Enbridge Energy is an energy transportation company that discloses deferred tax assets and liabilities arising from temporary differences in depreciation, as well as permanent differences from risks. It uses the indirect cash flow method and discloses non-cash transactions like depreciation. It has a defined benefit pension plan and share-based compensation including stock options and performance share units.

1. Financial Statements for Enbridge Energy
Week 6 Project
Intermediate Accounting III
By: Alexander Luna
DeVry University

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TABLE OF CONTENTS
1. INTRODUCTION ..................................................................................................ERROR! BOOKMARK NOT DEFINED.
2. DEFERRED TAX ASSETS OR DEFERRED TAX LIABILITIES ................................................................................4
3. TEMPORARY AND PERMANENT DIFFERENCES .......................................................................................................4
4. INCOME TAX PROVISION .....................................................................................................................................................5
5. DEFINED BENEFITS AND CONTRIBUTION PLAN .....................................................................................................5
6. EARNINGS PER SHARE...........................................................................................................................................................6
7. SHARE-BASED COMPENSATION .......................................................................................................................................7
8. CASH FLOW PRESENTATION METHOD ........................................................................................................................7
9. FINANCING ACTIVITIES ........................................................................................................................................................8
10. NONCASH TRANSACTIONS ..................................................................................................................................................8
11. CONCLUSION...............................................................................................................................................................................9
REFERENCES .......................................................................................................................................................................................10

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1. Introduction
Enbridge Energy is an energy company that transports, distributes and generates energy, oil
and gas. Enbridge Energy, Inc., has made it to one of the Fortune 500 Companies and their mission
statement is written on their website. Enbridge goes “beyond by building on pipeline expertise,
technology and people to be the company of choice for transportation of hydrocarbon energy and
related services” (MissionStatements.com). Currently I am employed by Enbridge Energy, and I
have worked for this corporation for seven years. I chose to do my course project on Enbridge
Energy because I would like to attain more knowledge on the corporation, especially as it applies to
accounting.
Enbridge Energy is a public company with shareholders, financial statements that include
deferred taxes, post-retirement benefits, and share-based compensation. This publicly traded
corporation invests billions of dollars a year with assets in Canada, United States and the Gulf of
Mexico. Enbridge is “one of the largest gas gatherers and transporters in the Gulf of Mexico,
handling approximately 60% of deep-water gas production,” and produces “approximately 1.7
million barrels per day of crude oil.” (Enbridge Annual Report, 2014, page 10). Enbridge Energy
Partners was audited by PricewaterhouseCoopers, LLP. PricewaterhouseCoopers, LLP has provided
a report on “consolidated financial statements of Enbridge, Inc.,” (Enbridge Inc., Consolidated
Financial Statements, 2014, page 2).
In this report you will find Enbridge Energy’s deferred tax assets, tax liabilities and income
tax provisions. This report analyzes the corporation’s defined benefits and contribution plan,
earnings per shares, and share-based compensation. The report also reviews Enbridge Energy’s cash
flow presentation method and financial activities.

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2. Deferred TaxAssets or Deferred Tax Liabilities
What amount of deferred taxassets or deferred tax liabilities are on the two most recent years on
the balance sheet? What gives rise to these deferred taxes? What information is disclosed in the
footnotes related to deferred taxes? Please define a deferred tax asset and deferred taxliability.
Deferred tax assets and liabilities usually affect a company’s cash flow because tax
accounting and financial accounting have different set of rules. Deferred tax assets show that a
company has accumulated future deductions. Deferred tax liabilities indicate future cash outflows.
Enbridge Energy “Company has not provided for deferred income taxes on the difference
between the carrying value of substantially all of its foreign subsidiaries and their corresponding tax
basis as the earnings of those subsidiaries are intended to be permanently reinvested in their
operations. As such these investments are not anticipated to give rise to income taxes in the
foreseeable future. (Enbridge Annual Report, 2014, page 169). The total deferred tax liabilities for
2014 was $5,479 and $3,573 in 2013. The total deferred income tax assets were $1, 483 in 2014 and
$812 in 2013. All figures are in millions. Deferred tax assets and deferred tax liabilities arise from
Liquid Pipelines, Gas Distribution, and Sponsored Investments. The first footnote states that “the
assets represent the regulatory offset to deferred income tax liabilities that are expected to be
recovered under flow-through income tax treatment. The recovery period depends on future reversal
of temporary differences.” (Enbridge Annual Report, 2014, page 137).
3. Temporary and PermanentDifferences
What temporary and permanent differences does the company disclose in their footnotes? What
are some other examples of temporary and permanent differences?
The most common example of a temporary difference is financial and tax depreciation and
permanent tax differences can’t be reported such as meals and entertainment. Enbridge’s permanent
differences are liquidity risks, including commitments and guarantees. The other permanent
differences are credit risks that arise “from the possibility that a counterparty will default on its

