Calculate Taxable Income for 2019 and 2020 in an Excel spreadsheet. Construct a deferred tax calculation table for Deferred Warranty Plan; Property, Plant and Equipment; and Lease Liability for year 2020 and 2019 and determine the future tax rates that were used for these items.
Year ended December 31, 2020 December 31, 2019 Notes 210,485 143,046 Consolidated Statements of Cash Flows For the Cs in thousands Operating activities Net income before income tax Add(deduct) items not involving an outlay of cash: Depreciation of property, plant and equipment and investment properties Amortization of intangible assets Amortization of deferred warranty plan revenue Amortization of premium Net finance costs Gain on sale of property, plant and equipment and investment properties Fair value gain on loan receivable Gain (loss) on sale of debt and equity instruments 17 108,970 2,319 (64,736) 222 18,050 (831) (714) (139) 273,626 118,775 3,920 (71,449) 144 25,472 (424) (528) 5 218,961 15 26 Change in operating working capital Cash received on warranty plan sales Income taxes paid Cash provided by operating activities 217,674 66,130 (46,006) 511,424 (11,627) 66,086 (38,806) 234,614 8 10 Investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds on sale of property, plant and equipment Purchase of debt and equity instruments Proceeds on sale of debt and equity instruments Repayment of loan receivable Interest received Cash used in investing activities (43,493) (995) 1,298 (36,038) 30,586 1,046 4,526 (43,070) (32,931) (1,236) 1,004 (36,497) 22,097 666 3,505 (43,392) 15 13 Financing activities Payment of lease liability Dividends paid Decrease of employee loans-redeemable shares Repurchase of common shares Repayment of term loan interest paid Cash used in financing activities 15 16 14 (71,076) (44,636) 2,499 (48,202) (5,000) (22,336) (188,751) (66,149) (43,313) 5,063 (10,158) (50,000) (27,900) (192,457) Net increase (decrease) in cash and cash equivalents during the year Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 279,603 89,032 368,635 (1,235) 90,267 89,032 Leon's Furniture Limited Consolidated Statements of Changes in Shareholders' Equity Equity component of Accumulated other comprehensive debentures As at December 31, 2019 115,728 3,378 convertible Common shares C$ in thousands income Retained earnings 793,116 Total 915,764 3,542 163,250 163,250 Comprehensive income Net income for the year Other comprehensive income for the year Total comprehensive income 5,321 5,321 5,321 163,250 168,571 (69,977) (3,511) Transactions with shareholders Dividends declared Management share purchase plan (note 15) Convertible debentures (note 14 Treasury Shares (note 16) Share repurchase commitment (note 16] Repurchase of common shares (note 16] Total transactions with shareholders As at December 31, 2020 2,499 51,859 (6) (159) (5,252) 48,941 164,669 (59) (841) (42,885) (113,762) 842,604 (69,977) 2,499 48,348 (65) (1,000) (48,137) (68,332) 1,016,003 (3,511) 31 8,699 Equity component of convertible debentures 3,546 C$ in thousands As at December 31, 2018 Common shares 111,956 Accumulated other comprehensive income (loss) (1,539) Retained earnings 743,399 Total 857,362 106,929 Comprehensive Income Net income for the year Other comprehensive income for the year Total comprehensive income 4,917 4,917 106,929 4,917 111,846 106,929 (43,445) (4) Transactions with shareholders Dividends declared Management share purchase plan (note 15) Convertible debentures (note 14) Share repurchase commitment (note 16] Repurchase of common shares (note 16] Total transactions with shareholders As at December 31, 2019 5,063 100 (443) (948) 3,772 115,728 (43,445) 5,063 96 (5,000) (10,158) (53.444) 915,764 (4,557) 19,210) (57,212) 793,116 (4) 3,542 3,378 Leon's Furniture Limited Consolidated Statements of Comprehensive Income For the $ in thousands Year ended December 31, 2020 December 31, 2019 Net income for the year 163,250 106,929 2,053 135 805 13 Other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss: Gain on debt instruments arising during the year Reclassification adjustment for gains on disposal of debt instruments Items that will not be reclassified to profit or loss: Gain on equity instruments arising during the year Other comprehensive income for the year Comprehensive income for the year 3,133 5,321 168,571 4,099 4,917 111,846 The accompanying notes are an integral part of these consolidated financial statements. Leon's Furniture Limited Consolidated Statements of Income For the in thousands except share and share amounts Notes Year ended December 31, 2020 December 31, 2019 Revenue Cost of sales Gross profit 17 6 2,220,180 1,236,258 983,922 2,283,411 1,284,826 998,585 Operating expenses Selling, general and administrative expenses Operating profit 18 750,951 232,971 830,495 168,090 19 19 Finance costs Finance income Change in fair value of derivative instruments Net income before income tax (22,413) 4,526 (4,599) 210,485 (28,689) 3,505 140 143,046 20 Income tax expense Net income for the year 47,235 163,250 36,117 106,929 Weighted average number of common shares outstanding Basic Diluted 79,798,908 82,113,879 77,594,496 83,746,040 21 Earnings per share Basic Diluted $2.05 $1.99 $1.38 $1.30 Dividends declared per share Common Convertible, non-voting $0.88 $0.29 $0.56 $0.28 il catamant Notes December 31, 2020 December 31, 2019 cs in thousands) Assets 5 368,635 2,451 73,565 48,634 130,582 4,266 332,072 10,725 11,095 89,032 5,777 65,859 42,286 140,535 3,578 334,443 10,994 9,273 625 702,402 6 7 Current assets Cash and cash equivalents Restricted marketable securities Debt securities Equity securities Trade receivables Income taxes receivable Inventories Deferred acquisition costs Prepaid expenses and other assets Other assets Total current assets Non-current assets Deferred acquisition costs Loan receivable