2022
2022
2022
Annual
Annual
Annual
Annual
Financial
Financial
Financial
Financial
Results
Results
Results
Results
Consolidated Financial Statements
For the year ended December 31, 2022
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,
2022 and 2021, 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 for the years ended December 31, 2022 and
2021;
the consolidated statements of financial position as at December 31, 2022 and 2021;
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.
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.
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, 2022. These matters were
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 19 – Goodwill and intangible assets to the
consolidated financial statements.
The Company had intangible assets of $659,261
thousand as at December 31, 2022, of which a
portion pertains to the Canadian Operations
segment. Management performs an impairment
test at least annually, or more frequently, if events
or changes in circumstances indicate that the
carrying value may not be recoverable. For the
purpose of assessing impairment, assets are
grouped as cash generating units (CGU), the
lowest level for which there are separately
identifiable cash flows. Impairments are recorded
when the recoverable amounts of CGUs are less
than their carrying amounts. The recoverable
amount of each CGU is based on the greater of fair
value less cost 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 considerations.
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 EBITDA determined through projected
operating margins, growth rates and EBITDA
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
EBITDA through 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.
How our audit addressed the key audit matter
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
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
recognized impairment recoveries of $8,691
thousand in the Canadian Operations segment
allocated to intangible assets.
We consider 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 CGU’s,
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
related to franchise rights acquired
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 13 – Business acquisitions to the consolidated
financial statements.
Tested how management estimated the fair
values of the indefinite-life intangible assets
relating to franchise rights, which included the
following:
During the year ended December 31, 2022, the
Company completed the acquisitions of
substantially all of the assets or shares of various
dealerships for total consideration of $134,880
thousand. The fair values of the identifiable assets
acquired included $83,085 thousand in intangible
assets relating to indefinite-life franchise rights
associated with the respective dealerships.
Management applies significant judgment in
estimating the fair value of the intangible assets.
The fair value of the intangible assets relating to
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,
Key audit matter
How our audit addressed the key audit matter
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
testing the reasonableness of the discount
rates.
indefinite-life franchise rights is based on the multi-
period excess earnings method, using the
discounted cash flow model. These determinations
of the estimated fair values involve significant
estimates and 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
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 1, 2023
AutoCanada Inc.
Consolidated Statements of Comprehensive Income
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 on disposal of assets, net (Note 10)
Recoveries of non-financial assets (Note 19)
Operating profit
Finance costs (Note 11)
Finance income (Note 11)
Loss on redemption liabilities (Note 14)
Other gains (losses), net
Net income for the year before taxation
Income tax expense (Note 12)
Net income for the year
Other comprehensive (loss) income
Items that may be reclassified to profit or loss
Foreign operations currency translation
Change in fair value of cash flow hedge (Note 24)
Income tax relating to these items
Other comprehensive (loss) income for the year, net of tax
Comprehensive income for the year
Net income for the year attributable to:
AutoCanada shareholders
Non-controlling interests
Comprehensive income for the year attributable to:
AutoCanada shareholders
Non-controlling interests
Net income per share attributable to AutoCanada shareholders:
Basic
Diluted
Weighted average shares
Basic (Note 29)
Diluted (Note 29)
December 31,
2022
$
6,040,619
(4,997,746)
1,042,873
(811,018)
231,855
14,301
(296)
8,691
254,551
(131,478)
4,144
(4,829)
1,496
123,884
32,824
91,060
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
6,505
6,650
(1,688)
11,467
102,527
85,436
5,624
91,060
96,903
5,624
102,527
3.28
3.03
(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
26,050,206
28,233,882
27,474,106
29,305,292
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 15)
Trade and other receivables (Note 16)
Inventories (Note 17)
Other current assets (Note 20)
Property and equipment (Note 18)
Right-of-use assets (Note 23)
Other long-term assets (Note 20)
Deferred income tax (Note 12)
Derivative financial instruments (Note 24)
Intangible assets (Note 19)
Goodwill (Note 19)
LIABILITIES
Current liabilities
Trade and other payables (Note 21)
Revolving floorplan facilities (Note 22)
Current tax payable
Vehicle repurchase obligations (Note 25)
Indebtedness (Note 22)
Redemption liabilities (Note 14)
Lease liabilities (Note 23)
Other liabilities (Note 26)
Long-term indebtedness (Note 22)
Long-term lease liabilities (Note 23)
Long-term redemption liabilities (Note 14)
Derivative financial instruments (Note 24)
Other long-term liabilities (Note 26)
Deferred income tax (Note 12)
EQUITY
Attributable to AutoCanada shareholders
Attributable to non-controlling interests
December 31,
2022
$
December 31,
2021
$
108,301
217,790
979,540
10,142
1,315,773
345,592
396,369
17,298
40,984
4,970
659,261
78,084
2,858,331
229,696
992,254
13,952
2,277
777
26,219
27,766
4,338
1,297,279
554,351
457,111
1,050
1,939
8,894
50,910
2,371,534
457,899
28,898
486,797
2,858,331
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
Commitments and contingencies (Note 27)
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)
Attributable to AutoCanada shareholders
Cumulative
translation
adjustment
$
Contributed
surplus
$
OCI hedge
reserve
$
Treasury
shares
$
(2,440)
(6,823)
(5,105)
(6,149)
Share
capital
$
510,819
Retained
earnings
$
3,109
Total
capital
$
493,411
Non-
controlling
interests
$
25,998
Total
equity
$
519,409
—
—
—
—
—
—
—
—
85,436
85,436
5,624
91,060
6,505
4,962
—
11,467
—
11,467
—
—
—
—
—
—
—
(3,247)
(3,247)
(32,089)
—
(24,516)
—
—
—
(56,605)
—
(56,605)
(55,533)
—
(27,009)
—
—
—
—
(21)
—
(2,890)
—
376
10,496
—
(5,101)
—
1,768
(1,768)
—
—
—
—
5,410
(2,401)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(82,542)
—
(82,542)
863
842
523
1,365
—
(2,890)
—
(2,890)
—
376
—
376
—
5,395
—
5,395
—
—
—
—
—
5,410
—
5,410
—
(2,401)
—
(2,401)
Balance, January 1, 2022
Net income
Other comprehensive (loss)
income
Dividends paid by subsidiaries to
non-controlling interests (Note
14)
Repurchase of common shares
under the Normal Course Issuer
Bid (Note 29)
Repurchase of common shares
under the Substantial Issuer Bids
(Note 29)
Reorganization of non-
controlling interests (Note 14)
Forward share purchase (Note
26)
Repayment of Executive
Advance (Note 33)
Settlement of share-based
awards (Note 28)
Shares settled from treasury
(Note 29)
Share-based compensation
(Note 28)
Deferred tax on share-based
payments
Balance, December 31, 2022
433,693
(672)
(64,743)
1,400
(1,187)
89,408
457,899
28,898
486,797
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
$
(2,494)
—
9,995
—
(3,036)
—
(12,637)
—
Retained
earnings
$
Total
capital
$
Non-
controlling
interests
$
(160,560) 341,874
20,946
164,207
164,207
2,992
Total
equity
$
362,820
167,199
510,606
—
—
—
—
Balance, January 1, 2021
Net income
Other comprehensive (loss)
income
Dividends paid by subsidiaries
to non-controlling interests
(Note 14)
Reorganization of non-
controlling interests (Note 14)
Forward share purchase (Note
26)
Settlement of share-based
awards (Note 28)
Issuance of executive and
employee advances
Deferred tax on share-based
payments
Shares settled from treasury
(Note 29)
Share-based compensation
(Note 28)
—
—
(2,069)
6,488
—
4,419
—
4,419
—
—
—
—
(3,631)
(2,570)
213
—
(18,422)
—
—
—
(4,570)
—
9,084
—
3,685
(3,685)
—
—
3,345
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(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 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 for the year
Adjustments for:
Income tax expense (Note 12)
Amortization of deferred financing costs
Amortization of note premium
Depreciation of property and equipment (Note 18)
Depreciation of right-of-use assets (Note 23)
Amortization of terminated hedges (Note 24)
Amortization of intangible assets
Loss on disposal of assets, net (Note 10)
Share-based compensation - equity-settled (Note 28)
Share-based compensation - Used Digital Retail Division (Note 28)
Loss on extinguishment of debt (Note 11)
Loan forgiveness
Unrealized fair value changes on non-hedging instruments (Note 24)
Unrealized fair value changes on foreign exchange forward contracts (Note 24)
Loss on extinguishment of embedded derivative (Note 11, 22)
Unrealized fair value changes on embedded derivative (Note 11)
Revaluation of redemption liabilities (Note 14)
Income taxes paid
Recoveries of non-financial assets (Note 19)
Settlement of share-based awards (Note 28)
Issuance of employee advances (Note 28)
Repayment (issuance) of executive advance (Note 33)
Net change in non-cash working capital (Note 34)
Investing activities
Business acquisitions, net of cash acquired (Note 13)
Purchases of property and equipment (Note 18)
Settlement of prior year business acquisitions
Proceeds on sale of property and equipment
Financing activities
Proceeds from indebtedness
Repayment of indebtedness
Repurchase of common shares under Normal Course Issuer Bid (Note 29)
Shares settled from treasury, net (Note 29)
Proceeds from exercise of stock options, net
Settlement of share-based awards (Note 28)
Forward share purchase (Note 26)
Settlement of Substantial Issuer Bids (Note 29)
Dividends paid to non-controlling interests (Note 14)
Repayment of loan by non-controlling interests
Principal portion of lease payments
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year (Note 15)
Cash and cash equivalents at end of year (Note 15)
December 31,
2022
$
December 31,
2021
$
91,060
167,199
32,824
1,377
(322)
20,852
30,781
3,268
374
296
5,410
391
9,860
—
(9,303)
(18)
29,306
—
4,829
(33,114)
(8,691)
(3,641)
—
376
(27,941)
147,974
(174,882)
(52,667)
(598)
123
(228,024)
1,010,006
(770,064)
(56,605)
1,768
8,573
—
—
(82,542)
(3,247)
2,162
(27,214)
82,837
3,034
5,821
102,480
108,301
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)
(2,570)
(2,000)
(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
Page 5 • AutoCanada
The accompanying notes are an integral part of these consolidated financial statements.
AutoCanada Inc.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2022 and 2021
(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, after-market products and
auction services. 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 1, 2023.
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. 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.
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, used 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.
Page 7 • AutoCanada
(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.
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.
