entered into on January 1, 2021
Transaction costs of $1,443 have been expensed and recorded in operating expenses.
Prior year business acquisitions
For the year ended December 31, 2021, the provisional amounts previously disclosed were finalized as follows:
● Cash consideration decreased by $200
● Trade and other receivables decreased by $9
● Inventory decreased by $68
● Property, plant, and equipment decreased by $64
● Goodwill increased by $4
● Trade and other payables increased by $43
● Bank indebtedness increased by $78
● Non-Controlling interest decreased by $60
Contingent consideration of $500 was earned and payable at December 31, 2021.
Management deemed these adjustments as immaterial and have adjusted them prospectively in the 2021
financial statements.
Acquisitions in 2020 prior to adjustments of provisional amounts
During the year ended December 31, 2020, the Company completed three business acquisitions that have been
accounted for using the acquisition method.
Auto Bugatti Inc.
On October 6, 2020, the Company acquired 75% of the voting shares of Auto Bugatti Inc., a collision repair
facility specializing in luxury vehicles in Montreal, Quebec. The acquisition supports management's strategic
objectives of expanding the Company's collision centre capacity, and also allows the Company to leverage
existing dealerships in Quebec.
Autohaus of Peoria
On October 29, 2020, the Company acquired substantially all of the net assets of Autohaus of Peoria, a luxury
dealership representing four franchises based in Illinois, USA. This was a strategic transaction which further
bolstered the Company’s presence in southern Illinois and is highly complementary to its existing operations in
Bloomington, IL as both dealers are in close proximity of each other and serve similar luxury-brand
communities.
Haldimand Motors Ltd.
On December 1, 2020, the Company completed the acquisition of all issued capital of Haldimand Motors Ltd.
("Haldimand"), a used car dealership in Cayuga, Ontario. The acquisition forms a part of management's
strategic objective of developing a Used Digital Retail Division in the Canadian pre-owned vehicle market.
Used Digital Retail Division
On December 1, 2020, as a part of the development of the used digital retail strategy, AutoCanada UD LP ("the
Partnership") was formed to hold the interest in Haldimand, as well as future dealerships that will be acquired as
a part of the strategy. A wholly owned subsidiary of the Company is the general partner ("GP") of the
Partnership while different classes of common units are issued to various stakeholders in the Partnership. The
subsidiary also holds a preferred interest in the Partnership that is repaid over a ten-year period from
contribution date, with a rate of return that reflects the Company's consolidated borrowing rate. Any
distributions to other shareholders are subordinate to the preferred interest repayment.
Dealership management and the Executive Chairman hold common interests in the Partnership, which are
subordinate to the GP and the preferred interest held by the Company. The Partnership agreement includes
various put and call options, which are based on prescribed valuation of the Partnership at the date of exercise
(Note 15).
Page 23 • AutoCanada
A portion of the Partnership common interests is allocated to a pool for issuance to dealership management
("the Vendor Pool"), the aggregate of which cannot exceed 14% of total Partnership interests. Dealership
management is granted an interest under an equity issuance plan (the “Digital Plan”), which vests based on the
achievement of certain service conditions, which also form the vesting conditions of a share-based payment
arrangement (Note 30). The put and call options associated with the common interests granted can only be
exercised during certain periods in 2024 and 2026, respectively. For the year ended December 31, 2021, the
vested Vendor Pool interests were nominal.
The related party interest represent a 15% interest in the Partnership granted to an entity controlled by the
Executive Chairman (Note 35) and contains a share-based payment arrangement that vested immediately when
granted on December 1, 2020. The expense associated with this arrangement was recorded in the Consolidated
Statements of Comprehensive Income (Loss) (Note 30). The put option can only be exercised after the tenth
anniversary of the grant date and does not contain a limitation on exercise period thereafter (Note 15).
Concurrent with the formation of the Partnership, a wholly owned special purpose entity ("SPE") was formed for
the purpose of issuing stock options to employees or service providers of the Partnership (the "Digital Option
Plan"). The portion of the common interests allocated to the pool for option issuances (the "Option Pool")
cannot exceed 10% of total Partnership interests. The options represent a right to purchase non-voting shares in
the SPE, which represent an accretive interest in the Partnership. For the year ended December 31, 2021, no
options were issued under the Digital Option Plan.
Summary of acquisitions
The aggregate purchase consideration of the above noted acquisitions are as follows:
Cash 1
Contingent consideration
Total purchase consideration
Total
$
21,765
500
22,265
1 Net cash paid during the year ended December 31, 2020 is $18,445.
In the event that certain post-close milestones related to supplier programs, software implementation, and
staffing levels are achieved, additional consideration of up to $500 may be payable in cash by December 31,
2021.
Page 24 • AutoCanada
The business acquisitions completed during the year ended December 31, 2020 described above are
summarized as follows:
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Property and equipment
Right-of-use assets
Intangible assets
Other long-term assets
Total assets
Current liabilities
Indebtedness
Trade and other payables
Revolving floorplan facilities
Other liabilities
Long-term indebtedness
Lease liabilities
Deferred income tax
Total liabilities
Net identifiable assets acquired
Less: Non-controlling interests (Note 15) 1
Goodwill
Total net assets acquired
Total consideration
Total
$
370
518
21,310
82
22,280
3,262
19,316
4,626
8
49,492
28
1,489
11,052
246
12,815
42
19,316
444
32,617
16,875
(1,071)
6,461
22,265
22,265
1 Non-controlling interest represents the interest in net assets not acquired by the Company, measured at fair
value at the acquisition date.
The goodwill is attributable to the workforce, synergies from combining operations of the acquirees and
profitability of the acquired businesses. Goodwill of $2,426 is deductible for tax purposes.
The results of operations of the acquired entities are included in the Company's Consolidated Statements of
Financial Position and Consolidated Statements of Changes in Equity from the date of acquisition. Such results
of operations and the related assets and liabilities at the statement of financial position date are included in the
Consolidated Statements of Financial Position. The results of operations of the acquired entities since
acquisition date are nominal to the Consolidated Statements of Comprehensive Income (Loss) for the year
ended December 31, 2020. Had the acquisitions occurred at January 1, 2020, the combined entity of the
Company and the acquired entities would have had a nominal impact on the consolidated results currently
presented.
All transaction costs have been expensed and recorded in operating expenses.
Page 25 • AutoCanada
14 Dealership divestitures
There were no dealership divestitures for the year ended December 31, 2021.
On July 31, 2020, the Company sold substantially all of the operating assets of 417 Infiniti, located in Ottawa,
Ontario, for cash consideration. Net proceeds of $683 resulted in a gain on divestiture of $135, included in
(Loss) gain on disposal of assets, net (Note 10) in the Consolidated Statements of Comprehensive Income (Loss)
for the year ended December 31, 2020, as summarized below.
Inventories
Revolving floorplan facilities
Net assets disposed
Net proceeds on divestiture
Net gain on divestiture
15 Interest in subsidiaries
$
2,752
(2,204)
548
683
135
Certain subsidiaries of the Company have non-controlling interests ("NCI") held by other parties. The interests
in these subsidiaries are summarized as follows:
Subsidiary
GI G Auto HoldCo Inc.
WBG Auto HoldCo Ltd.
NBFG Holdings Inc.
2282239 Alberta Ltd.
2282237 Alberta Ltd.
LMB Automobile Inc.
Canbec Automobile Inc.
156023 Canada Inc.
Auto Bugatti Inc.
Ericksen M-B Ltd.
Principal place
of business
British Columbia
Manitoba
Saskatchewan
Saskatchewan
Saskatchewan
Quebec
Quebec
Quebec
Quebec
Alberta
Proportion of
ownership
interests held
by non-
controlling
interests
10 %
10 %
5 %
10 %
10 %
15 %
15 %
5 %
25 %
10 %
Proportion
of voting
rights held
by non-
controlling
interests
10 %
10 %
5 %
10 %
10 %
15 %
15 %
5 %
25 %
10 %
Dividends
paid to non-
controlling
interests
2021
$
—
—
—
7
16
—
45
—
—
11
Dividends
paid to non-
controlling
interests
2020
$
—
—
—
—
—
—
—
—
—
—
79
—
The subsidiaries are companies that own automotive dealerships and related businesses. For purposes of
disclosure, the non-controlling interest profit and loss, and accumulated non-controlling interest of the
subsidiaries at the end of the reporting period are reported in aggregate as the subsidiaries are similar in nature
and risk, based on assessment of the interest and industry classification.
The Company provides long-term loans to specific NCI parties and these are presented as other assets (Note
22).
Transactions with non-controlling interests
During the year ended December 31, 2021, the Company reorganized capital in certain subsidiaries to bring in
new non-controlling parties. The change in ownership did not result in a change of control. Equity attributable
to AutoCanada shareholders was reduced by $538 as a result of the reorganization of non-controlling interests.
The transactions resulted in new loans of $1,674 being issued to some of these parties to purchase a non-
controlling interest in the subsidiaries for $2,139 (2020 - $12,524). These loans are recorded in Other long-term
assets on the Consolidated Statements of Financial Position.
Used Digital Retail Division
A wholly owned subsidiary of the Company is the general partner of AutoCanada UD LP, a limited partnership
("the Partnership") that holds the interest in the dealerships acquired as a part of the digital retail strategy (Note
13). The non-controlling unitholders hold put options where they can sell their shares back to the Partnership.
Page 26 • AutoCanada
These put options are recognized as redemption liabilities, measured at fair value at each reporting date, with
subsequent changes recognized on the Consolidated Statements of Comprehensive Income (Loss).
The fair value of the put options and associated redemption liabilities has been determined as $659 (2020 -
$435) as at December 31, 2021, as a result of the preferred interest rights in the Partnership and the limited time
of operation.
Redemption liabilities
Canbec Automobile Inc., LMB Automobile Inc., 156023 Canada Inc., and Auto Bugatti Inc. arrangements contain
put options, whereby the non-controlling shareholders are able to sell their shares back to the Company. These
put options are recognized as redemption liabilities, measured at their fair value on the Consolidated
Statements of Financial Position. The fair value is determined based on the equity value of the related
subsidiary (Note 34). Those options eligible to be executed in the next fiscal year are presented as current
liabilities.
The continuity of the redemption liabilities is summarized as follows:
Beginning of period
Additions in the year (Note 30)
Derecognition on settlement
Recognition on acquisition (Note 13)
Loss on settlement 1
Adjustment to fair value 1
End of period
Current redemption liabilities
Long-term redemption liabilities
December 31,
2021
$
December 31,
2020
$
7,992
224
—
—
—
14,116
22,332
21,673
659
15,498
435
(8,250)
1,071
1,346
(2,108)
7,992
7,557
435
1 Net amount of $14,116 (2020 - ($762)) presented on the Consolidated Statements of Comprehensive Income (Loss)
16 Cash and cash equivalents
Cash at bank and on hand
Short-term deposits
December 31,
2021
$
102,467
13
102,480
December 31,
2020
$
107,704
—
107,704
Short-term deposits include cash held with a national Canadian financial institution. The Company's revolving
floorplan facility agreements allow the Company to hold excess cash in accounts with the financial institution,
which is used to offset its finance costs on revolving floorplan facilities. The Company has immediate access to
this cash unless it is in default of its facilities, in which case the cash may be used by the financial institution in
repayment of its facilities. Refer to Note 33 for further detail regarding cash balances held with the financial
institution.