Property, plant and equipment Investment properties Intangible assets Goodwill Deferred income tax assets Total non-current assets Total assets 22 982,025 7 15 8 9 10 10 20 17,614 12,721 714,423 16,212 270,481 390, 120 14,993 1,436,564 2,418,589 16,870 13,053 720,794 16,633 271,810 390,120 14,779 1,444,059 2,146,461 11 12 20 17 13 16 17 14 304,844 25,608 15,479 305,460 73,476 36,163 55,733 256,539 23,274 6,505 151,817 70,601 10,822 57,638 25,000 Liabilities Current liabilities Trade and other payables Provisions Income taxes payable Customers' deposits Lease liability Dividends payable Deferred warranty plan revenue Loans and borrowings Other liabilities Total current liabilities Non-current liabilities Loans and borrowings Convertible debentures Lease liability Deferred warranty plan revenue Redeemable share liability Deferred income tax liabilities Total non-current liabilities Total liabilities 22 3,976 820,739 502,196 14 14 13 17 15 20 90,000 441 327,227 88,604 13 75,562 581,847 1,402.586 70,000 48,788 342,093 85,305 13 82,302 628,501 1,230,697 16 14 Equity Common shares Equity component of convertible debentures Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity 164,659 31 842,604 8,699 1,016,003 2,418,589 115,728 3,542 793,116 3,378 915,764 2,146,461 Consolidated Statements of Financial Position Notes December 31, 2020 December 31, 2019 5 As at Ks in thousand Assets Current assets Cash and cash equivalents Restricted marketable securities Debt securities Equity securities Trade receivables Income taxes receivable Inventories Deferred acquisition costs Prepaid expenses and other assets Other assets Total current assets Non-current assets Deferred acquisition costs Loan receivable Property, plant and equipment Investment properties Intangible assets Goodwill Deferred income tax assets Total non-current assets Total assets 368,635 2,451 73,565 48,634 130,582 4,266 332,072 10,725 11,095 89,032 5,777 65,859 42,286 140,535 3,578 334,443 10,994 9,273 625 702,402 6 22 982,025 7 15 8 9 10 10 20 17,614 12,721 714,423 16,212 270,481 390,120 14,993 1,436,564 2,418,589 16,870 13,053 720,794 16,633 271,810 390,120 14,779 1,444,059 2,146,461 11 12 20 17 13 16 17 304,844 25,608 15,479 305,460 73,476 36,163 55,733 256,539 23,274 6,SOS 151,817 70,601 10,822 57,638 25,000 14 Liabilities Current liabilities Trade and other payables Provisions Income taxes payable Customers' deposits Lease liability Dividends payable Deferred warranty plan revenue Loans and borrowings Other liabilities Total current liabilities Non-current liabilities Loans and borrowings Convertible debentures Lease liability Deferred warranty plan revenue Redeemable share liability Deferred income tax liabilities Total non-current liabilities Total liabilities 22 3,976 820,739 602, 196 14 14 13 17 15 20 90,000 441 327,227 88,604 13 75,562 581,847 1,402.586 70,000 48,788 342,093 85,305 13 82,302 628, 501 1,230,697 16 14 Equity Common shares Equity component of convertible debentures Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity 164,669 31 842,604 8,699 1,016,003 2,418,589 115,728 3,542 793,116 3,378 915,764 2.146,461 The accompanying notes are an integral part of these consolidated financial statements. Leon's Furniture Limited Consolidated Statements of Income For the cs in thousands except there and shares Year ended December 31, 2020 December 31, 2019 Notes 17 Revenue Cost of sales Gross profit 6 2,220,180 1,236,258 983,922 2,283,411 1,284,826 998,585 Operating expenses Selling, general and administrative expenses Operating profit 18 750,951 232,971 830,495 168,090 19 19 Finance costs Finance Income Change in fair value of derivative Instruments Net income before income tax (22,413) 4,526 (4,599) 210,485 (28,689) 3,505 140 143,046 20 Income tax expense Net income for the year 47,235 163,250 36,112 106,929 Weighted average number of common shares outstanding Basic Diluted 79,798,908 82,113,879 77,594,496 83,746,040 21 Earnings per share Basic Diluted $2.05 $1.99 $1.38 $1.30 Dividends declared per share Common Convertible, non-voting $0.88 $0.29 $0.56 $0.28 The accompanying notes are an integral part of these consolidated financial statements. Leon's Furniture Limited Consolidated Statements of Comprehensive Income For the Sinshoardil Year ended December 31, 2020 December 31, 2019 Net income for the year 163,250 106,929 2,053 135 80s 13 Other comprehensive income, net of tax items that may be reclassified subsequently to profit or loss: Gainon debt instruments arising during the year Reclassification adjustment for gains on disposal of debt instruments Items that will not be reclassified to profit or loss: Gain on equity instruments arising during the year Other comprehensive income for the year Comprehensive income for the year 3,133 5,321 168,571 4,099 4,917 111,846 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statements of Changes in Shareholders' Equity Equity component of Accumulated other is in thousands As at December 31, 2019 convertible debentures 3,542 Common shares 115,728 comprehensive income 3,378 Retained earnings 793,116 Total 915,764 163,250 Comprehensive income Net income for the year Other comprehensive income for the year Total comprehensive income 5,321 5,321 163,250 5,321 168,571 163,250 (69,977) (3,5111 Transactions with shareholders Dividends declared Management share purchase planinote 15] Convertible debentures (note 14 Treasury Shares Inote 16 Share repurchase commitment [note 16 Repurchase of common shares (note 16] Total transactions with shareholders As at December 31, 2020 2,499 51,859 (6) (159) (52521 48,941 164,669 (59) (841) (42.885) (113,762) 842,604 169,9771 2,499 48,348 (65) (1,000) (48,137) 168,332) 1,016,003 (3,511) 31 8,699 Equity component of convertible debentures 3,546 Accumulated other comprehensive income (loss) (1,539) Common shares 111,956 les in