Page 8 • AutoCanada
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.
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.
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, contingent consideration and embedded derivative, 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 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 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.
Page 9 • AutoCanada
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.
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 acquired in a business combination consist of rights under franchise agreements ("dealer
agreements") and certifications with automobile manufacturers. The Company has determined that dealer
agreements and certifications 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 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.
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets with finite
lives amortized over the useful economic life and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortization period and the amortization method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in
the expected useful life or the expected pattern of consumption of future economic benefits embodied in
the asset are considered to modify the amortization period or method, as appropriate, and are treated as
changes in accounting estimates. The amortization expense on intangible assets with finite lives is
recognized in the statement of profit or loss in the expense category that is consistent with the function of
the intangible assets.
Page 10 • AutoCanada
(b) Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are
recognized as an intangible asset when the Company can demonstrate:
● The technical feasibility of completing the intangible asset so that the asset will be available for use
or sale;
● Its intention to complete and its ability and intention to use or sell the asset;
● How the asset will generate future economic benefits;
● The availability of resources to complete the asset; and
● The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any
accumulated amortization and accumulated impairment losses. Amortization of the asset begins when
development is complete, and the asset is available for use. It is amortized over the period of expected
future benefit. Amortization is recorded in operating expenses. During the period of development, the asset
is tested for impairment annually.
(c) 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.
(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 and certifications 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.
Page 11 • AutoCanada
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.
After the commencement date of a lease contract, remeasurements of a lease liability result from either a
lease modification or reassessment. A change in the scope of a lease contract, or the consideration for a
lease, that was not part of its original terms and conditions is considered a lease modification. A lease
modification is assessed to determine whether it meets the criteria of a separate lease that would require a
separate right-of-use asset and a corresponding lease liability at the effective date of the modification. If the
lease modification is not a separate lease, the Company remeasures the lease liability to reflect changes to
the lease payments and adjusts the carrying amount of the right-of-use asset. If the carrying amount of the
right-of-use asset has already been reduced to zero, the Company recognizes the remaining amount of the
remeasurement in the determination of net earnings (loss). A lease reassessment takes place when there are
changes in the lease payments based on contractual clauses included in the original contract. For lease
reassessments, the lease liability is remeasured to reflect changes to the lease payments and adjusts the
carrying amount of the right-of-use asset. If the carrying amount of the right-of-use asset has already been
reduced to zero, the Company recognizes the remaining amount of the remeasurement in the determination
of profit or loss.
(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.
(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.
Page 12 • AutoCanada
(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. 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 28.
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.
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.
Page 13 • AutoCanada
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 original hedged transactions occur.
Further information on the Company’s risk management and hedge accounting is presented in Note 24.
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 24.
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 Vice 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 35.
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.
4 New and amended accounting standards issued
Accounting standards and amendments issued and adopted in 2022
Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
Under IAS 16 Property, Plant and Equipment, it is required that the cost of an asset includes any costs
attributable to bringing the asset to the location and condition necessary for the asset to be capable for
operating in its intended manner. Testing that asset is functioning properly is one of those costs.
In May 2020, the IASB published an amendment to IFRS 16 that prohibits deducting any proceeds from selling
items produced while bringing that asset to the location and condition necessary for it to be capable of
operating in the manner intended by management from the cost of an item of property, plant, and equipment.
This amendment states that an entity should recognize the proceeds from selling such items, and the cost of
producing those items, in profit or loss. Further, an entity will use IAS 2 Inventories as guidance on how to
measure the cost of such items and specifically deprecation of the asset should not be included as the asset is
not ready for intended use.
Page 14 • AutoCanada
The amendment requires separate disclosure in the statement of comprehensive income or loss for the
amounts of proceeds and costs relating to items produced that are not an output of the entity’s ordinary
activities.
This amendment can have a significant impact on entities where items are produced and sold as part of
bringing an item of property, plant, and equipment to the location and condition required for its intended use.
The Company has assessed the adoption of this standard to have no material impact to the assets currently
held and under the scope of IAS 16.
Reference to Conceptual Framework (Amendments to IFRS 3 Business Combinations)
The IASB published minor amendments to IFRS 3 to update the references for what constitutes as asset or a
liability in a business combination in the Conceptual Framework for Financial Reporting to a current version
issued in March 2018, without significantly changing its requirements.
An amendment was included to add an exception to the recognition principle under IFRS 3 for liabilities and
contingent liabilities that fall under the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets
or IFRIC 21 Levies rather than the 2018 Conceptual Framework previously used. Under this new exception, an
entity will not recognize some liabilities when applying IAS 37 rather than would have been recognized under
IFRS 3 and therefore ensuring that certain liabilities do not need to be derecognized immediately after the
acquisition date along with a subsequent gain recognized that did not depict an economic gain.
Clarification by the board was also made that when applying IFRS 3, that contingent assets should not be
recognized in business combinations at the acquisition date, as defined in IAS 37. The Company has assessed
that there is no material impact upon adoption of the amendment.
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37 Provisions, Contingent Liabilities,
and Contingent Assets)
IAS 37 defines an onerous contract as one in which the unavoidable costs of meeting the entity’s obligations
exceed the economic benefits to be received under that contract. Unavoidable costs are the lower of the net
cost of exiting the contract and the costs to fulfil the contract.
In May 2020, the IASB published an amendment to IFRS 37 that clarifies that the costs of fulfilling a contract
should include both the incremental direct costs and an allocation of other costs directly related to fulfilling the
contact. The amendment also clarifies that before a separate provision for an onerous contract can be
recognized, any impairment loss on assets used in fulfilling the contract must first be recorded.
This expands the potential costs to be recorded and could result in the recognition of more onerous contract
provisions. The Company has assessed that there is no material impact upon adoption of the amendment.
Amendment to IFRS 9 Financial Instruments
An amendment was made to clarify which fees should be included in the "10 per cent" test for assessing
derecognition of financial liabilities. An entity includes only fees paid or received between the entity (the
borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s
behalf. Costs or fees paid to third parties are not to be included. The Company has assessed that there is no
material impact upon adoption of the amendment.
Accounting standards and amendments issued but not yet adopted in 2022
Certain new standards, interpretations, amendments and improvements to existing standards were issued by
the IASB or International Financial Reporting Interpretations Committee (“IFRIC”) that are not effective for the
year ended December 31, 2022, and have not been applied in the preparation of these consolidated financial
statements.
The standards issued that are applicable to the Company are as follows:
Insurance Contracts (IFRS 17)
IFRS 17 was issued in May 2017 as a replacement for IFRS 4 Insurance Contracts. It requires a current
measurement model where estimates are remeasured in each reporting period. The standard allows a choice
between recognizing changes in discount rates either in the statement of profit or loss or directly in other
comprehensive income. The choice is likely to reflect how insurers account for their financial assets under IFRS
9.
Targeted amendments were made in July 2020 aimed to ease the implementation of the standard by reducing
implementation costs and making it easier for entities to explain the results from applying IFRS 17 to investors
and others. The amendments also deferred the application date of IFRS 17 to annual reporting periods
beginning on or after January 1, 2023. Early adoption is permitted. The Company is assessing the potential
impact of this standard.
Page 15 • AutoCanada
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
In May 2021 amendments were made to IAS 12 Income Taxes that require companies to recognize deferred tax
on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary
differences. These will typically apply to transactions such as leases of lessees and decommissioning
obligations and will require the recognition of additional deferred tax assets and liabilities. IAS 12 did not
previously address how to account for the tax effects of on-balance sheet leases and similar transactions and
various approaches were considered acceptable, these amendments attempt to uniform the approach taken.
The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with early
adoption permitted. The Company is assessing the potential impact of this standard.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
In February 2021 IASB amended IAS 1 to require entities to disclose their material rather than their significant
accounting policies. The amendments define what is material accounting policy information and explain how to
identify when accounting policy information is material. They further clarify that immaterial accounting policy
information does not need to be disclosed. If it is disclosed, it should not obscure material accounting
information.
The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with early
adoption permitted. The Company is assessing the potential impact of this standard.
Definition of Accounting Estimates (Amendments to IAS 8)
The amendment made in February 2021 to IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors clarifies how companies should distinguish changes in accounting policies from changes in accounting
estimates. The distinction is important, because changes in accounting estimates are applied prospectively to
future transactions and other future events, whereas changes in accounting policies are generally applied
retrospectively to past transactions and other past events as well as the current period.
The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with early
adoption permitted. The Company is assessing the potential impact of this standard.
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 for 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 19).
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 31 for further disclosure.
Page 16 • AutoCanada
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.
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 14). 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.
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.
Deferred taxes
The extent to which deferred tax assets are recognized is based on estimates of future profitability.
Management has concluded that it is probable that the deferred tax assets will 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 to be probable of recovery.
6 Revenue
New vehicles
Used vehicles
Parts, service and collision repair
Finance, insurance and other
Revenue
7 Cost of sales
New vehicles
Used vehicles
Parts, service and collision repair
Finance, insurance and other
Cost of sales
2022
$
2021
$
1,963,881
1,937,541
484,639
267,354
6,040,619 4,653,415
2,160,565
2,870,145
642,665
367,244
2022
$
1,941,253
2,748,846
289,153
18,494
4,997,746
2021
$
1,787,466
1,796,279
217,985
17,502
3,819,232
Page 17 • AutoCanada
8 Operating expenses
Employee costs (Note 9)
Government assistance 1
Administrative costs 2, 3
Expected credit losses on trade and other receivables 3
Facility lease costs
Depreciation of right-of-use assets (Note 23)
Depreciation of property and equipment (Note 18)
Operating expenses
2021
Revised
(Note 36)
$
389,145
(11,769)
187,746
2,984
811
26,420
17,272
612,609
2022
$
520,515
(264)
235,116
1,273
2,745
30,781
20,852
811,018
1 Government assistance represents the Company's eligible claim of $nil (2021 - $4,388) for the Canada Emergency Wage
Subsidy (CEWS) and $264 (2021 - $653) claim for the Canada Emergency Rent Subsidy (CERS) for the year ended December
31, 2022, with $nil (2021 - $299) included in trade and other receivables. There are no unfulfilled conditions or other
contingencies attached to the subsidy recognized.
2 Administrative costs include professional fees, consulting services, technology-related expenses, marketing, and other
general and administrative costs.