Page 27 • AutoCanada
17 Trade and other receivables
Trade receivables
Other receivables
Less: Expected loss allowance (Note 33)
December 31,
2021
$
104,759
30,632
135,391
(2,478)
132,913
December 31,
2020
$
109,405
11,235
120,640
(1,990)
118,650
The Company is exposed to normal credit risk with respect to its accounts receivable and maintains provisions
for expected credit losses. Potential for such losses is mitigated because there is no significant exposure to any
single customer and because customer creditworthiness is evaluated before credit is extended.
18
Inventories
New vehicles
Demonstrator vehicles
Used vehicles
Parts and accessories
December 31,
2021
$
222,272
34,282
441,730
39,015
737,299
December 31,
2020
$
412,970
36,911
218,812
30,507
699,200
Amounts recognized in the Consolidated Statements of Comprehensive Income (Loss):
Inventory expensed as cost of sales
Writedowns on vehicles included in cost of sales
Demonstrator expenses included in administrative costs
19 Assets and liabilities held for sale
Land and buildings
December 31,
2021
$
3,724,309
9,851
7,907
December 31,
2020
$
2,685,420
28,711
8,092
During the year ended December 31, 2021, the Company disposed of one property that was previously held for
sale for proceeds of $1,039, with no gain or loss on the transaction. No assets remain as held for sale.
During the year ended December 31, 2020, the Company had the following transactions:
● During the three-month period ended March 31, 2020, the Company disposed of one property that
was held for sale as at December 31, 2019, for the proceeds of $1,102, which resulted in a gain of $33.
● During the three-month period ended June 30, 2020, the carrying amount of the land and buildings
reclassified to held for sale exceeded the fair value less costs to sell. As a result, the Company
recorded an impairment charge of $619 related to two properties in the Canadian Operations
segment.
● During the three-month period ended September 30, 2020, the Company disposed of two properties
previously held for sale as at December 31, 2019, for net proceeds of $7,831, which resulted in a gain
of $1,940.
Page 28 • AutoCanada
20 Property and equipment
Cost:
January 1, 2020
Capital expenditures
Business combinations (Note
13)
Acquisition of real estate
Disposals
Transfer from assets held for
sale
Asset class reclassifications
Transfers to inventory, net
Foreign currency translation
December 31, 2020
Capital expenditures
Business combinations (Note
13)
Acquisition of real estate
Disposals
Transfers from inventory, net
Foreign currency translation
December 31, 2021
Accumulated depreciation:
January 1, 2020
Depreciation
Disposals
Asset class reclassifications
Transfers in from inventory, net
Foreign exchange
December 31, 2020
Depreciation
Disposals
Transfers to inventory, net
Foreign exchange
December 31, 2021
Carrying amount:
December 31, 2020
December 31, 2021
Company
& lease
vehicles
$
Leasehold
improvements
$
Machinery &
equipment
$
Land &
buildings1
$
Furniture,
fixtures &
other
$
Computer
equipment
$
Total
$
33,820
—
53,637
6,648
35,735
2,465
130,589
—
18,985
1,242
14,845 287,611
12,452
2,097
1,258
—
(371)
—
—
(6,353)
(95)
28,259
—
2,174
—
—
6,576
(21)
554
—
(2,220)
—
286
—
(41)
58,864
8,030
3,954
—
(145)
—
(9)
1,417
—
(8,784)
—
—
—
(79)
30,754
3,705
11
8,514
(33)
5,432
(286)
—
—
144,227
—
2,958
8,123
— 20,990
(11,988)
—
111
(310)
—
(8)
2
—
(5,198)
—
—
—
(40)
14,991
987
1,203
—
(103)
—
(8)
36,988
70,694
37,099
161,463
17,070
(6,754)
(3,483)
243
—
4,056
20
(5,918)
(3,925)
—
2,858
—
(6,985)
(16,768)
(2,824)
1,760
(146)
—
9
(17,969)
(2,945)
888
—
—
(20,026)
(21,287)
(3,074)
7,441
—
—
(24,732)
(4,417)
—
146
—
53
(16,867)
(3,163)
220
—
—
—
(29,003)
(3,934)
9,592
—
—
(19,810) (23,345)
(10,905)
(1,678)
4,365
—
—
27
(8,191)
(1,459)
94
—
1
(9,555)
20 3,262
8,514
—
(6,711) (23,317)
— 5,432
—
—
(6,353)
—
(276)
(21)
10,230 287,325
14,181
1,459
542 18,954
— 20,990
(203) (12,749)
— 6,576
61
(4)
335,338
12,024
(9,755) (90,201)
(1,896) (17,372)
5,781 19,590
—
—
— 4,056
18
127
(5,852) (83,800)
(1,846) (17,272)
189 10,983
2,858
2
(7,508) (87,229)
—
1
22,341
30,003
40,895
50,668
13,887
17,289
115,224
138,118
6,800
7,515
4,378
4,516
203,525
248,109
1 As at December 31, 2021, the Company owns land of $66,266 (2020 - $45,487), which is not subject to depreciation.
Construction-in-progress additions of $6,865 (2020 - $6,514) are included in land and buildings, as well as
leasehold improvements, and are not subject to depreciation until the assets are available for use.
Fully depreciated assets are retained in cost and accumulated depreciated accounts until such assets are
removed from service. Proceeds from disposal are netted against the related assets and the accumulated
depreciation are included in the Consolidated Statements of Comprehensive Income (Loss).
Land and building additions are used for Open Point opportunities as well as dealership relocations, dealership
re-imagings, and also include the purchase of a previously leased dealership property.
During the year-ended December 31, 2021, management identified certain assets with no future value and
recorded an impairment of $nil (2020 - $3,303) in disposals.
Page 29 • AutoCanada
21 Goodwill and intangible assets
Intangible assets consist of rights under franchise agreements with automobile manufacturers (“dealer
agreements”). Intangible assets and goodwill are tested for impairment annually as at December 31 or more
frequently, if events or changes in circumstances indicate that they may be impaired.
The impairment (recovery) charges were allocated to the assets of the respective CGU’s as follows:
Land and buildings (Notes 19, 20)
Intangible assets
Goodwill
2021
$
—
(39,846)
—
(39,846)
2020
$
3,922
15,055
5,230
24,207
The changes in the book value of intangible assets and goodwill for the year ended December 31, 2021 were as
follows:
Cost:
January 1, 2020
Acquisitions (Note 13)
Additions 1
Effect of foreign currency translation
December 31, 2020
Acquisitions (Note 13)
Additions
Prior year business acquisitions (Note 13)
Effect of foreign currency translation
December 31, 2021
Accumulated impairment:
January 1, 2020
Impairment
Effect of foreign currency translation
December 31, 2020
Recoveries of impairment
Effect of foreign currency translation
December 31, 2021
Carrying amount:
December 31, 2020
December 31, 2021
Intangible
assets
$
Goodwill
$
Total
$
479,938
4,626
430
(1,050)
124,681
6,461
—
(1,666)
483,944
129,476
108,365
403
—
(14)
25,253
17
4
(387)
592,698
154,363
69,645
15,055
(389)
84,311
(39,846)
(16)
100,566
5,230
(2,054)
103,742
—
(340)
44,449
103,402
604,619
11,087
430
(2,716)
613,420
133,618
420
4
(401)
747,061
170,211
20,285
(2,443)
188,053
(39,846)
(356)
147,851
399,633
548,249
25,734
50,961
425,367
599,210
1 Additions to intangible assets represent increases to franchise rights.
The recoveries of impairment for the year ended December 31, 2021 relates to the Company's reportable
segments as follows:
Canadian
Operations
$
(39,846)
(39,846)
U.S.
Operations
$
—
—
Total
$
(39,846)
(39,846)
Intangible assets
Page 30 • AutoCanada
CGUs have been determined to be individual dealerships. The following table shows the carrying amount of
indefinite-lived identifiable intangible assets and goodwill by CGU:
Cash Generating Unit
AL
AZ
U
AD
AX
S
D
AO
T
Q
G
X
I
AK
P
AE
AP
AI
AH
K
AJ
M
A
AR
AS
AG
AA
F
AY
AN
AC
V
N
W
Y
B
AV
AQ
Other CGUs less than
$5,000
Carrying amount
December 31, 2021
$
Goodwill
Total
6,135
3,951
506
2,587
—
—
3,724
—
—
—
1,648
1,726
—
—
—
—
941
1,927
—
—
—
—
—
950
602
—
—
—
—
909
8,563
—
871
550
—
1,343
—
161
13,867
33,942
25,201
25,000
24,887
22,339
21,806
21,768
21,687
18,599
16,824
15,883
15,791
15,520
15,306
15,078
14,496
13,437
13,397
13,180
12,559
11,781
11,549
10,384
10,213
9,635
9,626
9,431
9,253
8,824
8,748
8,563
8,495
6,906
6,865
6,590
6,027
5,799
5,006
68,815
December 31, 2020
$
Goodwill
Total
6,135
3,951
506
—
—
—
3,724
—
—
—
—
—
—
—
—
—
941
—
—
—
—
—
—
950
—
—
—
—
—
—
—
—
—
—
—
1,343
—
—
8,184
33,942
25,201
25,000
—
22,434
21,806
21,768
21,687
15,152
16,448
—
—
12,488
10,950
14,872
14,496
13,437
—
10,210
12,612
9,641
8,048
5,260
10,213
—
9,626
9,431
3,398
3,247
—
—
8,495
—
—
6,590
6,027
5,489
—
47,399
Intangible
assets
27,807
21,250
24,494
—
22,434
21,806
18,044
21,687
15,152
16,448
—
—
12,488
10,950
14,872
14,496
12,496
—
10,210
12,612
9,641
8,048
5,260
9,263
—
9,626
9,431
3,398
3,247
—
—
8,495
—
—
6,590
4,684
5,489
—
39,215
Intangible
assets
27,807
21,250
24,494
22,300
22,339
21,806
18,044
21,687
18,599
16,824
14,235
14,065
15,520
15,306
15,078
14,496
12,496
11,470
13,180
12,559
11,781
11,549
10,384
9,263
9,033
9,626
9,431
9,253
8,824
7,839
—
8,495
6,035
6,315
6,590
4,684
5,799
4,845
54,948
548,249
50,961
599,210
399,633
25,734
425,367
Page 31 • AutoCanada
The following tables show the impairments (recoveries of impairment) of indefinite-lived identifiable intangible
assets and goodwill by CGU:
Canadian dealerships
For the year ended December 31, 2021, fifteen Canadian dealerships recorded impairment charges (recoveries)
on indefinite-lived identifiable intangible assets (2020 - thirteen). The recoverable amounts for nine dealerships
were determined using the value in use ("VIU") method while the remaining six dealerships were determined
using the fair value less costs to dispose ("FVLCD") method.