thousand As at December 31, 2018 Retained earnings 743,399 Total 857,362 106,929 Comprehensive Income Net income for the year Other comprehensive income for the year Total comprehensive Income 4,917 4,917 106,929 4,917 111,846 106,929 (43,445) (4) Transactions with shareholders Dividends declared Management share purchase planinote 15] Convertible debentures (note 14 Share repurchase commitment [note 16 Repurchase of common shares (note 16] Total transactions with shareholders As at December 31, 2019 5,063 100 [443) 1948) 3,772 115,728 [4,557) 19,210) (57,212) 793,116 [43,445) 5,063 96 (5,000) (10,158) 153,444) 915,764 (4) 3,542 3,378 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statements of Cash Flows Notes Year ended December 31, 2020 December 31, 2019 210,485 143,046 For the Sin thousandil Operating activities Net income before income tax Add (deduct) items not involving an outlay of cash Depreciation of property, plant and equipment and investment properties Amortization of intangible assets Amortization of deferred warranty plan revenue Amortization of premium Net finance costs Gain on sale of property, plant and equipment and investment properties Fair value gain on loan receivable Gain (loss) on sale of debt and equity instruments 17 108,970 2,319 (64,736) 222 18,050 (831) (714) (139) 273,626 118,775 3,920 171,449) 144 25,472 (424) (528) 5 218,961 15 26 Change in operating working capital Cash received on warranty plan sales Income taxes paid Cash provided by Operating activities 217,674 66,130 (46,006) 511,424 (11,627) 66,08G 138,806) 234,614 10 Investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds on sale of property, plant and equipment Purchase of debt and equity instruments Proceeds on sale of debt and equity instruments Repayment of loan receivable Interest received Cash used in investing activities (43,493) (995) 1,298 (36,038) 30,586 1,046 4,526 (43,070) 132,931) (1,236) 1,004 136,497) 22,097 666 3,SOS [43,392) 15 13 Financing activities Payment of lease liability Dividends paid Decrease of employee loans-redeemable shares Repurchase of common share Repayment of term loan Interest paid Cash used in financing activities 15 16 14 (71,076) (44,636) 2,499 (48,202) [5,000) (22,336) (188,7511 (66,149) [43,313) 5,063 (10,158) 150,000) [27,900) (192,457) Net increase (decrease in cash and cash equivalents during the year Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 279,603 89,032 368,635 (1,235) 90,267 89,032 The accompanying notes are an integral part of these consolidated financial statements. quivale As at ics in thousand December 31, 2020 December 31, 2019 368,635 89,032 Cash and cash equivalents 6. Inventories The amount of inventory recognized as an expense for the December 31, 2020 was $1,184,162 (2019 - $1,232,486), which is presented within cost of sales in the consolidated statement of income. There were $41 in inventory write-downs recognized during 2020 (as at December 31, 2019 - $1,682 inventory write-down reversals). As at December 31, 2020, the inventory markdown provision totaled $5,354 (as at December 31, 2019 - $5,313). 7. Deferred Acquisition Costs les in the Balance as at January 1, 2019 Costs of new policies sold Policy sales costs recognized Balance as at December 31, 2019 Cost of new policies sold Policy sales costs recognized Balance as at December 31, 2020 Total 28,940 7,177 (8,253) 27,864 11,761 (11,286) 28,339 Reported as: Current Non-current Balance as at December 31, 2019 Current Non-current Balance as at December 31, 2020 10,994 16,870 27,864 10,725 17,614 28,339 8. Property, Plant and Equipment KS in thousands Land Buildings Equipment Veides Building improvements Leased property Leased equipment Total 104,468| 171,918 1,963 261,421 25,110 1,319,110 102,626 9,043 Balance as at January 1, 2020 Additions Disposals Balance at December 31, 2020 (344 104,124 56,293 5,840 (1.374) 60,759 235,103 7,189 (1,2001 243,092 501944 55,446 (1431 359,247 1919) 130,040 14601 1,434 284,551 1,457,267 616 153,932 6,417 Accumulated depreciation Balance as at January 1, 2020 Depreciation Disposals Balance as at December 31, 2020 Net book value as at December 31, 2020 129,953 7,087 1877) 136,16) 31,711 5,643 (1357) 35,997 197,238 8,471 (1,200) 104,866 30,451 (84) (4691 104,515 13,987) 722,844 160,349 204,500 185 233 613 104,124 126,182 43,877 24,762 40,583 374,014 881 714,423 Sin thousands Land lluilding improvements Buildings Equipment Vehicles Leased property Leased equipment Total Cost Balance as at January 1, 2019 Additions Disposals Balance as at December 31, 2019 101,091 2220 (393) 254,351 7,050 158,440 7.529 (4,051) 171.918 949 1,014 50,876 6,387 (970) 56,293 235,755 8.185 (4.847) 239,103 450,296 53,685 (40) 1,261,778 87.633 (10,301) 1.339.110 104468 261,421 503.964 1.963 147,649 14.643 90,224 Accumulated depreciation Balance as at January 1, 2019 Depreciation Disposal Balance as at December 31, 2019 Net book value as at December 31, 2019 125,672 7.281 14.000) 129,953 41,965 27,658 4954 (901) 31,711 24,582 193,000 8.978 (4,820) 197,238 41,855 509,702 118,336 (9,722) 618,316 516 153,932 107,489 104.865 399,078 104,468 1,347 720,794 9. Investment Properties Buildings improvements ks in thousandil Land Buildings Total 10,946 17,333 Cost Balance as at January 1, 2020 Additions Balance as at December 31, 2020 1,097 14 1,111 29,376 14 29,390 10,946 17,333 Accumulated depreciation Balance as at January 1, 2020 Depreciation Balance as at December 31, 2020 Net book value as at December 31, 2020 12,209 377 12,586 4,747 534 58 592 12,743 435 13,178 16,212 10,946 519 Buildings improvements KS in thousand Land Buildings Total Cost Balance as at January 1, 2019 Balance as at December 31, 2019 10,946 10,946 17,333 17,333 1,097 1,097 29,376 29,376 423 Accumulated depreciation Balance as at January 1, 2019 Depreciation Balance as at December 