3 Reclassification of comparative figures for presentation purposes (Note 36). The Company previously presented its
expected credit losses on trade and other receivables as part of administrative costs. However, management considers it to
be more relevant if expected credit losses on trade and other receivables are presented on a separate line. Prior year
comparative as at December 31, 2021 have been revised by reclassifying $2,984 from administrative costs to expected
credit losses on trade and other receivable.
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 28)
Other benefits
Employee costs
10 Lease and other income and loss on disposal of assets, net
Lease and other income, net
Lease and rental income
Other income
Loss on disposal of assets, net
Loss on lease terminations, net
Disposals of property and equipment (loss) gains, net
Page 18 • AutoCanada
2022
$
461,260
27,182
23,593
5,801
2,679
520,515
2021
$
344,819
19,839
18,934
3,569
1,984
389,145
2022
$
8,083
6,218
14,301
—
(296)
(296)
2021
$
6,416
2,619
9,035
(427)
40
(387)
11 Finance costs and finance income
Finance costs
Interest on long-term indebtedness
Interest on lease liabilities (Note 23)
Loss on extinguishment of debt (Note 22)
Unrealized fair value changes on non-hedging instruments (Note 24)
Amortization of terminated hedges (Note 24)
Loss on extinguishment of embedded derivative (Note 22)
Unrealized fair value changes on embedded derivative (Note 22)
Floorplan financing
Interest rate swap settlements (Note 24)
Other finance costs
Finance income
Interest on net investment in lease (Note 23)
Short-term bank deposits
2022
$
2021
$
29,325
29,828
9,860
(9,303)
3,268
29,306
21,900
23,062
1,128
(8,412)
3,268
—
—
(29,306)
92,284
33,644
1,084
4,466
11,640
11,910
7,023
4,616
131,478
35,189
64
4,080
4,144
16
794
810
Cash interest paid during the year ended December 31, 2022 is $97,144 (2021 - $63,625), which includes
$29,828 (2021 - $23,062) of cash interest paid related to interest on lease liabilities.
Page 19 • AutoCanada
12 Taxation
Reconciliation of effective income tax rate for the year ended December 31, 2022 is as follows:
2022
$
2021
$
123,884
221,220
31,590
56,190
(1,810)
(709)
3,327
(500)
(268)
1,223
(29)
32,824
26.5 %
2022
$
40,347
3,198
43,545
(10,721)
—
(10,721)
32,824
(3,985)
2,335
1,782
(3,310)
143
722
144
54,021
24.4 %
2021
$
24,451
319
24,770
29,251
—
29,251
54,021
2022
$
40,984
(50,910)
(9,926)
2021
$
40,881
(53,814)
(12,933)
Net income for the year before tax
Net income for the year before tax multiplied by the blended rate of Canadian
corporate tax of 25.5% (2021 - 25.4%)
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 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
Total income tax expense
Components of deferred income tax:
Deferred tax asset
Deferred tax liability
Net deferred tax liability
Page 20 • AutoCanada
The movements of deferred tax assets and liabilities are shown below:
Deferred
income from
partnerships
$
Property
and
equipment
$
1,779
Goodwill
and
intangible
assets
$
Right-of-
use assets
net of lease
liabilities
$
Derivative
financial
instruments
$
Non-
capital
losses
$
(2,679)
(19,238)
9,974
4,486 10,770
Share-
based
Total
Other
payments
$
$
$
— 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)
9,816
(753)
(6,098)
1,959
4,950 (1,604)
(359) 2,810 10,721
—
—
—
—
(1,688)
—
— —
(1,688)
—
—
—
—
—
—
(2,401) —
(2,401)
—
—
(673)
(3,743)
—
866
—
—
—
—
—
—
— —
(4,416)
—
(75)
791
(4,606)
(758)
(37,552)
12,846
(3,209) 15,206
1,777 6,370 (9,926)
Deferred tax assets
(liabilities)
January 1, 2021
(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
(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,
2022
Changes in the deferred income tax components are adjusted through deferred tax expense. Of the above
components of the deferred income tax (liability) asset, ($4,606) (2021 - $(14,422)) 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
2022
$
129,385
2021
$
140,159
(46,722)
(35,162)
(81,884)
47,501
13,544
(46,764)
(45,608)
(92,372)
47,787
12,678
Page 21 • AutoCanada
As at December 31, 2022, the Company has recognized the benefit of $47,501 (2021 - $47,787) of the
deductible temporary differences, relating to the U.S. Operations, as a deferred tax asset. The Company has
concluded that it is probable that the recognized deferred tax assets will 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 to be probable of recovery.
The Company's U.S. Operations have federal and state net operating losses of $35,162 and $52,797,
respectively (2021 - $45,608 and $41,610). The federal losses can be carried forward indefinitely, while the state
losses expire, between 2038 and 2040.
The Company also has Canadian non-capital losses of $64,523 (2021 - $72,295) available to reduce future
taxable income, until their expiry between 2032 and 2042.
13 Business acquisitions
During the year ended December 31, 2022, the Company completed the following business acquisitions that
have been accounted for using the acquisition method.
Audi Windsor and Porsche Centre London
On May 2, 2022, the Company acquired substantially all of the assets to be used in the operations of the Audi
Windsor and Porsche Centre London dealerships. The acquisitions supports management's strategic objectives
of further establishing the Company's presence in the province of Ontario.
Burwell Auto Body
On June 30, 2022, the Company acquired 100% of the shares of Burwell Auto Body Limited ("Burwell Auto
Body"), a luxury-brand focused collision centre in London, Ontario. 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 Ontario.
Kelleher Ford Dealership and Collision Centre
On August 2, 2022, the Company acquired 100% of the shares of Kelleher Ford Dealership and Collision Centre
("Kelleher Ford"), a new and used vehicle Ford dealership and collision centre in Brandon, Manitoba. The
acquisition supports management's strategic objectives of expanding the Company's presence in the province
of Manitoba and collision centre capacity.
Velocity Autobody
On August 12, 2022, the Company acquired 100% of the shares of Velocity Auto Body Inc. ("Velocity
in Markham, Ontario. The acquisition supports
Autobody"), a
management's strategic objectives of expanding the Company's collision centre capacity, and also allows the
Company to leverage existing dealerships in Ontario.
luxury-brand focused collision centre
Auto Gallery of Winnipeg
On September 22, 2022, the Company acquired 100% of the shares of Auto Gallery of Winnipeg Inc. ("Auto
Gallery of Winnipeg"), an independent used vehicle dealership in Winnipeg, Manitoba. The acquisition supports
management's strategic objectives of expanding the Company's Used Digital Retail Division in the province of
Manitoba and provides a central logistics hub.
North Toronto Auction
On September 28, 2022, the Company acquired 100% of the shares of Northern Auto Auctions of Canada Inc.
("North Toronto Auction"), an entity that operates the North Toronto Auction, a fee-based used vehicle auction
business, serving dealers and consumers, located in Innisfil, Ontario. The acquisition forms part of
management's strategic objective of expanding the Used Digital Retail Division in the Canadian pre-owned
vehicle market.
Kavia Auto Body
On October 27, 2022, the Company acquired 100% of the shares in Kavia Auto Body Inc. ("Kavia Auto Body"), a
collision repair facility in Saskatoon, Saskatchewan. The acquisition supports management's strategic objective
of expanding the Company's collision centre capacity.
Page 22 • AutoCanada
Excellence Auto Collision
On November 7, 2022, the Company acquired 100% of the shares in Excellence Auto Collision Limited, an entity
that operates Excellence Auto Collision Silver Star and Excellence Auto Collision Midwest ("Excellence Auto
Collision Centres"), both luxury-brand focused collision repair facilities in Scarborough, Ontario and Toronto,
Ontario. The share purchase agreement contains a contingent consideration element that requires the
Company to pay the former owners up to a maximum of $4,000 if certain performance targets are met for each
of the three years ending December 31, 2025. The estimated fair value of the contingent consideration
arrangement is $nil as at the acquisition date and as at the year end December 31, 2022. The acquisition
supports management's strategic objective of expanding the Company's collision centre capacity.
Sterling Honda
On December 1, 2022, the Company acquired substantially all of the assets to be used in the operations of
Sterling Honda ("Sterling Honda"), a new and used Honda dealership in Hamilton, Ontario. The acquisition
supports management's strategic objectives of further establishing the Company's presence in the province of
Ontario.
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, 2022 described above are summarized as follows:
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Long-term assets
Property and equipment
Right-of-use assets
Intangible assets1
Total assets
Current liabilities
Trade and other payables
Revolving floorplan facilities
Lease liabilities
Other liabilities
Long-term liabilities
Lease liabilities
Deferred income tax (Note 12)
Total liabilities
Net identifiable assets acquired
Goodwill
Total net assets acquired
Total consideration
Dealership
Acquisitions
$
Used Digital
Retail Division
Acquisitions
$
Collision
Centre
Acquisitions
$
Total
Acquisitions
$
27
5,147
14,091
19,265
37,966
6,455
83,085
146,771
4,127
7,269
642
137
12,175
5,813
2,003
19,991
126,780
8,100
134,880
134,880
2,596
1,741
3,869
8,206
2,388
10,732
—
21,326
3,071
—
387
—
3,458
10,344
169
13,971
7,355
3,834
11,189
11,189
1,150
8,295
1,324
10,769
7,223
16,018
13,217
47,227
8,489
—
1,373
1,144
11,006
14,646
2,244
27,896
19,331
13,255
32,586
32,586
3,773
15,183
19,284
38,240
47,577
33,205
96,302
215,324
15,687
7,269
2,402
1,281
26,639
30,803
4,416
61,858
153,466
25,189
178,655
178,655
1 Intangible assets relate to indefinite-life franchise rights associated with the respective dealerships and certifications related
to the respective collision centre.
The goodwill is attributable to the workforce, synergies from combining operations of the acquirees and
profitability of the acquired businesses. Goodwill of $5,042 is deductible for tax purposes.
Page 23 • AutoCanada
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 $110,039 of revenue
and $4,755 of net income to the Consolidated Statements of Comprehensive Income for the period ended
December 31, 2022. Had the acquisitions occurred at January 1, 2022, consolidated pro-forma revenue and net
income for the period ended December 31, 2022 would have been $6,188,829 and $91,643 respectively. These
pro-forma results are not necessarily representative of future performance.
These amounts have been calculated using the subsidiary's results and adjusting them for:
● Income tax expense (recovery);
● Interest on long-term indebtedness; and
● Leasing arrangements as if they had been entered into on January 1, 2022.
Transaction costs of $773 have been expensed and recorded in operating expenses.