December 31, 2021
$
December 31, 2020
$
Intangible
assets
Goodwill
Cash Generating Unit
A
Intangible
assets
(5,124)
AK
Q
AE
T
AH
R
Y
AJ
AT
AV
P
F
O
M
AY
I
Net (recovery) impairment
U.S. dealerships
(4,356)
(376)
—
(3,447)
(2,970)
(1,420)
—
(2,140)
(352)
(310)
(206)
(5,855)
(1,180)
(3,501)
(5,577)
(3,032)
(39,846)
Goodwill
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
(5,124)
(4,356)
(376)
330
1,980
1,750
—
(2,840)
(3,447)
(2,970)
(1,420)
—
(2,140)
(352)
(310)
(206)
(5,855)
(1,180)
(3,501)
(5,577)
(3,032)
(39,846)
2,490
480
290
(800)
2,400
—
310
—
5,300
(1,720)
—
—
1,420
11,390
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
330
1,980
1,750
(2,840)
2,490
480
290
(800)
2,400
—
310
—
5,300
(1,720)
—
—
1,420
11,390
For the year ended December 31, 2021, no U.S. dealerships recorded impairment charges on indefinite-lived
identifiable intangible assets and goodwill (2020 - three).
Cash Generating Unit
AM
AX
K
Net impairment
December 31, 2021
$
December 31, 2020
$
Intangible
assets
Goodwill
—
—
—
—
—
—
—
—
Total
—
—
—
—
Intangible
assets
Goodwill
—
198
3,467
3,665
241
4,285
704
5,230
Total
241
4,483
4,171
8,895
The valuation methodology used to assess the recoverable value of the CGUs uses level 2 inputs, indirectly
derived from the market, where possible, for key assumptions such as the discount rate. Where level 2 inputs
are not available, as is the case with the growth rate, the Company uses level 3 inputs, which are unobservable
to the market, but reflect management’s best estimates from historical performance and expectations for the
future.
Page 32 • AutoCanada
The following tables show the recoverable amounts of CGUs, with impairments or recoveries of impairments
recorded in either the current year or prior year, that have not been fully impaired:
Canadian dealerships
Cash Generating Unit
A
AK
Q
AE
T
AH
R
Y
AJ
AT
AV
P
F
O
M
AY
I
1 The CGU was valued using the VIU technique in the prior year.
2 The CGU was valued using the FVLCD technique in the prior year.
U.S. dealerships
Cash Generating Unit
AX 1
K
FVLCD or VIU
VIU
FVLCD 1
FVLCD 1
VIU
VIU
VIU
VIU
VIU
FVLCD 1
FVLCD 1
VIU 2
FVLCD
VIU
VIU
VIU 2
FVLCD 1
VIU
December 31,
2021
$
11,565
13,869
15,982
23,078
36,165
16,827
10,369
20,706
11,781
4,197
13,574
53,165
12,658
11,565
26,515
8,942
19,407
December 31,
2020
$
6,799
13,288
18,442
17,493
17,118
12,430
4,935
16,861
10,285
—
5,250
11,932
5,236
5,600
7,260
5,365
12,413
FVLCD or VIU
VIU
VIU
December 31,
2021
$
23,903
23,825
December 31,
2020
$
23,903
14,575
1 This CGU did not show indicators of impairment during the year ended December 31, 2021 and was not tested for
impairment during the period.
Impairment test of indefinite life intangible assets
The assumptions and sensitivities applied in the intangible assets impairment test are described as follows:
Valuation techniques
The Company did not make any changes to the valuation methodology used to assess impairment in the
current year. The recoverable amount of each CGU is based on the greater of fair value less cost to dispose and
value in use.
Value in use
Value in use (“VIU”) is predicated upon the value of the future cash flows that a business will generate going
forward. The discounted cash flow (“DCF”) method is used, which involves projecting cash flows and
converting them into a present value equivalent through discounting. The discounting process uses a rate of
return that is commensurate with the risk associated with the business or asset and the time value of money.
This model requires assumptions about revenue growth rates, operating margins, and discount rates.
Page 33 • AutoCanada
Fair value less costs to dispose
Fair value less costs to dispose (“FVLCD”) assumes that companies operating in the same industry will share
similar characteristics and that the Company's values will correlate to those characteristics. Therefore, a
comparison of a CGU to similar companies may provide a reasonable basis to estimate fair value. Under this
model, fair value is calculated based on an applicable multiple applied to projected earnings before interest,
taxes, depreciation and amortization (EBITDA). Data for EBITDA multiples was based on recent comparable
transactions and management estimates. Multiples used in the test for impairment for each CGU were in the
range of 2.5 to 7.88 times forecasted EBITDA (2020 - 2.5 to 7.9 times).
Significant assumptions for VIU
Projected operating margins and growth rates
The assumptions used are based on the Company’s internal budget, which is approved by the Board of
Directors. The Company projects operating margins and cash flows for a period of one year, and applies
growth rates in the cash flow forecast period commensurate with industry forecasts. In arriving at its
forecasts, the Company considers past experience, economic trends and inflation as well as industry and
market trends.
Discount rates
The Company applies a discount rate in order to calculate the present value of its projected cash flows. The
discount rate represents the Company’s internally computed weighted average cost of capital (“WACC”) for
each CGU with appropriate adjustments for the risks associated with the CGUs in which intangible assets are
allocated. The WACC is an estimate of the overall required rate of return on an investment for both debt and
equity owners and serves as the basis for developing an appropriate discount rate. Determination of the
discount rate requires separate analysis of the cost of equity and debt, and considers a risk premium based
on an assessment of risks related to the projected cash flows of each CGU. Management applied a discount
rate between 10.62% and 12.58% in its projections (2020 - 11.05% and 12.25%).
Significant assumptions for FVLCD
Projected EBITDA
The Company’s assumptions for projected EBITDA are based on the Company’s internal budget, which is
approved by the Board of Directors. In arriving at the projected EBITDA, the Company considers projected
operating margins and growth rates as significant assumptions, past experience, economic trends and
inflation as well as industry and market trends.
EBITDA multiples
EBITDA multiples are based on recent comparable transactions, market comparatives, and management
estimates.
Sensitivity
As there are CGUs that have intangible assets with original costs that exceed their current year carrying
amounts, the Company expects future impairments and recoveries of impairments to occur as market
conditions change and risk premiums used in developing the discount rate change.
The recoverable amount of each CGU is sensitive to changes in market conditions and could result in material
changes in the carrying value of intangible assets in the future. Based on sensitivity analysis, no reasonably
possible change in key assumptions would cause the recoverable amount of any CGU to have a significant
change from its current valuation except for the CGUs identified below.
CGUs, which use VIU as the basis of recoverable amount, for which a reasonably possible change in key
assumptions would cause an impairment, along with the change required for an impairment to occur are as
follows:
Cash Generating Unit
December 31, 2021
K
December 31, 2020
AM
Page 34 • AutoCanada
Change in
discount rate
Change in
growth rate
Carrying
amount
$
Recoverable
amount exceeds
carrying amount
$
0.21 %
0.97 %
14,575
0.01 %
0.01 %
13,852
—
—
CGUs, which use FVLCD as the basis of recoverable amount, for which a reasonably possible change in key
assumptions would cause an impairment, along with the change required for an impairment to occur are as
follows:
Cash Generating Unit
December 31, 2021
Q
December 31, 2020
AH
22 Other assets
Prepaid expenses
Derivative financial instruments (Note 26)
Other assets 1
Net investment in lease (Note 25)
Change in
multiple
Recoverable
amount
$
Carrying
amount
$
Recoverable
amount exceeds
carrying amount
$
0.1
15,982
15,982
0.1
7,454
7,454
—
—
December 31, 2021
$
December 31, 2020
$
Current
Long-term
Current
9,528
—
—
44
9,572
309
—
15,868
1,034
17,211
8,536
366
29
—
8,931
Long-term
143
—
14,194
—
14,337
1 $15,868 (2020 - $14,194) relates to long-term loans receivable from the respective non-controlling interests (Note 15).
23 Trade and other payables
Trade payables
Accruals and provisions
Sales tax payable
Wages and withholding taxes payable
December 31,
2021
$
94,001
40,012
14,360
41,358
189,731
December 31,
2020
$
65,806
36,672
3,092
31,940
137,510
The following table provides a continuity schedule of all recorded provisions:
January 1, 2020
Provisions made during the year
Amounts expired or disbursed
December 31, 2020
Provisions made during the year
Amounts expired or disbursed
December 31, 2021
Legal and other
Finance and
insurance
$
71
—
—
71
—
(71)
—
Legal and
other
$
3,754
6,441
(3,122)
7,073
4,009
(2,526)
8,556
Total
$
3,825
6,441
(3,122)
7,144
4,009
(2,597)
8,556
The balance represents the non-recurring legal and loss provision associated with certain wholesale
transactions for the period ended December 31, 2018, management's best estimate of the most likely outcome
of the Company's liability under ongoing legal claims, and estimated contract termination fees related to the
integration of newly acquired entities.
Page 35 • AutoCanada
24
Indebtedness
This note provides information about the contractual terms of the Company’s interest bearing debt, which is
measured at amortized cost. For more information about the Company’s exposure to interest rate, foreign
currency and liquidity risk, refer to Note 33.
Revolving floorplan facilities
Revolving floorplan facilities - Syndicate (ii)
Revolving floorplan facilities - VW Credit Canada, Inc. (iii)
Revolving floorplan facilities - BMW Financial (iv)
Revolving floorplan facilities - RBC (v)
Revolving floorplan facilities - Mercedes-Benz Financial (vii)
Revolving floorplan facilities - GM Financial (vi)
Revolving floorplan facilities - Ally Financial (viii)
Carrying value
Indebtedness
Senior unsecured notes
Senior unsecured notes (i)
Embedded derivative
Unamortized deferred financing costs
Revolving term facilities (ii)
Revolving term facility
Unamortized deferred financing costs
Other debt
Mortgage (ix)
Other long-term debt
Total indebtedness
Current indebtedness
Long-term indebtedness
December 31,
2021
$
December 31,
2020
$
465,204
44,069
43,024
36,023
18,893
18,617
82,731
708,561
256,011
(29,306)
(4,740)
221,965
65,000
(1,158)
63,842
—
101
285,908
—
285,908
465,510
56,539
64,327
35,323
24,402
25,752
90,090
761,943
123,982
—
(3,266)
120,716
70,123
(1,296)
68,827
831
6,857
197,231
65
197,166
The following table shows the movement of indebtedness during the years ended December 31, 2021 and
December 31, 2020:
Balance, January 1
Amortization of deferred financing costs
Amortization of note premium
Recognition and revaluation of embedded derivative
Draws and additions
Repayments
Other
Balance, December 31
2021
$
197,231
1,896
(1,253)
(29,306)
353,957
(231,180)
(5,437)
285,908
2020
$
213,432
1,300
—
—
226,882
(245,505)
1,122
197,231
Page 36 • AutoCanada
Terms and conditions of outstanding loans are as follows:
i.
On April 15, 2021, the Company issued $125 million (2020 - $125 million) principal amount of its existing
8.75% (2020 - 8.75%) Senior Unsecured Notes due February 11, 2025 (the "New Notes", collectively the
"Notes"). The New Notes were issued at a premium issue price of $1,066.25 (2020 - $990.11) per $1,000
principal amount of notes (106.625%) (2020 - 9.00%). Interest is payable semi-annually on February 11 and
August 11 of each year the New Notes are outstanding. The initial interest payment date for the New Notes
will be August 11, 2021.