31, 2019 Net book value as at December 31, 2019 11,831 378 12,209 5,124 12,304 439 12,743 16,633 534 10,946 563 10. Intangible Assets and Goodwill Customer relationships Brand name and franchise arreements Computer software Sinhandel Total 7,000 268,500 Cost Balance as at January 1, 2020 Additions Disposals Balance as at December 31, 2020 19,694 995 (103) 20,586 295,194 995 (103) 296,086 7,000 268,500 2,500 6,218 625 Accumulated amortization Balance as at January 1, 2020 Depreciation Disposals Balance as at December 31, 2020 Net book value as at December 31, 2020 14,666 1,694 (98) 16,262 4,324 23,384 2,319 198) 25,605 270,481 6,843 157 2,500 266,000 Customer relationships Brand name and franchise agreements Computer software Sin thousand Total 7,000 268,500 18,458 1,236 19,694 293,958 1,236 295,194 7.000 268,500 Cost Balance as at January 1, 2019 Additions Balance as at December 31, 2019 Accumulated amortization Balance as at January 1, 2019 Depreciation Balance as at December 31, 2019 Net book value as at December 31, 2019 2,500 5,594 624 6,218 782 11,370 3,296 14,666 5,028 19,464 2,920 23,384 271,810 2,500 266,000 Amortization of intangible assets is included within selling, general and administrative expenses on the consolidated statements of income. The following table presents the details of the Company's indefinite-life intangible assets: As at ics in thousand The Brick brand name (allocated to Brick division) The Brick franchise agreements (allocated to Brick division) Total December 31, 2020 245,000 21,000 266,000 December 31, 2019 245,000 21,000 266,000 The Company currently has no plans to change The Brick store banners and expects these assets to generate cash flows over an indefinite future period. Therefore, these intangible assets are considered to have indefinite useful lives for accounting purposes. The Brick franchise agreements have expiry dates with options to renew. The Company's intention is to renew these agreements at each renewal date indefinitely. The company expects the franchise agreements and franchise locations will generate cash flows over an indefinite future period. Therefore, these assets are also considered to have indefinite useful lives. The following table presents the details of the Company's finite-life intangible assets: As at cs in the Brick division customer relationships Computer software Total December 31, 2020 157 4,324 4,481 December 21, 2019 782 5,028 5,810 Leon's Furniture Limited Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 Amounts in thousands of Canadian dollars, except share amounts and earnings per share For the purpose of the annual impairment testing goodwill is allocated to the following cau groups, which are the groups expected to benefit from the synergies of the business combinations and to which the goodwill is monitored by the Company: As at ics in thousand Appliance Canada (included within Leon's division) Brick division Total December 31, 2020 11,282 378,838 390, 120 December 31, 2019 11,282 378,838 390, 120 Impairment tests The Company performed impairment tests of goodwill, brand and franchise agreements intangible as at December 31, 2020 and 2019 in accordance with the accounting policy as described in Note 3. The recoverable amount of the CGUs was determined based on value-in-use calculations. These calculations used cash flow projections based on financial budgets approved by management covering a one-year period. Cash flows beyond the one-year period are extrapolated using the estimated growth rates stated below. The key assumptions used for the value-in-use calculation as at December 31, 2020 and 2019 were as follows: As at December 31, 2020 December 31, 2019 Growth rate 2.0% 2.0% Pre-tax discount rate 8.4% 9.0% The impairment tests performed resulted in no impairment of the goodwill and indefinite life intangibles as at December 31, 2020 and December 31, 2019. 11. Trade and Other Payables As at KS in thousands Trade payables Other payables Total December 31, 2020 171,616 133,228 304,844 December 31, 2019 134,013 122.526 256,539 12. Provisions Full circle Other Total Unpaid insurance claims 574 574 (510) KS in thousands Balance as at December 31, 2019 Provisions made during the year Provisions used during the year Unused provisions reversed Balance as at December 31, 2020 Unpaid warranty Product returns claims 8,077 2,090 407 (2,882) (15) (551) 5,180 1.946 11,606 4,263 1957) 927 2,005 23,274 7,249 14,349) (566) 25,608 638 14,912 2,932 Lease liabilities Carrying amounts of lease liabilities are as follows: les in the Balance as at December 31, 2019 Additions Disposals Interest Payments Balance as at December 31, 2020 Total 412,694 59,147 (62) 20,472 191,548) 400,703 Reported as: Current Non-current Total 73,476 327,227 400,703 Total les in thousandal Balance as at December 31, 2018 Additions Disposals Interest Payments Balance as at December 31, 2019 424,139 57,814 21,711 190,970) 412,694 Reported as: Current Non-current Total 70,601 342,093 412,694 For the year ended December 31, 2020, the Company recognized rent expense from short-term leases of $1,475, leases of low- value assets of $1,667 and variable lease payments of $36,116. For the year ended December 31, 2019, the Company recognized rent expense from short-term leases of $503, leases of low-value assets of $388 and variable lease payments of $39,222. Company as a lessor Lease revenue receivable The Company has entered into operating leases on its investment property portfolio consisting of certain land and building properties. These leases generally have terms between 5 and 15 years. Future minimum rentals receivable under non-cancellable operating are as follows: KS in thousands Total No later than 1 year 1,729 Later than 1 year and no later than 5 years 5,406 Later than 5 years 4,521 Total 11,656 17. Revenue a) Disaggregation of revenue