Prior year business acquisitions
During the year ended December 31, 2022, provisional amounts that were previously disclosed in the annual
consolidated financial statements for the year ended December 31, 2021, were finalized without any changes
for the following acquisitions:
● PG Klassic AutoBody acquired in April of 2021; and
● Crystal Lake Chrysler Dodge Jeep Ram (CDJR) Inc. ("Crystal Lake") acquired in November of 2021.
During the year ended December 31, 2022, new information was obtained about circumstances that existed at
the acquisition date, which resulted in certain adjustments to the fair value of net identifiable assets acquired
for the following acquisitions:
● Mark Wilson's Better Used Cars acquired in August of 2021;
● Autolux MB Collision acquired in September of 2021;
● Airdrie Autobody Ltd. ("Airdrie Autobody") acquired in October of 2021; and
● Autopoint Group. ("Autopoint Group") acquired in December of 2021.
These adjustments are immaterial and have been adjusted for prospectively in the December 31, 2022 financial
statements. Provisional amounts upon acquisition were previously disclosed in the annual consolidated
financial statements for the year ended December 31, 2021 for the above acquisitions.
Acquisitions in 2021 prior to adjustments of provisional amounts
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.
Page 24 • AutoCanada
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.
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
Long-term assets
Property and equipment
Right-of-use assets
Intangible assets 2
Deferred income tax asset
Total assets
Current liabilities
Indebtedness
Trade and other payables
Revolving floorplan facilities
Lease liabilities
Other liabilities
Long-term 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
Page 25 • AutoCanada
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 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. These
pro-forma results are not necessarily representative of future performance.
All transaction costs have been expensed and recorded in operating expenses.
14 Interest in subsidiaries
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 Auto Holdco Inc..
2282239 Alberta Ltd.
2282237 Alberta Ltd.
LMB Automobile Inc.
Canbec Automobile Inc.
156023 Canada Inc.
Auto Bugatti Inc.
Ericksen M-B Ltd.
WAM Motors LP
RS M Motors LP
Total
Principal place
of business
British Columbia
Manitoba
Saskatchewan
Saskatchewan
Saskatchewan
Quebec
Quebec
Quebec
Quebec
Alberta
Manitoba
Quebec
Proportion of
ownership
interests held
by non-
controlling
interests
10 %
10 %
5 %
10 %
10 %
15 %
15 %
— %
25 %
10 %
5 %
5 %
Proportion
of voting
rights held
by non-
controlling
interests
10 %
10 %
5 %
10 %
10 %
15 %
15 %
— %
25 %
10 %
5 %
5 %
Dividends
paid to non-
controlling
interests
2022
$
150
325
—
375
500
990
292
95
—
520
—
—
3,247
Dividends
paid to non-
controlling
interests
2021
$
—
—
—
7
16
—
45
—
—
11
—
—
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
20).
Transactions with non-controlling interests
On November 30, 2022, the Company acquired a 100% ownership interest in 156023 Canada Inc. Consideration
payable for the shares of $433 resulted in an extinguishment of the associated redemption liability. Upon the
acquisition of the non-controlling interest above, the Company recognized a decrease in non-controlling
interests of $252, with a corresponding increase in equity attributable to owners of the parent.
During the year ended December 31, 2022, 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 increased by $740 (2021 - ($538)) as a result of the reorganization of non-
controlling interests. The transactions resulted in new loans of $1,845 (2021 - ($1,674) being issued to some of
these parties to purchase a non-controlling interest in the subsidiaries for $775 (2021 - $2,139). These loans are
recorded in Other long-term assets on the Consolidated Statements of Financial Position.
Page 26 • AutoCanada
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 used car dealerships acquired as a part of the digital retail
strategy (Note 13). The non-controlling unitholders hold put options where they can sell their units back to the
Partnership. 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.
The fair value of the put options and associated redemption liabilities has been determined as $1,050 (2021 -
$659) as at December 31, 2022, 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., WAM Motors LP, RS M Motors LP, 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 32). 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 28)
Derecognition on settlement
Adjustment to fair value
End of period
Current redemption liabilities
Long-term redemption liabilities
15 Cash and cash equivalents
Cash at bank and on hand
Short-term deposits
Cash and cash equivalents
December 31,
2022
$
22,332
391
(283)
4,829
27,269
26,219
1,050
December 31,
2021
$
7,992
224
—
14,116
22,332
21,673
659
December 31,
2022
$
108,301
—
108,301
December 31,
2021
$
102,467
13
102,480
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 31 for further detail regarding cash balances held with the financial
institution.
Page 27 • AutoCanada
16 Trade and other receivables
Trade receivables
Sales tax receivable1
Other receivables1
Less: Expected loss allowance (Note 31)
Trade and other receivables
December 31,
2022
$
162,118
44,256
13,122
219,496
(1,706)
217,790
December 31,
2021
Revised
(Note 36)
$
104,759
21,157
9,475
135,391
(2,478)
132,913
1 Reclassification of comparative figures for presentation purposes (Note 36). The Company previously presented its sales tax
receivable as part of other receivables. However, management considers it to be more relevant if all sales tax receivable are
presented separately. Prior year comparative as at December 31, 2021 have been revised by reclassifying $21,157 from other
receivables to sales tax receivable.
The Company is exposed to normal credit risk with respect to its accounts receivable and maintains provisions
for expected credit losses (Note 31). 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.
17
Inventories
New vehicles
Demonstrator vehicles
Used vehicles
Parts and accessories
Inventories
December 31,
2022
$
327,866
65,994
533,024
52,656
979,540
December 31,
2021
$
222,272
34,282
441,730
39,015
737,299
Amounts recognized in the Consolidated Statements of Comprehensive Income:
Inventory expensed as cost of sales
Writedowns on vehicles included in cost of sales
Demonstrator expenses included in administrative costs
December 31,
2022
$
4,896,720
29,051
11,228
December 31,
2021
$
3,742,309
9,851
7,907
For the year ended December 31, 2022, the Company performed a comprehensive assessment on the net
realizable value of inventory. Provisions recorded on inventory were based on specific criteria regarding model
and year of production and reflect management's estimate of market pricing trends.
Page 28 • AutoCanada
18 Property and equipment
Cost:
January 1, 2021
Capital expenditures
Business combinations
(Note 13)
Acquisition of real estate
Disposals
Transfer from inventory,
net
Foreign currency
translation
December 31, 2021
Capital expenditures
Business combinations
(Note 13)
Acquisition of real estate
Disposals
Transfers from inventory,
net
Foreign currency
translation
Company
& lease
vehicles
$
Leasehold
improvements
$
Machinery &
equipment
$
Land &
buildings1,
2
$
Furniture,
fixtures &
other
$
Computer
equipment
$
Total
$
28,259
—
58,864
8,030
30,754
3,705
144,227
—
14,991
987
10,230 287,325
14,181
1,459
2,174
—
—
3,954
—
(145)
2,958
—
(310)
8,123
20,990
(11,988)
1,203
—
(103)
542
18,954
— 20,990
(12,749)
(203)
6,576
—
—
—
—
—
6,576
(21)
36,988
—
(9)
70,694
6,426
(8)
37,099
5,990
111
161,463
29,343
(8)
17,070
3,972
(4)
61
12,024 335,338
1,676 47,407
104
—
—
3,425
—
(90)
2,688
—
(291)
40,014
15,790
(36)
860
—
(175)
486
—
(716)
47,577
15,790
(1,308)
3,596
—
—
—
—
—
3,596
December 31, 2022
41,039
80,606
45,879
247,342
21,892
13,555
351
151
393
768
165
85
1,913
450,313
Accumulated
depreciation:
January 1, 2021
Depreciation
Disposals
Transfers to inventory, net
Foreign exchange
December 31, 2021
Depreciation
Disposals
Transfers to inventory, net
Foreign exchange
December 31, 2022
Carrying amount:
December 31, 2021
December 31, 2022
(5,918)
(3,925)
—
2,858
—
(6,985)
(4,781)
—
3,247
(30)
(8,549)
(17,969)
(2,945)
888
—
—
(20,026)
(3,315)
33
—
(31)
(23,339)
(16,867)
(3,163)
220
—
—
(19,810)
(4,668)
176
—
(188)
(29,003)
(3,934)
9,592
—
—
(23,345)
(4,620)
—
—
(5)
(24,490) (27,970)
(8,191)
(1,459)
94
—
1
(9,555)
(1,687)
156
—
(89)
(11,175)
(5,852) (83,800)
(17,272)
(1,846)
10,983
189
2,858
—
2
1
(87,229)
(7,508)
(20,852)
(1,781)
512
147
3,247
—
(399)
(56)
(9,198) (104,721)
30,003
32,490
50,668
57,267
17,289
21,389
138,118
219,372
7,515
10,717
4,516
4,357
248,109
345,592
1 As at December 31, 2022, the Company owns land of $88,250 (2021 - $66,266), which is not subject to depreciation.
2 Construction-in-progress additions of $29,343 (2021 - $6,865) are included in land and buildings 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.
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.
Page 29 • AutoCanada
The Company started the construction of a dealership in Maple Ridge, British Columbia facility on January 24,
2022. This project is expected to be completed in 2023. The construction is financed with our non-revolving
term facilities (Note 22).
The amount of borrowing costs capitalized during the year-ended December 31, 2022 was $409 (2021 - $nil).
During the year-ended December 31, 2022, management did not identify any assets that were impaired and $nil
(2021 - $nil) impairment losses were recorded.
19 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 recovery charges were allocated to the assets of the respective CGU’s as follows:
Intangible assets
December 31,
2022
$
(8,691)
(8,691)
December 31,
2021
$
(39,846)
(39,846)
The changes in the book value of intangible assets and goodwill for the year ended December 31, 2022 were as
follows:
Cost:
January 1, 2021
Acquisitions (Note 13)
Additions 1
Prior year business acquisitions (Note 13)
Effect of foreign currency translation
December 31, 2021
Acquisitions (Note 13)
Additions 1, 2
Prior year business acquisitions (Note 13)
Effect of foreign currency translation
December 31, 2022
Accumulated amortization and impairment:
January 1, 2021
Recoveries of impairment
Effect of foreign currency translation
December 31, 2021
Recoveries of impairment
Amortization of intangible assets
Effect of foreign currency translation
December 31, 2022
Carrying amount:
December 31, 2021
December 31, 2022
Goodwill
$
Total
$
Intangible
assets
$
483,944
108,365
403
—
(14)
129,476
25,253
17
4
(387)
592,698
154,363
96,302
3,192
—
3,468
25,189
—
1,672
5,716
695,660
186,940
84,311
(39,846)
(16)
44,449
(8,691)
374
267
103,742
—
(340)
103,402
—
—
5,454
36,399
108,856
613,420
133,618
420
4
(401)
747,061
121,491
3,192
1,672
9,184
882,600
188,053
(39,846)
(356)
147,851
(8,691)
374
5,721
145,255
548,249
659,261
50,961
78,084
599,210
737,345
1 Additions to intangible assets represent increases to franchise rights and OEM certifications.
2 Additions to intangible assets with a finite useful life.
Page 30 • AutoCanada
The recoveries of impairment for the year ended December 31, 2022 relates to the Company's reportable
segments as follows:
Intangible assets
Carrying value
Canadian
Operations
$
(8,691)
(8,691)
U.S.
