TELUS Corporation is one of Canada’s largest telecommunications companies and provides both products and services. Its shares are traded on the Toronto and New York stock exchanges, and its credit facilities contain certain covenants relating to the amount of debt the company is allowed to hold.

The following are selected excerpts from the 2017 audited financial statements:

Note 1(o) – Sales of trade receivables – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Sales of trade receivables in securitization transactions are recognized as collateralized short-term borrowings and thus do not result in our de-recognition of the trade receivables sold.

Note 22 - SHORT-TERM BORROWINGS

On July 26, 2002, one of our subsidiaries, TELUS Communications Inc., entered into an agreement with an arm’s-length securitization trust associated with a major Schedule I bank under which it is able to sell an interest in certain of its trade receivables up to a maximum of $500 million (2016 – $500 million). This revolving-period securitization term ends December 31, 2018, and it requires minimum cash proceeds of $100 million from monthly sales of interests in certain trade receivables. TELUS Communications Inc. is required to maintain a credit rating of at least BB (2016 – BB) from Dominion Bond Rating Service or the securitization trust may require the sale program to be wound down prior to the end of the term.

When we sell our trade receivables, we retain reserve accounts, which are retained interests in the securitized trade receivables, and servicing rights. As at December 31, 2017, we had sold to the trust (but continued to recognize) trade receivables of $119 million (2016 – $116 million). Shortterm borrowings of $100 million (2016 – $100 million) are comprised of amounts advanced to us by the arm’s-length securitization trust pursuant to the sale of trade receivables.

The balance of short-term borrowings (if any) comprised amounts drawn on our bilateral bank facilities.

Instructions

Assume the role of a private company in the same business as TELUS that is considering going public. Discuss the differing accounting treatment regarding the securitization transactions under IFRS and ASPE.