For the Cs in thousands) Sales of goods by corporate stores Income from franchise operations Extended warranty revenue Insurance sales revenue Rental Income from investment property Total Year ended December 31, 2020 December 31, 2019 2,134,563 2,199,650 30,521 28,885 40,883 39,171 12,738 14,195 1,475 1,510 2,220,180 2,283,411 b) Customers' deposits For the C$ in thousands Opening balance as at January 1 Revenue recognized that was included in the customer deposit balance at the beginning of Year ended December 31, 2020 December 31, 2019 151,817 146,362 the year (145,954) (139,474) For the Year ended December 31, 2020 December 31, 2019 142,943 148,306 KS in thousands Opening balance as at January 1 Revenue recognized that was included in the ceferred warranty balance at the beginning of the year Recognition of deferred warranty during the year Total (54,736) 66,130 (71.4491 56,086 144,337 142.943 Reported as: Current Non-current Total 55,733 88,504 144,337 57,638 85,305 142,943 18. Expenses by Nature For the Year ended cs in the December 31, 2020 December 31, 2019 Salaries and benefits 391,178 388,279 Depreciation of property, plant and equipment and investment properties 108,970 118,775 Amortization of intangible assets 2,319 3,920 Occupancy expenses 87,470 92,745 (1) Salaries and benefits for the year ended December 31, 2020 include Canada Emergency Wage Subsidy ("CEWS") instalments of $31,559 (note 28) 19. Net Finance Costs For the Kinh Interest expense on lease obligations Interest expense on term credit facilities and revolving credit facilities Interest expense on convertible debentures Finance income Total Year ended December 31, 2020 December 31, 2019 20,472 21,711 1,787 5.027 154 1,951 (4,526) (3,505) 17,887 25,184 20. Income Tax Expense (a) The major components of income tax expense for the years ended December 31 are as follows: Year ended December 31, 2020 December 31, 2019 For the Sin the Consolidated statements of income Current Income tax expenses Based on taxable income of the current year Deferred income tax expense: Origination and reversal of temporary differences Income tax expense reported in the consolidated statements of income 54,378 42,808 (7,143) 47,235 (6,691) 36,117 26. Consolidated Statements of Cash Flows a) The net change in operating working capital balances consist of the following: For the les in thousand Trade receivables Inventories Prepaid expenses and other assets Trade and other payables Customers' deposits Other assets Other liabilities Provisions Deferred acquisition costs Deferred rent liabilities and lease inducements Total Year ended December 31, 2020 December 31, 2019 9.953 (18,403) 2,371 (5,126) (1,822) (938) 47,069 4,312 153,643 5455 625 3,976 2,334 11,582 (475) (8,214) (159) 217,674 (11,627) Leases Loans and borrowings 412,694 95,000 15,000] b) Changes in liabilities arising from financing activities comprise the following: Convertible Debentures (including Is in the sand equity component! Balance as at December 31, 2019 52,330 Cash changes: Long-term debt repayment Lease obligation repayment Non-cash changes: Additions Disposals Conversions of debenture (51,8771 Amortization Accretion 19 Balance as at December 31, 2020 472 191,548) 59,147 (62) 20,472 400,703 90,000 dx rates are as follow For the Sin thousand Income before income taxes Income tax expense based on statutory tax rate Year ended December 31, 2020 210,485 55,56B 26.40% December 31, 2019 143,046 38,165 26.68% Increase (decrease) in income taxes resulting from non-taxable items or adjustments of prior year taxes: Non-deductible items Remeasurement of deferred income tax asset for rate changes Income exempt from tax Prior year adjustments Other Income tax expense reported in the consolidated statements of income 609 (421) (204) 0.43% (0.29%) (0.14%) 410 (461) (138) (2,3071 (5,837) 47,235 0.19% (0.22%) (0.07%) (1.10%) (2.77%) 22.44% (2,032) 36,112 (1.42%) 25.25% (c) Deferred income tax balances and reconciliation are as follows: (0) Deferred income tax relates to the following: December 31, 2020 December 31, 2019 As at Sin thousands Deferred income tax assets (liabilities) Deferred tax income assets Deferred tax income abilities Total deferred Income tax assets liabilities) 14,993 (75,562) (60,569) 14,779 (82,302) (67,5231 (8) Deferred income tax movements are as follows: As at Balance, beginning of Other year Sin thouse Deferred warranty plan Deferred financing fees Deferred acquisition costs Property, plant and equipment Intangible assets Lease liabilities Other Mark to market Net deferred income tax expense - statements of income Movement in convertible debenture Net deferred income tax expense (benefit) -equity Total deferred income tax expense (benefit) 198) 56 (359) 198,9141 [76,793) 91,804 18,158 (95) (56,241) (1,282) (1,282) [67,5231 December 31, 2020 Consolidated Expense Balance, end (benefit of year (98) (45) 11 40 (319) 7,813 191,101) 221 (76,572) (6,627) 85,177 3,246 21,215 1,214 1,119 5,862 (60,568) 1,281 (1) 1,281 (1) 7,143 (60,569) (189) (189) (189) Year ended December 31, 2020 December 31, 2019 Notes 210,485 143,046 Consolidated Statements of Cash Flows For the Cs in thousands Operating activities Net income before income tax Add(deduct) items not involving an outlay of cash: Depreciation of property, plant and equipment and investment properties Amortization of intangible assets Amortization of deferred warranty plan revenue Amortization of premium Net finance costs Gain on sale of property, plant and equipment and investment properties Fair value gain on loan receivable Gain (loss) on sale of debt and equity instruments 17 108,970 2,319 (64,736) 222 18,050 (831) (714) (139) 273,626 118,775 3,920 (71,449) 144 25,472 (424) (528) 5 218,961 15 26 Change in operating working capital Cash received on warranty plan sales Income taxes paid Cash provided