The Notes agreements contain certain redemption options whereby the Company can redeem all or part
of the Notes at prices set forth in the agreement, following certain dates specified in the agreements. In
addition, at any time prior to February 11, 2022, the Company may at its option redeem up to 35% of the
aggregate principal amount of the Notes with net cash proceeds from equity offerings at a specified
redemption price in the agreement. The Note holders also have the right to require the Company to
redeem the Notes or a portion thereof, at the redemption prices set forth in the agreement in the event of
a change in control. These redemption features constitute embedded derivatives that are required to be
separated from the Notes and measured at fair value.
The embedded derivative components of these compound financial instruments are measured at fair
value at each reporting date with gains or losses in fair value recognized through profit or loss (Note 11).
For the year ended December 31, 2021, the fair value of the embedded derivative was $29,306 with the
offsetting gain recognized in Finance costs (Note 11).
For the year ended December 31, 2020, the Company extinguished $150 million of Senior Unsecured
Notes and an extinguishment charge of $3,211 was recorded as a loss on extinguishment in Finance Costs
(Note 11).
ii. On April 14, 2021, the Company amended and extended its existing credit facility for three years to 2024.
The amended credit facility increases the revolving facility by $50 million to $225 million, and includes a
$1,060 million wholesale floorplan financing facility and a $15 million wholesale leasing facility, for total
aggregate bank facilities of $1.3 billion (the "New Credit Facilities"). New staged covenant thresholds were
established as per the terms of the April 14, 2021 amended credit facility agreement. Previously deferred
financing costs of $1,128 (2020 - $791) were included in the loss on extinguishment in Finance costs (Note
11).
On December 1, 2021, the Company amended and restated the existing credit facility for three years to
April 14, 2024. No changes were made to the facility limits or covenant thresholds.
In the case of advances under the revolving facility, the margins above the prime rate, banker’s
acceptance rate, US base rate or LIBOR rate are subject to a pricing grid based on the then applicable
ratio of senior net funded debt to EBITDA. As at December 31, 2021, the Company would have been in the
first of five tiers of the pricing grid which provides for advances at the prime rate or US base rate plus
1.25% (3.70% at December 31, 2021) or at the banker’s acceptance rate or LIBOR rate plus 2.25% (2.69% at
December 31, 2021).The wholesale leasing facilities bear interest rates of Canadian Dollar Offered Rate
(“CDOR”) plus 2.25% for a total of 2.69% as at December 31, 2021. The wholesale floorplan facilities bear
interest rates of Canadian Dollar Offered Rate (“CDOR”) plus 1.05% for a total of 1.49% as at December 31,
2021 except for facility for floorplan of used export vehicles which bears interest rates of CDOR rate plus
1.30% for total of 1.74% as at December 31, 2021.
The agreement has certain reporting requirements and financial covenants. The floorplan facility is
collateralized by each individual dealership’s inventories that are directly financed by the facility. The
revolving credit facility is collateralized by certain of the Company’s real property and fixed assets, as well
as certain current receivable and inventory assets not otherwise pledged as collateral.
iii.
VW Credit Canada, Inc. (“VCCI”) provides floorplan financing for new and used vehicles for all of the
Company’s Volkswagen and Audi dealerships (the “VCCI facilities”). During the first quarter of 2021,
amendments were made to the maximum amount of financing provided by the VCCI facilities to $98,545.
As at December 31, 2021, the maximum amount of financing is $98,545 (2020 - $94,800). The VCCI
facilities bear interest at Royal Bank of Canada (“RBC”) prime rate plus 0.00% – 0.25% (2020 -
0.00%-0.25%). The RBC prime rate was 2.45% at December 31, 2021 (2020 - 2.45%). The combined total
interest rates were 2.45%-2.70% (2020 - 2.45%-2.70%). The VCCI facilities have certain reporting
requirements and financial covenants and are collateralized by all of the dealerships' assets financed by
VCCI. The individual notes payable of the VCCI facilities are due when the related vehicle is sold.
Page 37 • AutoCanada
iv.
v.
BMW Financial Services Canada (“BMW Financial”), a division of BMW Canada Inc., provides floorplan
financing for new and used vehicles for all of the Company’s BMW dealerships (the “BMW Facilities”).
During the second quarter of 2021, amendments were made to the maximum advance limit to $109,550.
As at December 31, 2021, the maximum advance limit is $109,550 (2020 - $102,255). The BMW Facilities
bear a variable interest rate of prime minus 0.40% (2020 - 0.40%) per 360 day annum for a total of 2.05%
at December 31, 2021 (2020 - 2.05%). The BMW Facilities have certain reporting requirements and financial
covenants and are collateralized by the dealerships’ movable and immovable property.
RBC provides floorplan financing for new, used and demonstrator vehicles for three of the Company’s
dealerships (the “RBC Facilities”). As at December 31, 2021, the maximum advance limit is $50,000 (2020
- $50,000). The RBC Facilities bear interest rates of RBC’s Cost of Funds Rate plus 0.25%-0.50% (2020 -
0.25%-0.50%). The RBC’s Cost of Funds Rate was 1.21% as at December 31, 2021 (2020 - 1.24%). The
combined total interest rates were 1.46%-1.71% as at December 31, 2021 (2020 - 1.49%-1.74%). The RBC
Facilities have certain reporting requirements and financial covenants and are collateralized by the new,
used, and demonstrator inventory financed by RBC and a general security agreement from the General
Motors dealerships financed by RBC.
vi. General Motors Financial of Canada (the "GM Financial Facilities") provides floorplan financing for new,
used, service loaner, and demonstrator vehicles for two of the Company's dealerships. GM Financial
Facilities bear interest at a floating rate of interest per annum, which equals the prime rate. During the
first quarter of 2021, amendments were made to the maximum amount of financing to $51,300. As at
December 31, 2021, the prime rate was 2.45% (2020 - 2.45%) and the maximum amount of financing was
$51,300 (2020 - $50,300). The GM Financial Facilities have certain reporting requirements and are
collateralized by the new, used, and demonstrator inventory financed by GM Financial and a general
security agreement from the Company’s two dealerships financed by GM Financial.
vii. Mercedes-Benz Financial provides floorplan financing for new, used and demonstrator vehicles for two of
the Company’s dealerships (the “Mercedes-Benz Facilities”). As at December 31, 2021, the maximum
amount of financing was $59,500 (2020 - $58,000). The facilities bear interest rates of CDOR plus 1.75%
per annum and 2.05% per annum (2020 - 1.80%) for new wholesale lines of credit and used wholesale lines
of credit, respectively for totals of 2.19% and 2.49% (2020 - 2.47%). The Mercedes-Benz Facilities have
certain reporting requirements and financial covenants and are collateralized by the new, used, and
demonstrator inventory financed by Mercedes-Benz Financial and a general security agreement from the
Company’s dealerships financed by Mercedes-Benz Financial.
viii. Ally Financial provides U.S. floorplan financing for new, used, and demonstrator vehicles in the company's
U.S dealerships (the "Ally facility"). During the fourth quarter of 2021, amendments were made to include
an additional dealership to the floorplan financing and the interest rate was amended to the Ally prime
rate. As at December 31, 2021, the facility limit was $127,500 USD (2020 – $108,500 USD). The Ally facility
bears interest at the Ally Bank prime rate. As at December 31, 2021, the Ally prime rate was 3.25% while the
rate for the period ended December 31, 2020 was the one-month London Interbank Offered Rate ("LIBOR")
plus 3.45%. The floorplan facility has certain reporting requirements and financial covenants and is
collateralized by each individual dealership’s inventories that are directly financed by the facility.
ix.
VCCI provided the Company with a mortgage (the “VCCI Mortgage”). The VCCI Mortgage bore interest at
a floating rate of interest per annum equal to RBC’s prime rate plus 0.15% (2020 - 0.15%). The RBC prime
rate was 2.45% as at December 31, 2021 (2020 - 2.45%). The total interest rate was 2.60% as at December
31, 2021 (2020 - 2.60%). The VCCI Mortgage was repayable with blended monthly payments of $4
amortized over a 20-year period with the term expiring on July 15, 2021. The VCCI Mortgage had certain
reporting requirements and financial covenants and was collateralized by a general security agreement
consisting of a first fixed charge over the property. The VCCI Mortgage was repaid during the third quarter
of 2021.
Government assistance
For the year ended December 31, 2021, the Small Business Association Paycheck Protection Program (SBA PPP)
loan of $6,728 ($5,395 USD) received in the year ended December 31, 2020 was forgiven and recognized as an
offset to Operating expenses (Note 8).
Page 38 • AutoCanada
25 Leases
Right-of-use asset balance, beginning of period
Additions
Sublease adjustment
Acquisitions (Note 13)
Depreciation (Note 8)
Disposals
Effect of foreign currency translation
Right-of-use asset balance, end of period
Lease liability balance, beginning of period
Additions
Acquisitions (Note 13)
Repayments
Interest expense (Note 11)
Disposals
Effect of foreign currency translation
Lease liability balance, end of period
Current lease liabilities
Long-term lease liabilities
Rent concessions
December 31,
2021
$
308,897
17,217
(2,016)
81,539
(26,420)
(7,937)
(282)
370,998
December 31,
2021
$
387,929
17,047
81,539
(48,827)
23,062
(8,429)
496
452,817
25,602
427,215
December 31,
2020
$
303,536
12,135
—
19,316
(24,759)
(90)
(1,241)
308,897
December 31,
2020
$
380,463
13,111
19,316
(45,270)
22,189
(95)
(1,785)
387,929
24,079
363,850
The Company negotiated certain rent concessions on property leases primarily related to the deferral of rent
payments for a three-month period, predominantly during the second quarter of 2020 in exchange for future
repayment of the concessions or extensions to the respective lease terms. For the year ended December 31,
2021, the Company did not receive any additional rent concessions and $109 (2020 - $2,389) remains of the
overall negotiated cash deferral of $4,169, which is to be repaid over various terms ending in 2022.
The optional exemption for all eligible rent concessions has been applied for leases with similar characteristics
and the financial impact was nominal to the Consolidated Statements of Comprehensive Income (Loss). Certain
leases did not meet the criteria for the optional exemption due to substantive lease term extensions.
Other disclosures
Other than depreciation, the following amounts have been recognized in income:
Expenses related to short-term leases (included in Operating expenses)
Expenses related to leases of low-value assets that are not shown above as short-
term leases (included in Operating expenses)
Income from sub-leasing right-of-use assets (included in Lease and other income,
net)
2021
$
525
76
2020
$
2,006
95
215
204
As at December 31, 2021, potential cash outflows of $596,394 (2020 - $508,933), (undiscounted), have not
been included in the lease liability as it is not reasonably certain the extension options will be exercised. The
financial effect of including reasonably certain extension options in leases liabilities and right-of-use assets is
$98,225 (2020 - $54,873).
Page 39 • AutoCanada
As at December 31, 2021, estimated commitments associated with low-value and short-term leases are
insignificant.
For the year ended December 31, 2021, the Company recognized a loss of $919 on derecognition of the right-
of-use asset and lease liabilities pertaining to the buildings and presented the loss as part of 'Gain (loss) on
disposal of assets, net (Note 10).