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contractual obligations.” (Enbridge Annual Report, 2014, page 163). The temporary differences are,
foreign exchange risk, interest rate risk, commodity price risk and equity price risk totaling $2,364
million in the end of December 31, 2014.
4. Income Tax Provision
What is the amount of income tax provision in the two most recent years on the income
statement? What information is disclosed in the footnotes relating to income tax expense? Does
the company have a net operating loss carry-forward or carry-back? What are the guidelines for
carry-forwards and carry-backs?
In the year of 2014 Enbridge Energy’s Income Tax Rate Reconciliation was $2,173 and $613
in 2013in millions of earnings before income taxes and discontinued operations. Enbridge Energy has
“Valuation allowances have been established for certain loss and credit carry-forwards that reduce
deferred income tax assets to an amount that will more likely than not be realized.” (Enbridge Annual
Report, 2014, page 169). The first footnote states “The higher effective income tax rate for 2014
reflected the increase in earnings in the Company’s United States operations and the higher United
States federal statutory rate over the Canadian federal statutory rate,” since Enbridge Energy resides
and conducts business in both Canada and United States. The liability method with deferred income
tax assets and liabilities recorded with temporary differences between tax bases of assets and
liabilities and carrying values.
5. Defined Benefits and ContributionPlan
Does the company have a defined benefit or defined contribution plan? What are the key
elements of the plan discussed in the footnotes? What amounts on the balance sheet relate to
this plan? What are the differences between defined benefit and defined contribution plans?
Enbridge Energy as a whole does offer three registered pension plans. The company offers
defined benefit or defined contribution pension benefits, or both. For the Canadian employees there is
defined benefit pension and/or contribution benefits, and in the United States the company funds a

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defined benefit pension benefits plan. In 2014 the United States Plan will result in increase to pension
liabilities of approximately $21 million and in 2013 pension liabilities were $58 million.
Enbridge Energy has a defined benefits plan, in which the company promises a specified
monthly benefit on retirement that is predetermined by a calculation set on the employees’ earnings
history, years employed and age. The footnote states that “assets of $32 million (2013 -$27 million)
are held by the Company in trust accounts that back non-registered supplemental pension plans
benefiting United States plan participants,” (Enbridge Annual Report, 2014, page 171) and the
footnote states that the assets are not restricted from conditions in the United States due to tax
regulations and cannot be included in the balance sheets for accounting purposes.
6. EarningsPer Share
What are the earnings per share amounts disclosed on the income statement for the most recent
year? What dilutive securities are discussed in the footnotes? Please identify and describe other
examples of dilutive securities. How do these impact earnings per share?
The earnings per common share is calculated by dividing earnings attributable to common
shareholders by the weighted average number of common shares outstanding. The weighted average
number of common shares outstanding has been reduced by the Company’s pro-rata weighted
average interest in its own common shares of 12 million (2013 – 15 million; 2012 – 20 million).
Registered shareholders may reinvest dividends in common shares and make additional optional cash
payments receiving a 2% discount on common shares. The footnote does mention diluted earnings as
of “December 31, 2014, 6,058,580 anti-dilutive stock options with a weighted average exercise price
of $48.78” (Enbridge Annual Report, 2014, page 153) which were excluded from diluted earnings per
common shares. The treasury stock method determines dilutive impact of stock options assuming any
proceeds are used to purchase common shares at average market price.
7. Share-BasedCompensation