by operating activities 217,674 66,130 (46,006) 511,424 (11,627) 66,086 (38,806) 234,614 8 10 Investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds on sale of property, plant and equipment Purchase of debt and equity instruments Proceeds on sale of debt and equity instruments Repayment of loan receivable Interest received Cash used in investing activities (43,493) (995) 1,298 (36,038) 30,586 1,046 4,526 (43,070) (32,931) (1,236) 1,004 (36,497) 22,097 666 3,505 (43,392) 15 13 Financing activities Payment of lease liability Dividends paid Decrease of employee loans-redeemable shares Repurchase of common shares Repayment of term loan interest paid Cash used in financing activities 15 16 14 (71,076) (44,636) 2,499 (48,202) (5,000) (22,336) (188,751) (66,149) (43,313) 5,063 (10,158) (50,000) (27,900) (192,457) Net increase (decrease) in cash and cash equivalents during the year Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 279,603 89,032 368,635 (1,235) 90,267 89,032 Leon's Furniture Limited Consolidated Statements of Changes in Shareholders' Equity Equity component of Accumulated other comprehensive debentures As at December 31, 2019 115,728 3,378 convertible Common shares C$ in thousands income Retained earnings 793,116 Total 915,764 3,542 163,250 163,250 Comprehensive income Net income for the year Other comprehensive income for the year Total comprehensive income 5,321 5,321 5,321 163,250 168,571 (69,977) (3,511) Transactions with shareholders Dividends declared Management share purchase plan (note 15) Convertible debentures (note 14 Treasury Shares (note 16) Share repurchase commitment (note 16] Repurchase of common shares (note 16] Total transactions with shareholders As at December 31, 2020 2,499 51,859 (6) (159) (5,252) 48,941 164,669 (59) (841) (42,885) (113,762) 842,604 (69,977) 2,499 48,348 (65) (1,000) (48,137) (68,332) 1,016,003 (3,511) 31 8,699 Equity component of convertible debentures 3,546 C$ in thousands As at December 31, 2018 Common shares 111,956 Accumulated other comprehensive income (loss) (1,539) Retained earnings 743,399 Total 857,362 106,929 Comprehensive Income Net income for the year Other comprehensive income for the year Total comprehensive income 4,917 4,917 106,929 4,917 111,846 106,929 (43,445) (4) Transactions with shareholders Dividends declared Management share purchase plan (note 15) Convertible debentures (note 14) Share repurchase commitment (note 16] Repurchase of common shares (note 16] Total transactions with shareholders As at December 31, 2019 5,063 100 (443) (948) 3,772 115,728 (43,445) 5,063 96 (5,000) (10,158) (53.444) 915,764 (4,557) 19,210) (57,212) 793,116 (4) 3,542 3,378 Leon's Furniture Limited Consolidated Statements of Comprehensive Income For the $ in thousands Year ended December 31, 2020 December 31, 2019 Net income for the year 163,250 106,929 2,053 135 805 13 Other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss: Gain on debt instruments arising during the year Reclassification adjustment for gains on disposal of debt instruments Items that will not be reclassified to profit or loss: Gain on equity instruments arising during the year Other comprehensive income for the year Comprehensive income for the year 3,133 5,321 168,571 4,099 4,917 111,846 The accompanying notes are an integral part of these consolidated financial statements. Leon's Furniture Limited Consolidated Statements of Income For the in thousands except share and share amounts Notes Year ended December 31, 2020 December 31, 2019 Revenue Cost of sales Gross profit 17 6 2,220,180 1,236,258 983,922 2,283,411 1,284,826 998,585 Operating expenses Selling, general and administrative expenses Operating profit 18 750,951 232,971 830,495 168,090 19 19 Finance costs Finance income Change in fair value of derivative instruments Net income before income tax (22,413) 4,526 (4,599) 210,485 (28,689) 3,505 140 143,046 20 Income tax expense Net income for the year 47,235 163,250 36,117 106,929 Weighted average number of common shares outstanding Basic Diluted 79,798,908 82,113,879 77,594,496 83,746,040 21 Earnings per share Basic Diluted $2.05 $1.99 $1.38 $1.30 Dividends declared per share Common Convertible, non-voting $0.88 $0.29 $0.56 $0.28 il catamant Notes December 31, 2020 December 31, 2019 cs in thousands) Assets 5 368,635 2,451 73,565 48,634 130,582 4,266 332,072 10,725 11,095 89,032 5,777 65,859 42,286 140,535 3,578 334,443 10,994 9,273 625 702,402 6 7 Current assets Cash and cash equivalents Restricted marketable securities Debt securities Equity securities Trade receivables Income taxes receivable Inventories Deferred acquisition costs Prepaid expenses and other assets Other assets Total current assets Non-current assets Deferred acquisition costs Loan receivable Property, plant and equipment Investment properties Intangible assets Goodwill Deferred income tax assets Total non-current assets Total assets 22 982,025 7 15 8 9 10 10 20 17,614 12,721 714,423 16,212 270,481 390, 120 14,993 1,436,564 2,418,589 16,870 13,053 720,794 16,633 271,810 390,120 14,779 1,444,059 2,146,461 11 12 20 17 13 16 17 14 304,844 25,608 15,479 305,460 73,476 36,163 55,733 256,539 23,274 6,505 151,817 70,601 10,822 57,638 25,000 Liabilities Current liabilities Trade and other payables Provisions Income taxes payable Customers' deposits Lease liability Dividends payable Deferred warranty plan revenue Loans and borrowings Other liabilities Total current liabilities Non-current liabilities Loans and borrowings Convertible debentures Lease liability Deferred warranty plan revenue Redeemable share liability Deferred income tax liabilities Total non-current liabilities Total liabilities 22 3,976 820,739 502,196 14 14 13 17 15 20 90,000 441 327,227 88,604 13 75,562 581,847 1,402.586 70,000 48,788 342,093 85,305 13 82,302 628,501 1,230,697 16 14 Equity Common shares