Leases as lessor
Finance lease
For the year ended December 31, 2021, the Company has sub-leased one property that has been presented as a
net investment in lease in Other assets (Note 22) and recognized interest income on lease receivables of $16
(2020 - $nil) (Note 11).
The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments
to be received after December 31, 2021:
2022
2023
2024
2025
2026
Thereafter
Total undiscounted lease receivable
Unearned finance income
Net investment in the lease
Lease termination
Total
$
108
114
117
123
127
945
1,534
456
1,078
During the year ended December 31, 2021, the Company repurchased the assets previously sold in a sale and
leaseback transaction to Capital Automotive Real Estate Services Inc. for cash consideration of $13,900. The
lease agreement was subsequently terminated and a gain of $492 was recognized on the derecognition of the
right-of-use asset and lease liability (Note 10).
Page 40 • AutoCanada
26 Derivative financial instruments
Derivative financial instruments are held for the purpose of managing exposures to fluctuations in foreign
exchange rates and interest rates.
Foreign exchange risk
The Company uses foreign exchange forward contracts to economically hedge foreign currency risk. These
contracts are not designated as hedges for accounting purposes and changes in fair value are immediately
recognized in net income.
Interest rate risk
The Company enters into interest rate swaps to hedge the variable rates of the syndicated floorplan facility,
transforming the variable rate exposure to fixed rate obligations. Certain interest rate swaps are designated as
cash flow hedges and periodically assessed for effectiveness. Where the hedging relationship is assessed as
being effective, changes in fair value are recognized in other comprehensive income.
Changes in fair value on derivative instruments not designated as hedging instruments are immediately
recognized in net income. These instruments have settlement periods through to June 2025. Changes in the fair
value of these instruments will be recorded in Finance costs as the Company has not elected to apply hedge
accounting to these contracts.
During the year ended December 31, 2021, there were no changes to the designation of cash flow hedges.
During the year ended December 31, 2020, certain cash flow hedges with a notional amount of $177,800 were
de-designated as a result of the termination of the interest rate swaps. This resulted in a pre-tax loss of $11,911
that was fully deferred in accumulated other comprehensive income, which will be reclassified to net income in
future periods with the original associated finance costs. Concurrently, the Company entered into new interest
rate swaps with the notional amount of $177,800 to economically hedge variable rate debt. These instruments
have a settlement period from April 2021 through to June 2025. Changes in the fair value of these instruments
will be recorded in finance costs as the Company has not elected to apply hedge accounting to these
contracts.
The fair values and notional amounts of derivative financial instruments are as follows:
December 31, 2021
Other liabilities - current
Derivative financial instruments - liabilities
Notional values
Maturity
December 31, 2020
Other current assets
Other liabilities - current
Derivative financial instruments - liabilities
Foreign exchange
contracts
Interest rate swaps
Non-hedges Cash flow hedges
Non-hedges
Total
173
—
284
1,625
—
457
6,674
8,299
48,200 USD
197,200 CAD
177,800 CAD
2022
2022 - 2024
2025
366
—
—
—
461
—
—
366
461
7,060
15,086
22,146
Notional values
Maturity
17,300 USD
2021
222,200 CAD
2021 - 2024
177,800 CAD
2025
The weighted average hedge rate of cash flow hedges was 2.44% (2020 - 2.58%).
Page 41 • AutoCanada
Unrealized and realized pre-tax gains and (losses) on derivative instruments recognized in net income and other
comprehensive income on the Consolidated Statements of Comprehensive Loss are:
For the year ended December 31, 2021
Change in fair value of hedging instruments
Change in the fair value of terminated hedges
Unrealized change in fair value of non-hedging instruments
(Note 11)
Amortization of terminated hedges (Note 11)
Interest rate swap settlements (Note 11)
Change in fair value of foreign exchange forward contracts
Realized gain on foreign exchange forward contracts
For the year ended December 31, 2020
Change in fair value of hedging instruments
Change in the fair value of terminated hedges
Change in fair value of non-hedging instruments (Note 11)
Amortization of terminated hedges (Note 11)
Interest rate swap settlements (Note 11)
Change in fair value of foreign exchange forward contracts
Realized loss on foreign exchange forward contracts
Other
comprehensive
income
$
Net income
$
—
—
8,412
(3,268)
(7,023)
(539)
216
(2,202)
—
—
(3,175)
(2,308)
(3,208)
366
(1,754)
5,612
—
—
3,268
—
—
—
8,880
(1,335)
(11,911)
—
2,308
—
—
—
(10,079)
(10,938)
Total
$
5,612
—
8,412
—
(7,023)
(539)
216
6,678
(1,335)
(11,911)
(3,175)
—
(3,208)
366
(1,754)
(21,017)
Hedge ineffectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective
effectiveness assessments to ensure that an economic relationship exists between the hedged item and
hedging instrument.
The Company enters into interest rate swaps that have similar critical terms as the hedged item, such as
interest rate, payment dates, maturities and notional amount. The group does not hedge 100% of its loans,
therefore, the hedged item is identified as a proportion of the outstanding loans up to the notional amount of
the swaps. As all critical terms matched during the year, the economic relationship was 100% effective.
Effect of IBOR reform
Following the financial crisis, the reform and replacement of benchmark interest rates such as CDOR and other
interbank offered rates ("IBORs") has become a priority for global regulators (referred to as "IBOR reform"). The
Canadian Alternative Reference Rate Working Group (CARR) was created to identify and seek to develop a new
risk-free Canadian dollar interest rate benchmark. Although there are no plans to immediately discontinue
CDOR rates, an enhanced Canadian Oversight Repo Rate Average (CORRA) has been designed to comply with
recommendations of the Financial Stability Board as part of a global effort to reform benchmark interest rates.
As a result, while CORRA has been officially announced, it has not been approved and there is uncertainty
about how the Canadian dollar benchmark rates will evolve and the speed at which CORRA will become a
dominant benchmark for Canadian dollar borrowings. All of the Company's hedging instruments are currently
based on CDOR.
Page 42 • AutoCanada
The Company performs a qualitative assessment of hedge ineffectiveness for interest rate swaps, which may
occur due to:
● the credit value/debit value adjustment on the interest rate swaps which is not matched by the loan;
● differences in critical terms between the interest rate swaps and loans; and
● the effects of the forthcoming reforms to CDOR because these may take effect at a different time
and have a different impact on the hedged item (the floating-rate debt) and the hedging instrument
(the interest rate swap used to hedge the debt).
The associated derivative financial instruments were valued at $8,299 as at December 31, 2021 (2020 - $22,146).
There was no ineffectiveness for the year ended December 31, 2021 and 2020.
The Company has evaluated the extent to which its cash flow hedging relationships are subject to uncertainty
driven by IBOR reform as at December 31, 2021. As the CDOR rate associated with the derivative financial
instrument was still in effect, there was no impact from the IBOR reform.
27 Vehicle repurchase obligations
The Company operates service loaner programs and provides vehicles to a third party vehicle rental company
with individual terms not to exceed 12 months, at which time the Company has an obligation to repurchase
each vehicle at a predetermined amount. As a result, the Company has recorded the contractual repurchase
amounts as outstanding vehicle repurchase obligations and has classified the liability as current due to the
short-term nature of the obligation.
28 Other liabilities
Equity forward
Restructuring charges
Contingent liability
Derivative financial instruments (Note 26)
Equity forward liability
December 31, 2021
$
December 31, 2020
$
Current
Long-term
Current
—
710
—
457
1,167
6,201
3,731
—
—
9,932
—
1,215
500
461
2,176
Long-term
3,466
4,962
—
—
8,428
The Company has entered into an equity forward purchase agreement with a major Canadian financial
institution to reduce its cash and income exposure to fluctuations in its share price relating to the Restricted
Share Units ("RSUs"), Deferred Share Units ("DSUs"), and Share Appreciation Rights ("SARs"). Pursuant to the
agreement, the Company receives the economic benefit of share price appreciation and suffers the economic
loss of share price depreciation, while providing payments to the financial institution for the institution's cost of
funds minus dividends. As the agreement requires settlement in shares, the liability has been recorded as the
present value of the settlement and is not subject to remeasurement.
During the year ended December 31, 2021, the Company settled all of the 329,000 (2020 - 329,000) common
shares pursuant to the previous equity forward agreement (Note 31) and entered into a new equity forward for
150,000 common shares. Transaction fees of $165 were incurred on the settlement of the equity forward
liability resulting in a total amount of $3,631 recognized in equity for the purchase of treasury shares.
The following table shows the change in the equity forward liability for the years ended:
Outstanding, beginning of the period
Acquired
Exercised
Forfeited
Outstanding, end of the period
December 31, 2021
December 31, 2020
Number of
shares
329,000
150,000
(329,000)
—
150,000
$
3,466
6,201
(3,466)
—
6,201
Number of
shares
329,000
—
—
—
329,000
$
3,466
—
—
—
3,466
Page 43 • AutoCanada
Restructuring charges
Restructuring charges are related to the voluntary termination of two franchises in year ended December 31,
2019 and the operating costs of the related leased facility, with $1,736 being utilized and recognized in
Operating expenses (Note 8) during the year ended December 31, 2021.
29 Commitments and contingencies
Lawsuits and legal claims
The Company is engaged in various legal proceedings and claims that have arisen in the ordinary course of
business. The outcome of all of the proceedings and claims against the Company is subject to future resolution,
including the uncertainties of litigation. Based on information currently known to the Company and after
consultation with outside legal counsel, management believes that the probable ultimate resolution of any such
proceedings and claims, individually or in the aggregate, will not have a material adverse effect on the financial
condition of the Company, taken as a whole. Note 23 includes provisions to account for information known to
the Company and based on estimates of probable resolutions.
information for environmental matters, the Company’s ongoing efforts to
The Company’s operations are subject to federal, provincial and local environmental laws and regulations in
Canada. While the Company has not identified any costs likely to be incurred in the next several years, based on
known
identify potential
environmental concerns in connection with the properties it leases may result in the identification of
environmental costs and liabilities. The magnitude of such additional liabilities and the costs of complying with
environmental laws or remediating contamination cannot be reasonably estimated at the Consolidated
Statement of Financial Position date due to lack of technical information, absence of third party claims, the
potential for new or revised laws and regulations and the ability to recover costs from any third parties. Thus,
the likelihood of any such costs or whether such costs would be material cannot be determined at this time.
Letters of guarantee
The Company has outstanding letters of guarantee totaling $4,402 as at December 31, 2021 (2020 - $3,528)
with various due dates.
The Company will settle obligations as they arise for which these letters have been issued as security and it is
not the Company’s intent that draws will be made on these letters.
Capital commitments
As at December 31, 2021, the Company is committed to capital expenditure obligations in the amount of $2,971
(2020 - $17,700) related to dealership relocations, dealership re-imagings, and dealership Open Points with
expected completion of these commitments in 2022.
30 Share-based payments
The Company operates an equity-settled compensation plan under which it receives services from employees
as consideration for share-based payments. The plans are as follows:
Restricted Share Units (RSUs)
The Company grants RSUs to designated management employees. Effective in 2018, the RSU Plan was modified
such that awards are intended to be settled in shares. The RSU Plan settles by way of common shares, based on
the Company's average share price for the seven days prior to the vesting date. The RSUs are also entitled to
earn additional units based on dividend payments made by the Company and the share price on date of
payment. The RSUs granted are scheduled to vest at different intervals over three years — conditional upon
continued employment with the Company.