Operations
$
—
—
Total
$
(8,691)
(8,691)
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
AF
CI
AZ
U
AD
AX
S
D
AO
AH
T
BS
Q
G
X
I
AK
P
BI
AE
AP
K
AI
CK
AJ
M
A
AS
AR
Other CGUs less than $10,000 1
Carrying amount
December 31, 2022
$
Goodwill
Total
6,135
1,026
2,919
3,970
506
2,629
—
—
3,724
—
—
—
3,058
—
1,677
1,740
—
—
—
4,230
—
941
—
1,927
1,132
—
—
—
643
950
40,877
78,084
33,942
30,521
30,184
25,220
25,000
24,929
23,865
21,806
21,768
21,687
20,384
18,599
18,393
16,824
15,912
15,805
15,520
15,306
15,078
14,535
14,496
13,437
13,417
13,397
12,122
11,781
11,549
10,384
10,293
10,213
190,978
737,345
Intangible
assets
27,807
29,495
27,265
21,250
24,494
22,300
23,865
21,806
18,044
21,687
20,384
18,599
15,335
16,824
14,235
14,065
15,520
15,306
15,078
10,305
14,496
12,496
13,417
11,470
10,990
11,781
11,549
10,384
9,650
9,263
150,101
659,261
December 31, 2021
$
Goodwill
Total
6,135
—
—
3,951
506
2,587
—
—
3,724
—
—
—
—
—
1,648
1,726
—
—
—
—
—
941
—
1,927
—
—
—
—
602
950
26,264
50,961
33,942
—
—
25,201
25,000
24,887
22,339
21,806
21,768
21,687
13,179
18,599
—
16,824
15,883
15,791
15,520
15,306
15,078
—
14,496
13,437
12,559
13,397
—
11,781
11,549
10,384
9,635
10,213
168,949
599,210
Intangible
assets
27,807
—
—
21,250
24,494
22,300
22,339
21,806
18,044
21,687
13,179
18,599
—
16,824
14,235
14,065
15,520
15,306
15,078
—
14,496
12,496
12,559
11,470
—
11,781
11,549
10,384
9,033
9,263
142,685
548,249
1 CGUs under $10,000 have been aggregated together, determined to be appropriate given the size of the Company.
Comparatives in the table have been updated to aggregate CGU's under $10,000.
Page 31 • AutoCanada
Recoveries of impairment
Canadian Operations
For the year ended December 31, 2022, two Canadian dealerships (2021 - fifteen) recorded impairment
recoveries on indefinite-lived identifiable intangible assets amounting to $(8,691) (2021 - $(39,846)). For the
year ended December 31, 2022, $nil (2021 - $nil) impairment charges on goodwill were recorded. The
recoverable amount for one dealership was determined using the value in use ("VIU") method while the other
dealership was determined using the fair value less costs to dispose ("FVLCD") method.
U.S. Operations
For the year ended December 31, 2022, no U.S. dealerships recorded impairment charges on indefinite-lived
identifiable intangible assets and goodwill (2021 - none).
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.
Recoverable amounts
The following table shows 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 Operations
Cash Generating Unit
Q
I
AJ
AE
AK
A
P
T
AV
AH
Other CGUs less than $10,000 3
FVLCD or
VIU
VIU 2
VIU
VIU 2
FVLCD 1
VIU 2
VIU
FVLCD
VIU
VIU
VIU
FVLCD
December 31,
2022
$
20,313
19,410
13,044
13,938
22,117
12,781
62,063
44,729
12,648
28,400
6,927
December 31,
2021
$
15,982
19,407
11,781
23,078
13,869
11,565
53,165
36,165
13,574
16,827
4,197
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.
3 CGUs under $10,000 have been aggregated together, determined to be appropriate given the size of the Company.
Comparatives in the table have been updated to aggregate CGU's under $10,000.
U.S. Operations
There were no CGUs in the U.S. Operations segment with impairments or recoveries of impairments recorded
in either the current year or prior year.
Page 32 • AutoCanada
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.
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 8.5 times forecasted EBITDA (2021 - 2.5 to 7.88 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 11.42% and 12.72% in its projections (2021 - 10.62% and 12.58%).
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.
Page 33 • AutoCanada
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, 2022
AK
Q
AJ
December 31, 2021
K
Change in
discount rate
Change in
growth rate
Carrying
amount
$
Recoverable
amount exceeds
carrying amount
$
0.02 %
0.04 %
0.01 %
0.10 %
0.20 %
0.01 %
22,117
20,313
13,044
0.21 %
0.97 %
14,575
—
—
—
—
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, 2022
AE
December 31, 2021
Q
20 Other assets
Prepaid expenses
Derivative financial instruments (Note 24)
Other assets 1
Net investment in lease (Note 23)
Other assets
Change in
multiple
Recoverable
amount
$
Carrying
amount
$
Recoverable
amount exceeds
carrying amount
$
0.1
13,938
13,938
0.1
15,982
15,982
—
—
December 31, 2022
$
December 31, 2021
$
Current
Long-term
Current
8,913
1,071
44
114
10,142
539
—
15,839
920
17,298
9,528
—
—
44
9,572
Long-term
309
—
15,868
1,034
17,211
1 $15,839 (2021 - $15,868) relates to long-term loans receivable from the respective non-controlling interests (Note 14).
Page 34 • AutoCanada
21 Trade and other payables
Trade payables
Accruals and provisions
Sales tax payable
Wages and withholding taxes payable
Trade and other payables
December 31,
2022
$
89,765
60,717
31,948
47,266
229,696
December 31,
2021
$
94,001
40,012
14,360
41,358
189,731
The following table provides a continuity schedule of all recorded provisions:
January 1, 2021
Provisions made during the year
Amounts expired or disbursed
December 31, 2021
Provisions made during the year
Amounts expired or disbursed
December 31, 2022
Employee
costs
$1
Legal and
other
$1
4,169
363
(2,295)
2,237
1,388
(1,247)
2,378
2,975
3,646
(302)
6,319
273
(814)
5,778
Total
$
7,144
4,009
(2,597)
8,556
1,661
(2,061)
8,156
1 Reclassification of comparative figures for presentation purposes (Note 36). The Company previously presented its provision
for employee costs as part of legal and others. However, management considers it to be more relevant if all employee costs
provisions are presented separately. Prior year comparative as at January 1, 2021 have been revised by reclassifying $4,169
from Legal and other to Employee costs.
Employee costs
The balance represents management's best estimate of the most likely outcome of the Company's liability
associated with termination benefits and employment claims.
Legal and other
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.
Page 35 • AutoCanada
22 Revolving floorplan facilities and 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 31.
Revolving floorplan facilities
Revolving floorplan facilities - Syndicate (ii) (Note 37)
Revolving floorplan facilities - VW Credit Canada, Inc. (iii)
Revolving floorplan facilities - BMW Financial (iv)
Revolving floorplan facilities - RBC (v)
Revolving floorplan facilities - GM Financial (vi)
Revolving floorplan facilities - Mercedes-Benz Financial (vii)
Revolving floorplan facilities - Ally Financial (viii)
Total revolving floorplan facilities
Indebtedness
Senior unsecured notes
Senior unsecured notes (i)
Embedded derivative
Unamortized deferred financing costs
Revolving term facilities (ii) (Note 37)
Revolving term facility
Unamortized deferred financing costs
Non-revolving term facilities
Non-recourse mortgages (ix)
Unamortized deferred financing costs
Other debt
Other long-term debt
Total indebtedness
Current indebtedness
Long-term indebtedness
December 31,
2022
$
December 31,
2021
$
636,775
72,477
68,355
33,964
31,351
38,713
110,619
992,254
350,000
—
(5,498)
344,502
180,000
(1,412)
178,588
31,979
(77)
31,902
136
555,128
777
554,351
465,204
44,069
43,024
36,023
18,617
18,893
82,731
708,561
256,011
(29,306)
(4,740)
221,965
65,000
(1,158)
63,842
—
—
—
101
285,908
—
285,908
The following table shows the movement of indebtedness during the years ended December 31, 2022 and
December 31, 2021:
Balance, January 1
Amortization of deferred financing costs
Amortization of note premium
Extinguishment and revaluation of embedded derivative
Draws and additions
Repayments and redemption
Other
Balance, December 31
Page 36 • AutoCanada
2022
$
285,908
1,377
(322)
29,306
1,010,006
(770,064)
(1,083)
555,128
2021
$
197,231
1,896
(1,253)
(29,306)
353,957
(231,180)
(5,437)
285,908
Terms and conditions of outstanding loans are as follows:
i.
On February 7, 2022, the Company issued Senior Unsecured Notes (the "New Issuance Notes") of $350
million aggregate principal amount at par for a stated interest rate of 5.75% to fund a redemption of the
then outstanding $250 million Senior Unsecured Notes ("the Notes"). The Company redeemed the full
$250 million outstanding balance on February 10, 2022. A charge of $9.9 million was recognized in profit
or loss in relation to the extinguishment of the Notes (Note 11). 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, and a loss on extinguishment of $29.3 million was
recorded in Finance costs (Note 11).
The New Issuance Notes agreement contains certain redemption options whereby the Company can
redeem all or part of the New Issuance Notes at prices set forth in the agreement, following certain dates
specified in the agreement. In addition, at any time prior to February 7, 2025, the Company may at its
option redeem up to 40% of the aggregate principal amount of the New Issuance Notes with net cash
proceeds from equity offerings at a specified redemption price in the agreement. The New Issuance Note
holders also have the right to require the Company to redeem the New Issuance 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 New
Issuance 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, 2022, the Company recognized an embedded derivative of $nil related
to these redemption options.
ii. On February 7, 2022, the Company amended the $1,300 million syndicated credit agreement ("Credit
Facility") with the Bank of Nova Scotia (“Scotiabank”), the Canadian Imperial Bank of Commerce (“CIBC”),
the Royal Bank of Canada (“RBC”), HSBC Bank Canada ("HSBC"), ATB Financial (“ATB”), the Bank of
Montreal (“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.