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What kind of share-based compensation does the company have? What was compensation
expense for the two most recent years? What are the key elements of this plan discussed in the
footnotes? Please identify and describe other types of share-based compensation.
Many companies supplement cash compensation awarding shares of the company to its
employees with the option to buy shares of the company which is known as share-based
compensation. Enbridge Energy offers a stock-based compensation known as Incentive Stock
Options (ISO) and recorded with the fair value method. Enbridge also offers performance based stock
options (PBSO).
“Under the DRIP, registered shareholders may reinvest dividends in common shares of the
Company and make additional optional cash payments to purchase common shares, free of brokerage
or other charges. Participants in the Company’s DRIP receive a 2% discount on the purchase of
common shares with reinvested dividends. .” (Enbridge Annual Report, 2014, page 153).
8. Cash Flow Presentation Method
Does the company use the direct or indirect cash flow presentation method? What is the
difference between these two methods? How does the cash flow statement agree to the other
financial statements?
Direct cash flow method is used for auditing by taking actual numbers from the company’s
books and reports and indirect cash flow method is used for internal reports using net income and
adjustments that calculate the total net income from operating activities. Enbridge Energy uses the
indirect cash flow presentation method in their Annual Financial Report for 2014. As of November
18th 2014 Enbridge adopted the Pushdown Accounting for Business Combination which refers to “an
acquired entity with the option to apply pushdown accounting in its separate financial statements
upon the occurrence of a change-in-control event. (Enbridge Annual Report, 2014, page 133).

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9. FinancingActivities
What investing and financing activities does the company have? What are some other examples
of investing and financing activities?
Enbridge Energy’s is a public company that trades energy transportation and distribution
conducting business with five business segments: “Liquids Pipelines; Gas Distribution; Gas
Pipelines, Processing and Energy Services; Sponsored Investments and Corporate. These operating
segments are strategic business units established by senior management to facilitate the achievement
of the Company’s long-term objectives, to aid in resource allocation decisions and to assess
operational performance.” (Enbridge Annual Report, 2014, page 126). Enbridge has equity
investments in entities in which the corporation has influence and does not have influence as other
financial activities.
10. Noncash Transactions
What noncash transactions does the company have on its cash flow statement? What are some
other examples of noncash transactions?
Enbridge Energy has a non-cash goodwill impairment charge of $440 million ($167 million
after-tax). Enbridge determines the fair value reporting units inclusive of goodwill, comparing the
values to the carrying value of the unit reported. Enbridge reviews the carrying value of long-lived
assets. The company also has intangible assets of software, natural gas supply opportunities, power
purchase agreements, transportation agreements and other that totaled in $1,626 million cost and
$1,166 million net after accumulated amortization of $460 million. “A non-cash item is an entry on
an income statement or cash flow statement correlating to expenses that are essentially just
accounting entries rather than actual movements of cash,” (InvestingAnswers) and the most common
examples are depreciation and amortization. As of December 31, 2014 the consolidated amount of
depreciation and amortization for Enbridge Energy was $1,577 million as stated on Enbridge Annual
Report of 2014 on page134.

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11. Conclusion
Enbridge Energy is an international oil, gas and energy corporation with detailed financial and
accounting statements that give detailed information about the company in their Annual Report. The
preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and
expenses, as well as the disclosure of contingent assets and liabilities in the consolidated financial
statements. As an employee of Enbridge Inc., I do receive a 401(K) with a defined benefit plan and
share-based compensation after working with the company for over seven years. Enbridge Energy
also provides its employees with Health Incentives Benefits and Educational Reimbursement Plan
that I also participate in. Therefore, it has been very informative in doing research on the company
assets and liabilities as a whole, and seeing financial information as a whole and not just as an
individual employee’s perspective.
REFERENCES

10. Financial Statements for Enbridge Energy
Week 6 Project
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http://www.missionstatements.com/fortune_500_mission_statements.html
http://www.enbridge.com/~/media/www/Site%20Documents/Investor%20Relations/2015/2014_ENB-
AnnualReport.pdf
http://www.enbridge.com/~/media/www/Site%20Documents/Investor%20Relations/2015/2014_YE_E
NB_%20FS.pdf
www.enbridge.com/~/.../2015_ENB_Q2_NewsRelease.pdf
www.enbridge.com/.../Investor%20Relations/.../2014_YE_ENB...