Page 44 • AutoCanada
The following table shows the change in the number and value of RSUs for the years ended:
Outstanding, beginning of the year
Settled - equity
Granted
Forfeited units
Dividends reinvested
Outstanding, end of the year
December 31, 2021
December 31, 2020
Number of
RSUs
316,456
(37,626)
33,549
(3,692)
—
308,687
Amount
$
2,382
(1,278)
1,036
(39)
—
2,101
Number of
RSUs
127,657
(4,823)
191,773
—
1,849
316,456
Amount
$
1,406
(34)
997
—
13
2,382
During the year ended December 31, 2021, 168,703 RSUs were vested but not settled. In addition, during the
year ended December 31, 2021, the total number of RSUs exercised and settled was 37,626 (2020 - 4,823), with
a charge of $459 (2020 - $nil) to Contributed surplus for exercised and settled RSUs, of which $603 was paid in
cash for the settlement of related tax withholdings.
Deferred Share Units (DSUs)
Independent members of the Board of Directors are paid a portion of their annual retainer in the form of DSUs.
They may also elect to receive up to 100% of their remaining cash remuneration in the form of DSUs. Effective
in 2018, the DSU Plan was modified such that awards are intended to be settled in shares. The underlying
security of DSUs are the Company’s common shares and are valued based on the Company’s average share
price for the five business days prior to the date on which Directors’ fees are granted. The DSUs are also
entitled to earn additional units based on dividend payments made by the Company and the share price on
date of payment.
The DSUs granted are scheduled to vest upon the termination date of the Director, at which time, the DSUs will
be settled in common shares no earlier than the termination date and no later than December 15 of the calendar
year following the Director’s termination date.
The following table shows the change in the number and value of DSUs for the years ended December 31:
Outstanding, beginning of the year
Settled
Granted
Dividends reinvested
Outstanding, end of the year
Stock Option Plan
December 31, 2021
December 31, 2020
Number of
DSUs
142,641
—
15,629
—
158,270
Amount
$
1,515
—
638
—
2,153
Number of
DSUs
107,203
—
33,764
1,674
142,641
Amount
$
1,020
—
483
12
1,515
The Stock Option Plan (the “Plan”) is designed to provide long-term incentives to designated management to
deliver long-term shareholder returns. Under the Plan, participants are granted options which only vest if
certain service and market conditions are met. The terms of the Plan specify that following retirement an
employee may exercise vested options with the rights to exercise continuing for 120 days following the
retirement date.
Options are granted under the Plan for no consideration and carry no dividend or voting rights. When
exercisable, each option is exercisable to acquire one common share. The exercise price of options is
determined by the Board and shall not be lower than the closing price of the AutoCanada shares on the Toronto
Stock Exchange immediately preceding the date of grant.
Page 45 • AutoCanada
The following table shows the change in the number of stock options for the years ended December 31:
2021
2020
Average
exercise price
per share
option
$
10.06
35.72
5.20
—
5.20
13.47
10.04
Share options
#
2,500,000
345,968
(33,333)
—
(66,667)
2,745,968
2,366,666
Average
exercise price
per share
option
$
10.26
5.20
—
—
—
10.06
10.04
Share options
#
2,400,000
100,000
—
—
—
2,500,000
1,858,333
Outstanding, beginning of the year
Granted
Exercised
Expired
Forfeited
Outstanding, end of the year
Vested and exercisable, end of the year
During the year ended December 31, 2021, 33,333 (2020 - nil) options under the Stock Option Plan (the "Plan")
were exercised and settled, with a charge of $40 (2020 - nil) to Contributed surplus.
The following table shows the expiry date and exercise price for the share options outstanding as at December
31, 2021:
Grant date
August 14, 2018
March 19, 2019
August 14, 2019
December 7, 2021
Total
Weighted average remaining contractual life of options
outstanding, end of the period
Expiry date
August 14, 2028
August 14, 2028
August 14, 2024
December 7, 2026
Exercise
price
$
10.05
11.49
9.72
35.72
Share options
#
1,930,000
370,000
100,000
345,968
2,745,968
6.27 years
The weighted average remaining contractual life for the share options outstanding as at December 31, 2020
was 7.33 years.
For the year ended December 31, 2021, the assessed weighted average fair value at grant date of options
granted was $15.49 per option. The fair value at grant date is determined using the Black-Scholes Model that
takes into account the exercise price, the expected life of the option, the share price at grant date, the
expected price volatility of the underlying share, the expected dividend yield of the underlying share and the
risk-free interest rate for the term of the option.
The model inputs for options granted during the year ended December 31, 2021 include:
December 7, 2021 grant
● Options are granted for no consideration and all options granted vest on December 7, 2024. Vested
options are exercisable until December 7, 2026.
● Exercise price: $35.72
● Grant date: December 7, 2021
● Life of option: 3 years
● Share price at grant date: $36.96
● Expected price volatility of the Company's shares: 64.18%
● Expected dividend yield: 1.08%
● Risk-free interest rate: 1.23%
Expected price volatility was determined at the time of grant using the AutoCanada share price on a historical
basis. It reflects the assumption that the historical volatility is indicative of future trends, which may not
necessarily be the actual outcome.
During the year ended December 31, 2021, there were expenses of $479 (2020 - $1,822) and nil recoveries
(2020 - nil).
Page 46 • AutoCanada
Executive Advance
During the year ended December 31, 2021, the Company advanced $2,000 to the President, collateralized by
the President's outstanding stock options under the existing Plan (the "Executive Advance") (Note 35). The
Executive Advance was considered to represent an advance against share-based compensation secured
against the Company's own shares and is treated as an equity instrument rather than an asset of the Company.
The Executive Advance was granted for no consideration, carries no dividend or voting rights, and was
immediately exercisable upon grant.
The share price of the Executive Advance is based on the unrealized value of the President's outstanding
options on the grant date, less the outstanding stock option exercise price, while the exercise price represents
the amount advanced to the President. The fair value of the awards granted on August 31, 2021 and the share-
based compensation expense for the period is insignificant.
Share Appreciation Rights (SARs)
The share appreciation rights are designed to enable those granted rights under the plan to participate in the
growth and profitability of the Company. All of the rights are time-based and vest over a maximum period of
three years. Vested rights are exercisable for a maximum period of five years after grant date.
Each share appreciation right that is exercised entitles the employee to receive a number of common shares
that is equal to (i) the amount by which the fair market value of one common share exceeds the notional
exercise price of the vested share appreciation right; divided by (ii) the fair market value of one common share.
The following table shows the change in the number of share appreciation rights for the year ended December
31, 2021:
2021
Weighted average
exercise price per
share appreciation
right
$
10.27
31.45
10.62
6.21
18.11
12.17
Share
appreciation
rights
#
1,126,950
143,000
(839,675)
(41,275)
389,000
66,000
2020
Weighted average
exercise price per
share appreciation
right
$
10.86
10.05
10.25
11.07
10.27
12.17
Share
appreciation
rights
#
1,159,450
158,000
(63,000)
(127,500)
1,126,950
66,000
Outstanding, beginning of the year
Granted
Exercised
Forfeited
Outstanding, end of the year
Vested and exercisable, end of the
year
During the year ended December 31, 2021, the total number of SARs exercised and settled was 839,675 (2020 -
63,000), with a charge of $17,923 (2020 - $191) to Contributed surplus for exercised and settled SARs, of which
$18,772 was paid in cash for the settlement of related tax withholdings. No share appreciation rights expired.
The weighted average contractual life remaining for these share appreciation rights as at December 31, 2021 is
2.81 years.
The assessed weighted average fair value at grant date of the share appreciation rights granted during the year
ended December 31, 2021 was $9.06 per option. The fair value at grant date has been determined using the
Black-Scholes Model.
The weighted average model inputs for the share appreciation rights granted during the year ended December
31, 2021 include:
● Exercise price: $31.45
● Expected life of option: 2.59 years
● Share price at grant date: $29.56
● Expected price volatility of the Company's shares: 54.72%
● Expected dividend yield: 1.43%
● Risk-free interest rate: 0.49%
Page 47 • AutoCanada
Expected price volatility was determined at the time of grant using the AutoCanada share price on a historical
basis, adjusted for any expected changes to future volatility due to publicly available information. It reflects the
assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual
outcome.
Employee Advances
During the year ended December 31, 2021, the Company advanced $2,570 to certain employees (the "Employee
Advances"), collateralized by the employees' outstanding SARs. The Employee Advances are accounted for as
equity-settled awards and are expected to vest 90 days from the grant date. The SARs held by these certain
employees were modified concurrent with the grant of the Employee Advances (the "SARs Modifications").
The share price of the Employee Advances is based on the amount advanced to each employee, while the
exercise price represents the amount advanced, including interest over the term of the advance. The fair value
of the awards granted on August 20, 2021 and the share-based compensation expense was recognized in
Operating expenses.
The SARs Modifications are accounted for as a new grant of SARs under the Company's existing SARs Plan and
were granted for no consideration and carry no dividend or voting rights. The fair value of the awards granted
on August 20, 2021 and the share-based compensation expense was recognized in Operations expenses.
The fair values of the SARs Modifications, Employee Advances, and Executive Advance granted during the year
ended December 31, 2021 were determined using the Black Scholes Model. Expected price volatility was
determined at the time of grant for the awards using the AutoCanada share price on a historical basis. It reflects
the assumption that the historical volatility is indicative of future trends, which may not necessarily be the
actual outcome.
For the year ended December 31, 2021, the employee's outstanding SARs vested and the Employee Advances
were partially settled by employee shares the settled out of the money with $1,271 recognized as a charge to
Employee costs.
Used Digital Retail Division
Common interests of the Partnership are granted to dealership management and the Executive Chairman (Note
35) under an equity issuance plan (the “Digital Plan”). This is designed to provide long-term incentives to
dealership and related party management to develop and deliver long-term returns on the digital retail initiative
(Note 13).
Equity interests are issued under the Digital Plan for the fair value of the interests at grant date and carry no
dividend or voting rights. The interests vest in accordance with the terms stated in the initial grant agreements.
When exercisable, the consideration paid to the equity interest holders is based on the value of the Partnership
on the date of exercise and will be settled in common shares.
The Executive Chair holds a 15% interest, that contains a share-based payment arrangement that vested
immediately upon grant, in the Partnership. Share-based compensation expense of $224 (2020 - $435) was
recognized in the Consolidated Statements of Comprehensive Income (Loss).
Share-Based Compensation Expense
Total expenses net of recoveries arising from share-based payment transactions recognized during the year
included in employee costs are as follows:
Stock options
Restricted share units
Deferred share units
Share appreciation rights
Share-based compensation
Used digital retail equity issuance (Note 15)
Page 48 • AutoCanada
2021
$
479
1,048
638
1,180
3,345
224
3,569
2020
$
1,822
917
494
796
4,029
435
4,464
31 Share capital
Common shares
Common shares of the Company are voting shares and have no par value. The authorized share capital is an
unlimited number of shares.