On December 12, 2022, the Company amended the Credit Facility with Scotiabank, CIBC, RBC, HSBC, ATB,
BMO, and TD. The amendment included administrative and other structural changes made to support
planned future growth. There were no material changes to the Credit Facility's specified-use tranches,
interest rates or covenants for disclosure purposes. The Credit Facility term remains until April 14, 2025.
In addition, on December 12, 2022, the Company executed the accordion feature to increase the revolving
credit limit by $50 million, from $225 million.
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, 2022, 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
0.75% (2021 - 1.25%) for total of 7.20% (2021 - 3.70%) at December 31, 2022 or at the banker’s acceptance
rate or LIBOR rate plus 1.75% (2021 - 2.25%) for total of 6.22% (2021 - 2.69%) at December 31, 2022. The
wholesale leasing facilities bear interest rates of Canadian Dollar Offered Rate (“CDOR”) plus 1.75% (2021 -
2.25%) for a total of 6.22% (2021 - 2.69%) as at December 31, 2022. The wholesale floorplan facilities bear
interest rates of CDOR plus 1.00% (2021 - 1.05%) for a total of 5.47% (2021 - 1.49%) as at December 31, 2022
except for facility for floorplan of used export vehicles which bears interest rates of CDOR plus 1.25%
(2021 - 1.30%) for total of 5.72% (2021 - 1.74%) as at December 31, 2022.
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.
Page 37 • AutoCanada
iii.
iv.
v.
VW Credit Canada, Inc. (“VCCI”) provides floorplan financing for new and used vehicles for all of the
Company’s Volkswagen, Audi, and Porsche dealerships (the “VCCI facilities”). During the second quarter
of 2022, amendments were made to include two additional dealerships to the floorplan financing (Audi
Windsor and Porsche Center London). This resulted in an amendment to the maximum amount of
financing provided by the VCCI facilities to $122,995. As at December 31, 2022, the maximum amount of
financing was $122,995 (2021 - $98,545). The VCCI facilities bear interest of RBC prime rate plus 0.00%–
0.25% (2021 - 0.00%-0.25%). The RBC prime rate was 6.45% at December 31, 2022 (2021 - 2.45%). The
combined total interest rates were 6.45%-6.70% (2021 - 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.
BMW Financial Services Canada (“BMW Financial”), a division of BMW Canada Inc., provides floorplan
financing for new, used and demonstrator vehicles for all of the Company’s BMW dealerships (the “BMW
Facilities”). During the second quarter of 2022, amendments were made to the maximum advance limit to
$118,050. As at December 31, 2022, the maximum advance limit was $118,050 (2021 - $109,550). The
BMW Facilities bears interest rate of prime minus 0.40% (2021 - 0.40%) per 360 day annum for a total of
6.05% at December 31, 2022 (2021 - 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”). During the first, second, and third quarters of 2022, amendments were
made to the maximum advance limit to $56,000, $50,000, and $55,000 respectively. As at December 31,
2022, the maximum advance limit was $55,000 (2021 - $50,000). The RBC Facilities bear interest rates of
RBC’s Cost of Funds Rate plus 0.15%-0.40% (2021 - 0.25%-0.50%). The RBC’s Cost of Funds Rate was
5.69% as at December 31, 2022 (2021 - 1.21%). The combined total interest rates were 5.84%-6.09% as at
December 31, 2022 (2021 - 1.46%-1.71%). 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 of prime rate. As at December 31, 2022, the prime rate was 6.45% (2021 - 2.45%)
and the maximum amount of financing was $51,300 (2021 - $51,300). 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”). During the first quarter of 2022, amendments
were made to the maximum advance limit to $65,500. As at December 31, 2022, the maximum amount of
financing was $65,500 (2021 - $59,500). The facilities bear interest at CDOR plus 1.75%-2.05% per annum
(2021 - 1.75%-2.05%) for total of 6.02%-6.32% (2021 - 2.19%-2.49%). 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"). As at December 31, 2022, the facility limit was $127,500 USD (2021 –
$127,500 USD). The Ally facility bears interest at the Ally Bank prime rate. As at December 31, 2022, the
Ally prime rate was 7.50% (2021 - 3.25%). 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. On June 22, 2022, the Company executed a non-recourse mortgage financing with Scotiabank for a
previously purchased property in Maple Ridge, BC. The non-recourse mortgage arrangement funds land
value as well as construction costs associated with the development of two dealerships. The mortgage is
comprised of three facilities with an aggregate $39.0 million limit, at a variable interest rate of prime +
1.50% (combined total rate of 7.95% as at December 31, 2022). The mortgage has a three-year term,
twenty-year amortization, and will require monthly interest-only payments until construction is complete.
As at December 31, 2022, the Company has drawn $13.6 million on the facilities to fund land value only.
Page 38 • AutoCanada
On June 30, 2022, the Company executed two non-recourse mortgage financings with Scotiabank for
previously purchased properties in Windsor, ON and London, ON. The $7.1 million and $11.5 million non-
recourse mortgage arrangements, respectively, funds land and building value only. The mortgages have a
five-year term with a fixed interest rate of 7.07%. The mortgages require quarterly installments of principal
and interest based on a twenty-five-year amortization, with the outstanding mortgage balance due at the
end of the term.
The underlying real estate is pledged as collateral on the non-recourse mortgages in the amount of the
loan, as at December 31, 2022 the NBV of the pledged real estate is $46.9 million.
As at December 31, 2022, $0.7 million (2021 - $nil) of non-recourse mortgage loans is classified as current.
23 Leases
The below table summarizes the right-of-use asset and lease liability movement for the Company's properties:
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
December 31,
2022
$
370,998
23,095
—
33,205
(30,781)
(3,024)
2,876
396,369
December 31,
2022
$
452,817
23,095
33,205
(56,812)
29,828
(2,930)
5,674
484,877
27,766
457,111
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
For the year ended December 31, 2022, the Company had total cash outflows for leases of $27,214 (2021 -
$25,922).
Rent concessions
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,
2022, the Company did not receive any additional rent concessions and $nil (2021 - $109) remains of the overall
negotiated cash deferral of $4,169, which was 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. Certain leases
did not meet the criteria for the optional exemption due to substantive lease term extensions.
Page 39 • AutoCanada
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)
2022
$
37
152
2021
$
525
76
190
215
As at December 31, 2022, potential cash outflows of $635,856 (2021 - $596,394), (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
111,146 (2021 - $98,225).
Leases as lessor
Finance lease
For the year ended December 31, 2022, the Company has sub-leased one property that has been presented as a
net investment in lease in Other assets (Note 20) and recognized interest income on lease receivables of $64
(2021 - $16) (Note 11).
The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments
to be received after December 31, 2022:
2023
2024
2025
2026
2027
Thereafter
Total undiscounted lease receivable
Unearned finance income
Net investment in the lease
Total
$
114
117
123
127
133
812
1,426
392
1,034
Page 40 • AutoCanada
24 Derivative financial instruments
Derivative financial instruments are held for the purpose of managing exposure 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 a portion of the syndicated floorplan
facility and the revolving term 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 years ended December 31, 2022 and December 31, 2021, there were no changes to the designation
of cash flow hedges.
The fair values and notional amounts of derivative financial instruments are as follows:
December 31, 2022
Other current assets
Other liabilities - current (Note 26)
Derivative financial instruments - assets
Derivative financial instruments - liabilities
Notional values
Maturity
December 31, 2021
Other liabilities - current (Note 26)
Derivative financial instruments - liabilities
Foreign Exchange
Forward Contracts
Interest Rate Swaps
Non-hedges Cash flow hedges
Non-hedges
Total
—
155
—
—
1,071
—
913
511
—
—
1,071
155
4,057
4,970
1,428
1,939
45,100 USD
97,200 CAD
177,800 CAD
2023
2023 - 2024
2025
173
—
284
1,625
—
457
6,674
8,299
Notional values
Maturity
48,200 USD
2022
197,200 CAD
2022 - 2024
177,800 CAD
2025
The weighted average hedge rate of cash flow hedges was 2.84% (2021 - 2.44%).
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 Income are:
For the year ended December 31, 2022
Change in fair value of hedging instruments
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 loss on foreign exchange forward contracts
For the year ended December 31, 2021
Change in fair value of hedging instruments
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
Other
comprehensive
income
$
Net income
$
—
9,303
(3,268)
(1,084)
18
(4,429)
540
—
8,412
(3,268)
(7,023)
(539)
216
(2,202)
3,382
—
3,268
—
—
—
6,650
5,612
—
3,268
—
—
—
8,880
Total
$
3,382
9,303
—
(1,084)
18
(4,429)
7,190
5,612
8,412
—
(7,023)
(539)
216
6,678
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 Company 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 $1,939 as at December 31, 2022 (2021 - $8,299).
There was no ineffectiveness for the year ended December 31, 2022 and 2021.
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, 2022. As the CDOR rate associated with the derivative financial
instrument was still in effect, there was no impact from the IBOR reform.
25 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.
26 Other liabilities
Equity forward
Restructuring charges
Derivative financial instruments (Note 24)
Other liabilities
Other long- term liabilities
Equity forward liability
December 31, 2022
$
December 31, 2021
$
Current
Long-term
Current
2,890
1,293
155
4,338
6,201
2,693
—
8,894
—
710
457
1,167
Long-term
6,201
3,731
—
9,932
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, 2022, the Company entered into equity forward agreements for a total of
100,000 (2021 - 150,000) outstanding common shares. The equity forward agreements settle on December 27,
2024 and August 28, 2025 for 150,000 and 100,000 common shares, respectively. The Company and the
counterparty have the option to settle 100,000 common shares under the equity forward agreement in
advance of the contractual settlement date.
Page 43 • AutoCanada
The following table shows the change in the equity forward liability for the years ended:
Outstanding, beginning of the period
Acquired
Exercised
Outstanding, end of the period
Restructuring charges
December 31, 2022
December 31, 2021
Number of
shares
150,000
100,000
—
250,000
$
6,201
2,890
—
9,091
Number of
shares
329,000
150,000
(329,000)
150,000
$
3,466
6,201
(3,466)
6,201
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 $1,242 (2021 - $1,736) being utilized and
recognized in Operating expenses (Note 8) during the year ended December 31, 2022.