Equity component of convertible debentures Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity 164,659 31 842,604 8,699 1,016,003 2,418,589 115,728 3,542 793,116 3,378 915,764 2,146,461 Consolidated Statements of Financial Position Notes December 31, 2020 December 31, 2019 5 As at Ks in thousand Assets Current assets Cash and cash equivalents Restricted marketable securities Debt securities Equity securities Trade receivables Income taxes receivable Inventories Deferred acquisition costs Prepaid expenses and other assets Other assets Total current assets Non-current assets Deferred acquisition costs Loan receivable Property, plant and equipment Investment properties Intangible assets Goodwill Deferred income tax assets Total non-current assets Total assets 368,635 2,451 73,565 48,634 130,582 4,266 332,072 10,725 11,095 89,032 5,777 65,859 42,286 140,535 3,578 334,443 10,994 9,273 625 702,402 6 22 982,025 7 15 8 9 10 10 20 17,614 12,721 714,423 16,212 270,481 390,120 14,993 1,436,564 2,418,589 16,870 13,053 720,794 16,633 271,810 390,120 14,779 1,444,059 2,146,461 11 12 20 17 13 16 17 304,844 25,608 15,479 305,460 73,476 36,163 55,733 256,539 23,274 6,SOS 151,817 70,601 10,822 57,638 25,000 14 Liabilities Current liabilities Trade and other payables Provisions Income taxes payable Customers' deposits Lease liability Dividends payable Deferred warranty plan revenue Loans and borrowings Other liabilities Total current liabilities Non-current liabilities Loans and borrowings Convertible debentures Lease liability Deferred warranty plan revenue Redeemable share liability Deferred income tax liabilities Total non-current liabilities Total liabilities 22 3,976 820,739 602, 196 14 14 13 17 15 20 90,000 441 327,227 88,604 13 75,562 581,847 1,402.586 70,000 48,788 342,093 85,305 13 82,302 628, 501 1,230,697 16 14 Equity Common shares Equity component of convertible debentures Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity 164,669 31 842,604 8,699 1,016,003 2,418,589 115,728 3,542 793,116 3,378 915,764 2.146,461 The accompanying notes are an integral part of these consolidated financial statements. Leon's Furniture Limited Consolidated Statements of Income For the cs in thousands except there and shares Year ended December 31, 2020 December 31, 2019 Notes 17 Revenue Cost of sales Gross profit 6 2,220,180 1,236,258 983,922 2,283,411 1,284,826 998,585 Operating expenses Selling, general and administrative expenses Operating profit 18 750,951 232,971 830,495 168,090 19 19 Finance costs Finance Income Change in fair value of derivative Instruments Net income before income tax (22,413) 4,526 (4,599) 210,485 (28,689) 3,505 140 143,046 20 Income tax expense Net income for the year 47,235 163,250 36,112 106,929 Weighted average number of common shares outstanding Basic Diluted 79,798,908 82,113,879 77,594,496 83,746,040 21 Earnings per share Basic Diluted $2.05 $1.99 $1.38 $1.30 Dividends declared per share Common Convertible, non-voting $0.88 $0.29 $0.56 $0.28 The accompanying notes are an integral part of these consolidated financial statements. Leon's Furniture Limited Consolidated Statements of Comprehensive Income For the Sinshoardil Year ended December 31, 2020 December 31, 2019 Net income for the year 163,250 106,929 2,053 135 80s 13 Other comprehensive income, net of tax items that may be reclassified subsequently to profit or loss: Gainon debt instruments arising during the year Reclassification adjustment for gains on disposal of debt instruments Items that will not be reclassified to profit or loss: Gain on equity instruments arising during the year Other comprehensive income for the year Comprehensive income for the year 3,133 5,321 168,571 4,099 4,917 111,846 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statements of Changes in Shareholders' Equity Equity component of Accumulated other is in thousands As at December 31, 2019 convertible debentures 3,542 Common shares 115,728 comprehensive income 3,378 Retained earnings 793,116 Total 915,764 163,250 Comprehensive income Net income for the year Other comprehensive income for the year Total comprehensive income 5,321 5,321 163,250 5,321 168,571 163,250 (69,977) (3,5111 Transactions with shareholders Dividends declared Management share purchase planinote 15] Convertible debentures (note 14 Treasury Shares Inote 16 Share repurchase commitment [note 16 Repurchase of common shares (note 16] Total transactions with shareholders As at December 31, 2020 2,499 51,859 (6) (159) (52521 48,941 164,669 (59) (841) (42.885) (113,762) 842,604 169,9771 2,499 48,348 (65) (1,000) (48,137) 168,332) 1,016,003 (3,511) 31 8,699 Equity component of convertible debentures 3,546 Accumulated other comprehensive income (loss) (1,539) Common shares 111,956 les in thousand As at December 31, 2018 Retained earnings 743,399 Total 857,362 106,929 Comprehensive Income Net income for the year Other comprehensive income for the year Total comprehensive Income 4,917 4,917 106,929 4,917 111,846 106,929 (43,445) (4) Transactions with shareholders Dividends declared Management share purchase planinote 15] Convertible debentures (note 14 Share repurchase commitment [note 16 Repurchase of common shares (note 16] Total transactions with shareholders As at December 31, 2019 5,063 100 [443) 1948) 3,772 115,728 [4,557) 19,210) (57,212) 793,116 [43,445) 5,063 96 (5,000) (10,158) 153,444) 915,764 (4) 3,542 3,378 The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statements of Cash Flows Notes Year ended December 31, 2020 December 31, 2019 210,485 143,046 For the Sin thousandil Operating activities Net income before income tax Add (deduct) items not involving an outlay of cash Depreciation of property, plant and equipment and investment properties Amortization of intangible assets Amortization of deferred warranty plan revenue Amortization of premium