The following table shows the change in common shares held during the years ended:
Issued, beginning of the period
Exercised stock options (Note 30)
Issued, end of the period
Normal Course Issuer Bid
December 31, 2021
December 31, 2020
Number of
common shares
Number of
common shares
$
27,459,683
33,333
27,493,016
510,606
213
510,819
27,459,683
—
27,459,683
$
510,606
—
510,606
On December 20, 2021, the Company received approval from the TSX to commence a Normal Course Issuer Bid
(“NCIB”). The NCIB commenced on December 23, 2021, and will terminate on the earlier of December 22, 2022
and the date on which the maximum number of common shares that can be acquired pursuant to the NCIB
have been purchased. Under the NCIB, the Company is authorised to purchase, for cancellation, up to 1,730,321
common shares, representing approximately 6.3%, of the 27,493,016 issued and outstanding common shares
of the Company as at December 20, 2021. The Company is limited under the NCIB to purchasing no more than
36,686 common shares on any given day, subject to the block purchase exemption under the TSX rules.
In connection with the NCIB, the Company has established an automatic repurchase plan with its designated
broker to facilitate the purchase of shares under the NCIB at times when the Company would ordinarily not be
permitted to purchase its shares due to regulatory restrictions or blackout periods.
No common shares have been repurchased and cancelled under the NCIB for the year ended December 31,
2021 (Note 38).
Treasury shares
Shares are held in trust to mitigate the risk of future share price increases from the time the equity-settled
awards (Note 30) are granted to when they are fully vested and can be exercised. Under the Trust Agreement,
the third party trustee will administer the distribution of shares to the beneficiaries upon vesting, as directed by
the Company. Dividends earned during the year ended December 31, 2021 on the shares held in trust of $nil
(2020 - $3) are reinvested to purchase additional shares. The shares held in trust are accounted for as treasury
shares and are recognized on a first-in-first-out basis upon issuance and presented separately in the
Consolidated Statements of Changes in Equity.
The following table shows the change in treasury shares held for the years ended:
Outstanding, beginning of the period
Treasury shares acquired
Dividends reinvested
Forward share purchase (Note 28)
Treasury shares settled
Outstanding, end of the period
Dividends
December 31, 2021
December 31, 2020
Number of
treasury shares
Number of
treasury shares
$
(232,980)
—
—
(329,000)
318,674
(243,306)
(2,494)
—
—
(3,631)
3,685
(2,440)
(28,774)
(217,350)
(438)
—
13,582
(232,980)
$
(716)
(2,081)
(3)
—
306
(2,494)
Dividends are discretionary and are determined based on a number of factors. Dividends are subject to
approval of the Board of Directors. During the year ended December 31, 2021, no eligible dividends (2020 -
$0.10 per share) on common shares were declared or paid, resulting in total payments of $nil (2020 - $2,743).
On April 20, 2020, the Company suspended the eligible quarterly dividend per common share.
Page 49 • AutoCanada
Earnings per share
Basic earnings per share was calculated by dividing earnings attributable to AutoCanada shareholders by the
sum of the weighted-average number of common shares outstanding during the period. Basic earnings per
share are adjusted by the dilutive impact of all share based payment plans to calculate the diluted earnings per
share.
Net income (loss) for the year attributable to AutoCanada shareholders
2021
$
164,207
2020
$
(7,455)
The following table shows the weighted-average number of shares outstanding for the years ended:
Basic
Effect of dilution from RSUs
Effect of dilution from stock options
Effect of dilution from SARs
Diluted
2021
$
27,474,106
184,738
1,541,696
104,752
29,305,292
2020
$
27,313,140
—
—
—
27,313,140
For the year ended December 31, 2020, potential common shares related to RSUs of (87,051), stock options of
(729,253), and SARs of (376,670) were excluded from the computation of diluted earnings per share because
they were anti-dilutive.
32 Capital disclosures
The Company’s objective when managing its capital is to safeguard the Company’s assets and its ability to
continue as a going concern while at the same time maximizing the growth of the business, returns to
shareholders, and benefits for other stakeholders. The Company views its capital as the combination of long-
term indebtedness and equity.
The calculation of the Company’s capital is summarized below:
Long-term indebtedness (Note 24)
Equity
December 31,
2021
$
285,908
519,409
805,317
December 31,
2020
$
197,166
362,820
559,986
The Company manages its capital structure in accordance with changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust its capital structure, the Company may
assume additional debt, refinance existing debt with different characteristics, sell assets to reduce debt, issue
new shares or adjust the amount of dividends paid to its shareholders. The Company was in compliance with its
debt covenants as at December 31, 2021.
Net indebtedness
Net indebtedness is a measure used by management to evaluate the liquidity of the Company. Net
indebtedness is calculated as total indebtedness (as shown in the Consolidated Statements of Financial
Position), adjusted to remove any associated embedded derivative impacts, less cash and cash equivalents, as
follows:
Total indebtedness
Embedded derivative asset
Total indebtedness
Cash and cash equivalents
Net Indebtedness
Page 50 • AutoCanada
December 31,
2021
$
December 31,
2020
$
197,231
—
197,231
107,704
89,527
285,908
29,306
315,214
102,480
212,734
33 Financial instruments
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognized, in respect of each class of
financial asset and financial liability, are disclosed in the significant accounting policies (Note 3). The
Company’s financial assets are measured at amortized cost. The Company’s financial liabilities are measured at
amortized cost except for redemption liabilities and non-hedged interest swaps, which are carried at fair value
through profit or loss. The carrying values of financial instruments approximate their fair values, excluding the
senior unsecured notes. The fair value of the senior unsecured notes is $266,563 (2020 - $123,764).
Financial risk management objectives
The Company’s activities are exposed to a variety of financial risks of varying degrees of significance, which
could affect the Company’s ability to achieve its strategic objectives. AutoCanada’s overall risk management
program focuses on the unpredictability of financial and economic markets and seeks to reduce potential
adverse effects on the Company’s financial performance. Risk management is carried out by financial
management in conjunction with overall corporate governance. The principal financial risks to which the
Company is exposed are described below.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign currency and interest rates.
Foreign currency risk
The Company has operations in Canada and the United States. Foreign exchange risk arises from future
commercial transactions and recognized assets and liabilities denominated in a currency that is not the
functional currency of the relevant entity. The Company is exposed to foreign exchange risk because its
Canadian and U.S. operations engage in transactions denominated in a currency other than their respective
functional currency. Risk arises as a result of specific transfers associated with working capital between
Canadian and U.S. operations as well as wholesale used vehicle transactions where Canadian operations will
participate in disciplined cross-border sales when arbitrage opportunities are present.
Interest rate risk
The Company’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity
risk management section herein, the indebtedness note (Note 24), and the derivative financial instruments note
(Note 26). The sensitivity analysis below has been determined based on the exposure to interest rates at the
reporting date and stipulated change taking place at the beginning of the financial year and held constant
throughout the reporting period. The amounts below represent the absolute change to the reported account,
an increase in the basis point would result in a positive amount and a decrease in the basis point would result in
a negative amount. A 100 basis point change and 200 basis point change is used when reporting interest risk
internally to key management personnel and represents management's assessment of the possible change in
interest rates.
Finance costs
Finance income
Credit risk
+/- 200 Basis Point
+/- 100 Basis Point
2021
$
7,971
16
2020
$
8,916
16
2021
$
3,986
8
2020
$
4,458
8
The Company’s exposure to credit risk associated with its accounts receivable is the risk that a customer will be
unable to pay amounts due to the Company. Concentration of credit risk with respect to contracts-in-transit
and accounts receivable is limited primarily to automobile manufacturers and financial institutions. Credit risk
arising from receivables with commercial customers is not significant due to the large number of customers
dispersed across various geographic locations comprising the Company's customer base. Details of the aging
of the Company’s trade and other receivables are disclosed in the table below.
The Company applies the simplified approach to measuring expected credit losses, which uses a lifetime
expected credit loss allowance for all trade receivables. The expected loss rates are based on the payment
profiles of sales over the 12-month periods prior to December 31, 2021 and December 31, 2020 and the
corresponding historical credit losses experienced within these periods.
Page 51 • AutoCanada
The loss allowance for trade receivables as at December 31, 2021 and December 31, 2020 was determined as
follows:
December 31, 2021
December 31, 2020
Expected
loss rate
%
0.05
2.13
4.82
9.91
10.25
Gross carrying
amount - Trade
receivables
$
97,407
12,471
8,215
2,062
15,236
135,391
Expected
loss
allowance
(Note 17)
$
52
266
395
204
1,561
2,478
Expected
loss rate
%
0.05
2.05
4.56
7.23
7.31
Gross carrying
amount - Trade
receivables
$
84,470
9,840
6,388
1,495
18,447
120,640
Expected
loss
allowance
(Note 17)
$
40
202
292
108
1,348
1,990
Current
31 - 60 days
61 - 90 days
91 - 120 days
> 120 days
Total
The closing loss allowance for trade receivables reconciles to the opening loss allowance as follows:
Balance, January 1
Loan loss allowance recognized in profit or loss during the year
Receivables written off during the year
Additional amount recorded
Balance, December 31
2021
$
1,990
2,984
(2,475)
(21)
2,478
2020
$
1,869
3,474
(2,640)
(713)
1,990
The amounts disclosed on the Consolidated Statements of Financial Position for accounts receivable are net of
the expected loss allowance, details of which are disclosed in Note 17. When a trade and other receivable is
uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent
recoveries of amounts previously written off are credited against operating expenses in the Consolidated
Statements of Comprehensive Income (Loss).
Concentration of cash and cash equivalents exist due to the significant amount of cash held with a Canadian
financial institution (refer to Note 16 for further discussion of the Company’s concentration of cash held on
deposit with the financial institution). The syndicated revolving floorplan facility (Note 24) allows the Company's
dealerships to hold excess cash (used to satisfy working capital requirements of the Company's various Original
Equipment Manufacturer ("OEM") partners) in an account with the financial institution which bears interest at
1.488% at December 31, 2021 (2020 - 1.519%). These cash balances are fully accessible by the Company's
dealerships at any time; however, in the event of a default by a dealership in its floorplan obligation; the cash
may be used to offset unpaid balances under the facility. As a result, there is a concentration of cash balances
risk to the Company in the event of a default under the facility.
Liquidity risk
Liquidity risk is the risk that the Company is not able to meet its financial obligations as they become due or can
do so only at excessive cost. The Company’s activity is financed through a combination of the cash flows from
operations, borrowing under existing credit facilities and the issuance of equity. Prudent liquidity risk
management implies maintaining sufficient cash and cash equivalents and the availability of funding through
adequate amounts of committed credit facilities. One of management’s primary goals is to maintain an optimal
level of liquidity through the active management of the assets and liabilities as well as cash flows.
The Company has renegotiated certain financial liabilities and put in place new facilities to manage liquidity risk
in response to the COVID-19 pandemic. The steps taken by the Company to respond to possible future liquidity
constraints arising from the COVID-19 pandemic and the impact of those steps on the consolidated financial
statements are summarized in Note 24.
As at December 31, 2021, the Company has $160,000 (2020 - $104,877) in readily available liquidity from its
revolving term facility. However, the Company's ability to borrow under this facility requires it to comply with
its financial covenants.