27 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 21 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
Statements 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 $4,771 as at December 31, 2022 (2021 - $4,402) 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, 2022, the Company is committed to capital expenditure obligations in the amount of
$12,134 (2021 - $2,971) related to dealership relocations, dealership re-imagings, and dealership Open Points
with expected completion of these commitments in 2023.
Page 44 • AutoCanada
28 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 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.
The number of RSUs granted is determined based on the grant value divided by the weighted average share
price of the Company's simple average share price for the seven days prior to the vesting date. For the year
ended December 31, 2022, 23,767 (2021 - 33,549) RSUs were granted at a fair value of $30.34 (2021 - $30.88).
The fair value of the RSUs granted is recognized as an expense over the period in which the RSUs are expected
to vest.
The RSU Plan settles by way of common shares, based on the Company's volume weighted average share price
for the seven days prior to the vesting date. For the year ended December 31, 2022, 178,598 (2021 - 37,626)
RSUs were settled, the weighted average share price at the date of exercise was $28.51 (2021 - $33.96).
For the year ended December 31, 2022, 1,391 (2021 - 3,692) RSUs were forfeited, the fair value of the RSUs
forfeited in the year was $20.70 (2021 - $10.48).
The following table shows the change in the number of RSUs for the years ended:
Outstanding, beginning of the year
Settled - equity
Granted
Forfeited units
Outstanding, end of the year
December 31, 2022
December 31, 2021
Number of
RSUs
308,687
(178,598)
23,767
(1,391)
152,465
Number of
RSUs
316,456
(37,626)
33,549
(3,692)
308,687
During the year ended December 31, 2022, 121,267 RSUs were vested but not settled.
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. For the year ended December 31, 2022, 38,200 (2021 - 15,629) DSUs were granted at a fair
value of $28.33 (2021 - $40.83). The fair value is recognized as an expense over the period in which the DSUs
are granted.
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.
For the year ended December 31, 2022, 55,422 (2021 - nil) DSUs were settled, the weighted average share price
at the date of exercise was $30.44 (2021 - $nil). The weighted average share price value is based on the volume
weighted average price of the Company's share price for the five business days prior to the date of settlement.
Page 45 • AutoCanada
The following table shows the change in the number of DSUs for the years ended:
Outstanding, beginning of the year
Settled - equity
Granted
Outstanding, end of the year
Stock Option Plan
December 31, 2022
December 31, 2021
Number of
DSUs
158,270
(55,422)
38,200
141,048
Number of
DSUs
142,641
—
15,629
158,270
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.
The following table shows the change in the number of stock options for the years ended:
December 31, 2022
December 31, 2021
Average
exercise price
per share
option
$
13.47
22.63
10.72
35.72
14.48
10.03
Share options
#
2,745,968
100,000
(800,000)
(49,424)
1,996,544
1,600,000
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
Outstanding, beginning of the year
Granted
Exercised
Forfeited
Outstanding, end of the year
Vested and exercisable, end of the year
No share options expired for the year ended December 31, 2022.
The following table shows the expiry date and exercise price for the share options outstanding as at December
31, 2022:
Grant date
August 14, 2018
August 14, 2019
December 7, 2021
December 22, 2022
Total
Weighted average remaining contractual life of options outstanding, end of the period
Expiry date
August 14, 2028
August 14, 2024
December 7, 2026
December 22, 2028
Exercise
price
$
10.05
9.72
35.72
22.63
Share options
#
1,500,000
100,000
296,544
100,000
1,996,544
5.19 years
The weighted average remaining contractual life for the share options outstanding as at December 31, 2021 was
6.27 years.
For the year ended December 31, 2022, the assessed weighted average fair value at grant date of options
granted was $12.66 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.
Page 46 • AutoCanada
The weighted average model inputs for options granted during the year ended December 31, 2022 include:
December 22, 2022 grant
● Options are granted for no consideration and vest based on varying service and market price
conditions over a four year period. Vested options are exercisable until December 22, 2028.
● Exercise price: $22.63
● Grant date: December 22, 2022
● Life of option: 6 years
● Share price at grant date: $22.59
● Expected price volatility of the Company's shares: 57.10%
● Expected dividend yield: 0.00%
● Risk-free interest rate: 3.15%
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, 2022, there were expenses of $1,800 (2021 - $479) and $276 recoveries
(2021 - $nil).
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. Rights granted vest upon certain service and market conditions over a
maximum period of four years. Vested rights are exercisable for a maximum period of six 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 SARs for the year ended:
December 31, 2022
December 31, 2021
Weighted average
exercise price per
share appreciation
right
$
18.11
31.00
10.25
10.25
29.25
18.66
Share
appreciation
rights
#
389,000
952,000
(120,000)
(20,000)
1,201,000
94,333
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
Outstanding, beginning of the year
Granted
Exercised
Forfeited
Outstanding, end of the year
Vested and exercisable, end of the
year
No share appreciation rights expired for year ended December 31, 2022.
The weighted average contractual life remaining for these share appreciation rights as at December 31, 2022 is
4.79 years (2021 - 2.81 years).
The assessed weighted average fair value at grant date of the share appreciation rights granted during the year
ended December 31, 2022 was $14.75 per option. The fair value at grant date has been determined using the
Black-Scholes Model. For certain SARs with market vesting conditions, the fair value at grant date has been
determined using an adjusted form of the Black-Scholes Model that takes into account probabilities using the
Monte Carlo simulation.
Page 47 • AutoCanada
The weighted average model inputs for the share appreciation rights granted during the year ended December
31, 2022 include:
● Rights are granted for no consideration and vest based on varying service and market price
conditions over a four year period. Vested rights are exercisable until August 22, 2028.
● Exercise price: $31.00
● Expected life of option: 4.66 years
● Share price at grant date: $28.00
● Expected price volatility of the Company's shares: 56.21%
● Expected dividend yield: 0.00%
● Risk-free interest rate: 3.18%
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.
Used Digital Retail Division
Common interests of the Partnership are granted to dealership management and the Executive Chairman (Note
33) 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 14).
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 $391 (2021 - $224) was
recognized in the Consolidated Statements of Comprehensive Income.
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 14)
Share-based compensation expense
2022
$
1,524
937
1,082
1,867
5,410
391
5,801
2021
$
479
1,048
638
1,180
3,345
224
3,569
Page 48 • AutoCanada
29 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:
December 31, 2022
December 31, 2021
Number of
common shares
Number of
common shares
$
Issued, beginning of the period
Exercised stock options (Note 28)
Shares repurchased and cancelled under SIB
Shares repurchased and cancelled under NCIB
Issued, end of the period
27,493,016
800,000
(3,011,558)
(1,730,321)
23,551,137
510,819
10,496
(55,533)
(32,089)
433,693
27,459,683
33,333
—
—
27,493,016
$
510,606
213
—
—
510,819
Normal Course Issuer Bid
During the year ended December 31, 2022, the Company repurchased and cancelled 1,730,321 common shares
(2021 - nil) at an average price of $33.55 per share, with prices ranging from $25.63 to $40.00 under its Normal
Course Issuer Bid ("NCIB") for $56,588 net of transaction costs of $17, which have been recorded within share
capital. The NCIB was approved by the Board of Directors on December 16, 2021.
On December 22, 2022, the Company received approval from the TSX to renew its NCIB, this renewal follows
the conclusion of the previous NCIB. The renewal of the NCIB commenced on December 28, 2022, and will
terminate on the earlier of December 27, 2023 and the date on which the maximum number of common shares
that can be acquired pursuant to the NCIB have been purchased. Under the renewal NCIB, the Company is
authorized to purchase, for cancellation, up to 1,350,048 common shares, representing approximately 10.00%
of the 23,551,137 issued and outstanding common shares of the Company as at December 20, 2022. The
Company is limited under the NCIB to purchasing no more than 21,695 common shares on any given day,
subject to the block purchase exemption under the TSX rules. The renewal of the NCIB was approved by the
Board of Directors on December 20, 2022.
Substantial Issuer Bids
On August 15, 2022, the Company completed a Substantial Issuer Bid, by way of a modified Dutch auction, to
purchase, for cancellation, the common shares of the Company (the “Offer”). The Company purchased and
cancelled 1,159,707 common shares (2021 - nil) at a purchase price of $28.00 per share under the Offer,
representing an aggregate purchase price of $32,472 which represents 4.37% of the total issued and
outstanding common shares of the Company before giving effect to the Offer. For the year ended December
31, 2022, the Company incurred transaction costs related to the Offer of $24 which have been recorded within
share capital. The Offer was approved by the Board of Directors on June 30, 2022.
On December 16, 2022, the Company completed a Substantial Issuer Bid, by way of a modified Dutch auction,
to purchase, for cancellation, the common shares of the Company (the “Second Offer”). The Company
purchased and cancelled 1,851,851 common shares (2021 - nil) at a purchase price of $27.00 per share under
the Second Offer, representing an aggregate purchase price of $50,000 which represents 7.29% of the total
issued and outstanding common shares of the Company before giving effect to the Second Offer. For the year
ended December 31, 2022, the Company incurred transaction costs related to the Second Offer of $46 which
have been recorded within share capital. The Offer was approved by the Board of Directors on November 11,
2022.
Page 49 • AutoCanada
Treasury shares
Shares are held in trust to mitigate the risk of future share price increases from the time the equity-settled
awards (Note 28) 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 on the shares held in trust are reinvested to purchase additional shares. No
dividends were earned during the year ended December 31, 2022 (2021 - $nil). 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
Forward share purchase (Note 26)
Treasury shares settled
Outstanding, end of the period
Earnings per share
December 31, 2022
December 31, 2021
Number of
treasury shares
Number of
treasury shares
$
(243,306)
—
194,639
(48,667)
(2,440)
—
1,768
(672)
(232,980)
(329,000)
318,674
(243,306)
$
(2,494)
(3,631)
3,685
(2,440)
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 for the year attributable to AutoCanada shareholders
2022
$
85,436
2021
$
164,207
The following table shows the weighted-average number of shares outstanding for the years ended:
Basic
Effect of dilution from equity forward
Effect of dilution from RSUs
Effect of dilution from stock options
Effect of dilution from SARs
Diluted
2022
#
26,050,206
67,005
100,393
1,693,080
323,198
28,233,882
2021
#
27,474,106
—
184,738
1,541,696
104,752
29,305,292
Page 50 • AutoCanada
30 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 22)
Equity
December 31,
2022
$
554,351
486,797
1,041,148
December 31,
2021
$
285,908
519,409
805,317
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, 2022.
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 (Note 22)
Cash and cash equivalents
Net Indebtedness
31 Financial instruments
December 31,
2022
$
December 31,
2021
$
285,908
29,306
315,214
102,480
212,734
555,128
—
555,128
108,301
446,827
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 $306,250.
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.
Page 51 • AutoCanada
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 22), and the derivative financial instruments note
(Note 24). 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
Embedded derivative
+/- 200 Basis Point
+/- 100 Basis Point
2022
$
18,217
82
2021
$
7,971
16
2022
$
9,108
41
2021
$
3,986
8
The early redemption embedded derivative asset on the New Issuance Notes (Note 22) is subject to interest rate
risk in the form of impacting the fair market valuation of the embedded derivative recorded. There is no change
in fair value based on +/-200 basis or +/-100 basis point change.
Credit risk
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, 2022 and December 31, 2021 and the
corresponding historical credit losses experienced within these periods.
The loss allowance for trade receivables as at December 31, 2022 and December 31, 2021 was determined as
follows:
Gross carrying
amount - Trade
receivables
$
December 31, 2022
Expected
loss
allowance
(Note 16)
$
31
180
353
219
923
1,706
153,091
17,017
13,315
7,755
28,318
219,496
Expected
loss rate
%
0.02
1.06
2.65
2.82
3.26
Current
31 - 60 days
61 - 90 days
91 - 120 days
> 120 days
Total
Page 52 • AutoCanada
Gross carrying
amount - Trade
receivables
$
December 31, 2021
Expected
loss
allowance
(Note 16)
$
52
266
395
204
1,561
2,478
97,407
12,471
8,215
2,062
15,236
135,391
Expected
loss rate
%
0.05
2.13
4.82
9.91
10.25
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
Balance, December 31
2022
$
2,478
1,273
(2,045)
1,706
2021
$
1,990
2,984
(2,496)
2,478
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 16. 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.
Concentration of cash and cash equivalents exist due to the significant amount of cash held with a Canadian
financial institution (refer to Note 15 for further discussion of the Company’s concentration of cash held on
deposit with the financial institution). The syndicated revolving floorplan facility (Note 22) 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
5.470% at December 31, 2022 (2021 - 1.488%). 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.
As at December 31, 2022, the Company has $95,000 (2021 - $160,000) 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.
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.
December 31, 2022
Trade and other payables
Revolving floorplan facilities
Vehicle repurchase obligations
Indebtedness
Contractual interest payable
Lease liabilities
Derivative financial instruments
2023
$
2024
$
2025
$
2026
$
Thereafter
$
Total
$
229,696
992,254
2,277
880
33,624
58,734
2,399
1,319,864
—
—
—
744
33,518
56,991
1,143
—
—
—
180,744
25,449
53,974
406
92,396 260,573
—
—
—
744
22,108
50,257
—
73,109
— 229,696
— 992,254
2,277
—
562,115
379,003
174,866
60,167
767,826
547,870
3,948
—
987,040 2,732,982
Page 53 • AutoCanada
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
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
—
32 Fair value of financial instruments
The Company’s financial instruments as at December 31, 2022 are represented by cash and cash equivalents,
trade and other receivables, trade and other payables, other liabilities, revolving and non-revolving floorplan
facilities, vehicle repurchase obligations, indebtedness, an embedded derivative, redemption liabilities, and
derivative financial instruments.
The fair values of cash and cash equivalents, trade and other receivables, trade and other payables, other
liabilities and revolving floorplan facilities approximate their carrying values due to their short-term nature.
The indebtedness has a carrying value that approximates the fair value due to the floating rate nature of the
debt. While there is a portion that has a fixed rate, the indebtedness has a carrying value that is not materially
different from its fair value.
The embedded derivative (Level 2) included within indebtedness (Note 22) is carried at fair value using the Hull
White pricing model.
Derivative financial instruments are made up of interest rate swaps and foreign exchange forward contracts
(Level 2). The fair value of both instruments are calculated as the present value of the future cash flows. Both
contractually agreed payments and forward 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 14).
The fair value was determined based on the prevailing and comparable market interest rates.
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.
Page 54 • AutoCanada
33 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 and
purchases used vehicle inventory to and from 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 former President, which provides the
sourcing of customer leads.
All significant transactions between AutoCanada and companies related to Directors were reviewed by the
Company's Board of Directors and are based on normal commercial terms and conditions. A summary of the
transactions are as follows:
Consulting services, administrative and other support and sourcing fees
Used vehicle inventory (sales to) purchases from related parties
2022
$
2,208
199
2,407
2021
$
2,175
5,997
8,172
Executive Advance
During the year ended December 31, 2021, the Company issued a $2,000 Executive Advance to the former
President, collateralized by the former President's outstanding stock options under the Company's existing
Stock Option Plan (the "Plan"). The Executive Advance is being repaid on a monthly basis. Interest is payable
annually at a rate of 1.00% (2021 - 1.00%). 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 28).
As at December 31, 2022, $1,624 (2021 - $2,000) of the Executive Advance issued to the former President
remains outstanding.
Used Digital Retail Division
The firm controlled by the Executive Chairman hold a 15% common interest in AutoCanada UD LP, a partnership
formed as part of the used digital retail strategy (Note 14), which vested at the time of grant (Note 28). Changes
in the value of the 15% interest are recorded in Operating expenses. The interest of $1,050 (2021 - $659) is
presented in Long-term redemption liabilities on the Consolidated Statements of Financial Position.
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
2022
$
4,808
102
391
1,830
7,131
2021
$
5,290
67
224
806
6,387
Page 55 • AutoCanada
34 Net change in non-cash working capital
The following table summarizes the net decrease in cash due to changes in non-cash working capital for the
years ended:
Trade and other receivables
Inventories
Other current assets
Trade and other payables
Revolving floorplan facilities
Other liabilities
Net change in non-cash working capital
December 31,
2022
$
(68,460)
(223,908)
824
(7,367)
270,794
176
(27,941)
December 31,
2021
$
(7,810)
(5,055)
(1,078)
40,594
(68,469)
(1,589)
(43,407)
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.
35 Segmented reporting
During the year ended December 31, 2022, 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. The
segmented information is set out in the following tables:
Year ended December 31, 2022
Year ended December 31, 2021
Canada 1
$
U.S.
$
Total
$
Canada 1
$
U.S.
$
Total
$
Revenues
External revenues
5,129,658
910,961
6,040,619
3,970,517
682,898
4,653,415
Inter-segment revenue
Total revenues
—
5,129,658
—
910,961
—
6,040,619
—
3,970,517
—
682,898
—
4,653,415
1 AutoCanada's corporate office has been included with the Canadian Operations segment, as it is located in Canada.
Page 56 • AutoCanada
Operating profit before other income
(expense)
Lease and other income, net (Note 10)
Loss on disposal of assets, net (Note 10)
Recoveries of non-financial assets (Note 19)
Operating profit
Finance costs (Note 11)
Finance income (Note 11)
Loss on redemption liabilities (Note 14)
Other gains (losses), net
Net income for the period before taxation
Year ended December 31,
2022
Year ended December 31,
2021
Canada 1
$
U.S.
$
Total
$
Canada 1
$
U.S.
$
Total
$
203,559 28,296 231,855
192,838
28,736 221,574
10,094
4,207
14,301
8,078
957
9,035
(296)
—
(296)
(387)
—
(387)
8,691
8,691
222,048 32,503 254,551
—
39,846
— 39,846
240,375 29,693 270,068
(131,478)
4,144
(4,829)
1,496
123,884
(35,189)
810
(14,116)
(353)
221,220
1 AutoCanada's corporate office has been included with the Canadian Operations segment, as it is located in Canada.
As at December 31, 2022
As at December 31, 2021
Segment assets
Capital expenditures and
acquisition of real estate (Note
18)
Segment liabilities
Canada 1
$
U.S.
$
Total
$
Canada 1
$
U.S.
$
2,521,158
51,395
337,173
11,802
2,858,331
63,197
1,969,692
288,981
28,763
6,408
35,171
Total
$
2,258,673
1,876,726
494,808
2,371,534
1,276,430
462,834
1,739,264
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, 2022
As at December 31, 2021
Canada 1
$
1,864,803
U.S.
$
Total
$
295,762 2,160,565
Canada 1
$
U.S.
$
1,639,894
323,987
Total
$
1,963,881
2,403,400
466,745 2,870,145
1,675,342
262,199
1,937,541
Parts, service and collision repair
559,277
83,388
642,665
426,927
57,712 484,639
Finance, insurance and other
302,178
65,066
367,244
228,354
39,000
267,354
Total revenue
5,129,658
910,961 6,040,619
3,970,517
682,898 4,653,415
1 AutoCanada's corporate office has been included with the Canadian Operations segment, as it is located in Canada.
Page 57 • AutoCanada
36 Reclassification of comparative figures
Certain comparative figures have been reclassified to conform to the current year presentation (Note 8, Note
16, and Note 21).
37 Subsequent events
Amended and Restated Credit Facilities
On February 7, 2023, the Company amended the $1,300 million syndicated credit agreement with Scotiabank,
CIBC, RBC, HSBC, ATB, BMO, and TD. The amended facility increases the revolving facility from $275 million to
$375 million, increases the wholesale floorplan financing facility from $1,060 million to $1,220 million and
maintains a $15 million wholesale leasing facility, for total aggregate bank facilities of $1,600 million. The
amendment included the creation of a goodwill tranche concept for the revolving facility and applicable
changes to the interest rate structure. The Credit Facility term was also extended to April 15, 2026.
Acquisition of DCCHail
On February 23, 2023, the Company acquired 100% of the shares of 5121175 Manitoba Ltd. ("DCCHail"), a
paintless dent repair service provider operating throughout western Canada. The acquisition supports
management's strategic objectives of expanding the Company's collision centre capacity. At the time the
financial statements were authorized for issue, the Company had not yet completed the accounting for the
acquisition of DCCHail.
Page 58 • AutoCanada
AutoCanada Inc.
200 - 15511 123 Avenue NW
Edmonton, AB • T5V 0C3 www.autocan.ca