Page 52 • AutoCanada
The following tables detail the Company’s remaining contractual maturity for its financial liabilities. The
amounts below have been determined based on the undiscounted contractual maturities of the financial
liabilities.
2022
$
2023
$
2024
$
2025
$
Thereafter
$
Total
$
December 31, 2021
Trade and other payables
Revolving floorplan facilities
Vehicle repurchase obligations
Indebtedness
Contractual interest payable
Lease liabilities
Derivative financial instruments
December 31, 2020
Trade and other payables
Revolving floorplan facilities
Vehicle repurchase obligations
Indebtedness
Contractual interest payable
Lease liabilities
Derivative financial instruments
189,731
708,561
3,584
—
23,622
54,561
3,357
983,416
—
—
—
101
23,622
53,420
2,860
80,003
—
—
—
—
—
—
65,000 250,000
2,539
22,380
48,740
51,656
428
2,111
141,147 301,707
—
—
—
—
—
189,731
708,561
3,584
315,101
72,163
534,428 742,805
8,756
534,428 2,040,701
—
2021
$
2022
$
2023
$
2024
$
Thereafter
$
Total
$
137,510
761,943
4,526
53
13,560
47,819
7,514
972,925
—
—
—
6,921
13,560
46,551
5,480
72,512
—
—
—
70,176
13,560
44,930
5,182
133,848
—
—
—
53
10,959
43,037
3,641
57,690
—
—
—
137,510
761,943
4,526
125,661 202,864
53,489
403,008 585,345
22,607
531,309 1,768,284
1,850
790
34 Fair value of financial instruments
The Company’s financial instruments as at December 31, 2021 are represented by cash and cash equivalents,
trade and other receivables, trade and other payables, revolving floorplan facilities, vehicle repurchase
obligations, long-term indebtedness, bank indebtedness, an embedded derivative, contingent consideration,
redemption liabilities, hedging derivatives, and non-hedge interest swaps.
The fair values of cash and cash equivalents, trade and other receivables, trade and other payables, and
revolving floorplan facilities approximate their carrying values due to their short-term nature.
Long-term indebtedness has a fixed-rate portion but the carrying value is not materially different from its fair
value.
The embedded derivative (Level 2) included within indebtedness (Note 24) is carried at fair value using the Hull
White pricing model. The increase in the fair value of the embedded derivative is largely due to an improvement
in the Company's credit spread.
Derivative financial instruments are made up of interest rate swaps and foreign exchange forward contracts
(Level 2). The fair value of interest rate swaps are calculated as the present value of the future cash flows. Both
contractually agreed payments and forward interest rates are used to calculate the cash flows, which are then
discounted on the basis of a yield curve that is observable in the market.
Redemption liabilities (Level 3) are remeasured at fair value each reporting period with the gain or loss being
recognized through profit or loss (Note 15).
The fair value was determined based on the prevailing and comparable market interest rates.
Page 53 • AutoCanada
The fair value hierarchy categorizes fair value measurements into three levels based on the inputs to valuation
technique, which are defined as follows:
● Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
● Level 3 – Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs).
There were no transfers between the levels of the fair value hierarchy during the year.
35 Related party transactions
Transactions with companies controlled by Directors
During the year, there were transactions with companies whose partners or senior officers are Directors of the
Company or related to Directors of the Company. These counterparties are:
● Business associates of the Executive Chairman who provide consulting services;
● A vehicle wholesale and export business, controlled by the Executive Chairman, that supplies used
vehicle inventory to the Company;
● A firm, whose controlling partner is the Executive Chairman, that provides administrative, limited
transportation, and other support services; and
● A company that is controlled by a family member of the President, which provides the sourcing of
customer leads.
All significant transactions between AutoCanada and companies related to Directors were approved by the
Company's Board of Directors and are based on normal commercial terms and conditions. A summary of these
transactions is as follows:
Consulting services, administrative and other support and sourcing fees
Used vehicle inventory purchases
2021
$
2,175
5,997
8,172
2020
$
1,151
—
1,151
Executive Advance
During the year ended December 31, 2021, the Company issued a $2,000 Executive Advance to the President,
collateralized by the President's outstanding stock options under the Company's existing Stock Option Plan (the
"Plan"). The Executive Advance is repayable in full on the earlier of i) March 31, 2022, or ii) the exercise and
settlement of the President's outstanding stock options under the Plan. Interest is payable annually at a rate of
1%. The Executive Advance was considered to represent an advance against share-based compensation
secured against the Company's own shares and is treated as an equity instrument rather than an asset of the
Company (Note 30).
Used Digital Retail Division
During the year ended December 31, 2020, the firm controlled by the Executive Chairman was issued a 15%
common interest in the Partnership created as a part of the digital retail strategy (Note 13), which vested at the
time of grant (Note 30). Changes in the value of the 15% interest are recorded in Operating expenses.
Page 54 • AutoCanada
Key management personnel compensation
Key management personnel consists of the Company's executive officers and directors. Key management
personnel compensation is as follows:
Employee costs (including Directors)
Short-term employee benefits
Partnership interest
Share-based compensation
2021
$
5,290
67
224
806
6,387
2020
$
4,029
108
435
1,327
5,899
36 Net change in non-cash working capital
The following table summarizes the net increase (decrease) in cash due to changes in non-cash working capital
for the years ended:
Trade and other receivables
Inventories
Current tax recoverable/payable
Other current assets
Other liabilities
Trade and other payables
Revolving floorplan facilities
December 31,
2021
$
(7,810)
(5,055)
—
(1,078)
(1,589)
40,594
(68,469)
(43,407)
December 31,
2020
$
14,711
137,036
(152)
(229)
172
(8,130)
(72,443)
70,965
Factors that can affect these items include seasonal sales trends, strategic decisions regarding inventory levels,
the addition of new dealerships, and the day of the week on which period-end cut-offs occur.
37 Segmented reporting
During the year ended December 31, 2021, the Executive Chairman served as the function of the Chief
Operating Decision Maker (CODM). The Executive Chairman is responsible for allocating resources and
assessing the performance of the following segments: Canadian Operations and U.S. Operations.
Each reportable operating segment is comprised of retail automobile dealerships and related businesses.
Transactions between reportable segments are accounted for in accordance with the accounting policies
described in the summary of significant accounting policies.
The Company's CODM measures the performance of each operating segment based on operating profit (loss).
The segmented information is set out in the following tables:
Year ended December 31, 2021
Year ended December 31, 2020
Canada 1
$
U.S.
$
Total
$
Canada 1
$
U.S.
$
Total
$
Revenues
External revenues
3,970,517
682,898
4,653,415
2,977,149
356,009
3,333,158
Inter-segment revenue
Total revenues
—
3,970,517
—
682,898
—
4,653,415
(3,664)
2,973,485
—
356,009
(3,664)
3,329,494
1 AutoCanada's corporate office has been included with the Canadian Operations segment, as it is located in Canada.
Page 55 • AutoCanada
Year ended December 31,
2021
Year ended December 31,
2020
Canada 1
$
U.S.
$
Total
$
Canada 1
$
U.S.
$
Total
$
Operating profit before other income
(expense)
192,838
28,736 221,574
87,692
(2,029) 85,663
Lease and other income, net (Note 10)
8,078
957
9,035
(Loss) gain on disposal of assets, net (Note 10)
(387)
—
(387)
6,744
1,563
642
(193)
7,386
1,370
Recoveries (impairment) of non-financial assets
(Note 21)
Operating profit
— 39,846
39,846
240,375 29,693 270,068
(15,312)
80,687
(8,895)
(10,475)
(24,207)
70,212
Finance costs (Note 11)
Finance income (Note 11)
(Loss) gain on redemption liabilities (Note 15)
Other losses
Net income (loss) for the year before tax
(35,189)
810
(14,116)
(353)
221,220
(72,505)
808
762
(482)
(1,205)
1 AutoCanada's corporate office has been included with the Canadian Operations segment, as it is located in Canada.
Assets held for sale (Note 19)
Segment assets
Capital expenditures and
acquisition of real estate (Note
20)
Segment liabilities
As at December 31, 2021
As at December 31, 2020
Canada 1
$
—
U.S.
$
—
Total
$
—
Canada 1
$
1,039
U.S.
$
—
Total
$
1,039
1,969,692
28,763
288,981
6,408
2,258,673
35,171
1,684,941
232,422
1,917,363
20,667
299
20,966
1,276,430
462,834
1,739,264
1,252,100
302,443
1,554,543
1 AutoCanada's corporate office has been included with the Canadian Operations segment, as it is located in Canada.
Disaggregation of revenue
The significant majority of the Company's revenue is from contracts with customers. Taxes assessed by
governmental authorities that are directly imposed on revenue transactions are excluded from revenue. In the
following table, revenue is disaggregated by major lines of goods and services and timing of transfer of goods
and services. The Company has determined that these categories depict how the nature, amount, timing, and
uncertainty of its revenue and cash flows are affected by economic factors. The table below also includes a
reconciliation of the disaggregated revenue with the Company's reportable segments:
New vehicles
Used vehicles
As at December 31, 2021
As at December 31, 2020
Canada 1
$
U.S.
$
1,639,894
323,987
Total
$
1,963,881
Canada 1
$
U.S.
$
1,528,915
204,976
Total
$
1,733,891
1,675,342
262,199
1,937,541
923,192
87,689
1,010,881
Parts, service and collision repair
426,927
57,712 484,639
361,472
48,499
409,971
Finance, insurance and other
228,354
39,000
267,354
159,906
14,845
174,751
Total revenue
3,970,517
682,898 4,653,415
2,973,485 356,009 3,329,494
1 AutoCanada's corporate office has been included with the Canadian Operations segment, as it is located in Canada.
Page 56 • AutoCanada
38 Subsequent events
Amended and Extended Credit Facilities
On February 7, 2022, the Company amended the $1,300 million syndicated credit agreement with Scotiabank,
CIBC, RBC, HSBC, ATB, BMO, and The Toronto-Dominion Bank ("TD"), while maintaining its existing specified-use
tranches and facility limits. The amendment included changes to the interest rate structure, covenants, and
other administrative and structural changes to add flexibility to meet the Company's operational needs on an
ongoing basis. Concurrently, the amendment was also executed to support both the Issuance of the $350
million senior unsecured notes issued on February 7, 2022 and the repayment of the previous $250 million
senior unsecured notes. The Credit Facility term was also extended to April 14, 2025.
Senior Unsecured Notes
On February 7, 2022, the Company issued Senior Unsecured Notes ("the New Issuance Notes") of $350 million
aggregate principal amount at 5.75%. to fund a redemption of the then outstanding $250 million Notes (Note
24). The Company redeemed the full $250 million outstanding balance on February 10, 2022. The New Issuance
Notes have a term of seven years and mature on February 7, 2029. Interest is payable semi-annually on February
7 and August 7 of each year the New Issuance Notes are outstanding. Concurrent with the redemption of the
Notes, the associated embedded derivative was extinguished.
Normal Course Issuer Bid
As at March 2, 2022, the Company repurchased and cancelled 542,401 shares under the Normal Course Issuer
Bid (“NCIB”) (Note 31) for $20 million.
Page 57 • AutoCanada
AutoCanada Inc.
200 - 15511 123 Avenue NW
Edmonton, AB • T5V 0C3 www.autocan.ca