Net finance costs Gain on sale of property, plant and equipment and investment properties Fair value gain on loan receivable Gain (loss) on sale of debt and equity instruments 17 108,970 2,319 (64,736) 222 18,050 (831) (714) (139) 273,626 118,775 3,920 171,449) 144 25,472 (424) (528) 5 218,961 15 26 Change in operating working capital Cash received on warranty plan sales Income taxes paid Cash provided by Operating activities 217,674 66,130 (46,006) 511,424 (11,627) 66,08G 138,806) 234,614 10 Investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds on sale of property, plant and equipment Purchase of debt and equity instruments Proceeds on sale of debt and equity instruments Repayment of loan receivable Interest received Cash used in investing activities (43,493) (995) 1,298 (36,038) 30,586 1,046 4,526 (43,070) 132,931) (1,236) 1,004 136,497) 22,097 666 3,SOS [43,392) 15 13 Financing activities Payment of lease liability Dividends paid Decrease of employee loans-redeemable shares Repurchase of common share Repayment of term loan Interest paid Cash used in financing activities 15 16 14 (71,076) (44,636) 2,499 (48,202) [5,000) (22,336) (188,7511 (66,149) [43,313) 5,063 (10,158) 150,000) [27,900) (192,457) Net increase (decrease in cash and cash equivalents during the year Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 279,603 89,032 368,635 (1,235) 90,267 89,032 The accompanying notes are an integral part of these consolidated financial statements. quivale As at ics in thousand December 31, 2020 December 31, 2019 368,635 89,032 Cash and cash equivalents 6. Inventories The amount of inventory recognized as an expense for the December 31, 2020 was $1,184,162 (2019 - $1,232,486), which is presented within cost of sales in the consolidated statement of income. There were $41 in inventory write-downs recognized during 2020 (as at December 31, 2019 - $1,682 inventory write-down reversals). As at December 31, 2020, the inventory markdown provision totaled $5,354 (as at December 31, 2019 - $5,313). 7. Deferred Acquisition Costs les in the Balance as at January 1, 2019 Costs of new policies sold Policy sales costs recognized Balance as at December 31, 2019 Cost of new policies sold Policy sales costs recognized Balance as at December 31, 2020 Total 28,940 7,177 (8,253) 27,864 11,761 (11,286) 28,339 Reported as: Current Non-current Balance as at December 31, 2019 Current Non-current Balance as at December 31, 2020 10,994 16,870 27,864 10,725 17,614 28,339 8. Property, Plant and Equipment KS in thousands Land Buildings Equipment Veides Building improvements Leased property Leased equipment Total 104,468| 171,918 1,963 261,421 25,110 1,319,110 102,626 9,043 Balance as at January 1, 2020 Additions Disposals Balance at December 31, 2020 (344 104,124 56,293 5,840 (1.374) 60,759 235,103 7,189 (1,2001 243,092 501944 55,446 (1431 359,247 1919) 130,040 14601 1,434 284,551 1,457,267 616 153,932 6,417 Accumulated depreciation Balance as at January 1, 2020 Depreciation Disposals Balance as at December 31, 2020 Net book value as at December 31, 2020 129,953 7,087 1877) 136,16) 31,711 5,643 (1357) 35,997 197,238 8,471 (1,200) 104,866 30,451 (84) (4691 104,515 13,987) 722,844 160,349 204,500 185 233 613 104,124 126,182 43,877 24,762 40,583 374,014 881 714,423 Sin thousands Land lluilding improvements Buildings Equipment Vehicles Leased property Leased equipment Total Cost Balance as at January 1, 2019 Additions Disposals Balance as at December 31, 2019 101,091 2220 (393) 254,351 7,050 158,440 7.529 (4,051) 171.918 949 1,014 50,876 6,387 (970) 56,293 235,755 8.185 (4.847) 239,103 450,296 53,685 (40) 1,261,778 87.633 (10,301) 1.339.110 104468 261,421 503.964 1.963 147,649 14.643 90,224 Accumulated depreciation Balance as at January 1, 2019 Depreciation Disposal Balance as at December 31, 2019 Net book value as at December 31, 2019 125,672 7.281 14.000) 129,953 41,965 27,658 4954 (901) 31,711 24,582 193,000 8.978 (4,820) 197,238 41,855 509,702 118,336 (9,722) 618,316 516 153,932 107,489 104.865 399,078 104,468 1,347 720,794 9. Investment Properties Buildings improvements ks in thousandil Land Buildings Total 10,946 17,333 Cost Balance as at January 1, 2020 Additions Balance as at December 31, 2020 1,097 14 1,111 29,376 14 29,390 10,946 17,333 Accumulated depreciation Balance as at January 1, 2020 Depreciation Balance as at December 31, 2020 Net book value as at December 31, 2020 12,209 377 12,586 4,747 534 58 592 12,743 435 13,178 16,212 10,946 519 Buildings improvements KS in thousand Land Buildings Total Cost Balance as at January 1, 2019 Balance as at December 31, 2019 10,946 10,946 17,333 17,333 1,097 1,097 29,376 29,376 423 Accumulated depreciation Balance as at January 1, 2019 Depreciation Balance as at December 31, 2019 Net book value as at December 31, 2019 11,831 378 12,209 5,124 12,304 439 12,743 16,633 534 10,946 563 10. Intangible Assets and Goodwill Customer relationships Brand name and franchise arreements Computer software Sinhandel Total 7,000 268,500 Cost Balance as at January 1, 2020 Additions Disposals Balance as at December 31, 2020 19,694 995 (103) 20,586 295,194 995 (103) 296,086 7,000 268,500 2,500 6,218 625 Accumulated amortization Balance as at January 1, 2020 Depreciation Disposals Balance as at December 31, 2020 Net book value as at December 31, 2020 14,666 1,694 (98) 16,262 4,324 23,384 2,319 198) 25,605 270,481 6,843 157 2,500 266,000 Customer relationships Brand name and franchise agreements Computer software Sin thousand Total 7,000 268,500 18,458 1,236 19,694 293,958 1,236 295,194 7.000 268,500 Cost Balance as at January 1, 2019 Additions Balance as at December 31, 2019 Accumulated amortization Balance as at January 1, 2019 Depreciation Balance as at December 31, 2019 Net book value as at December 31, 2019 2,500 5,594 624 6,218 782 11,370 3,296 14,666 5,028 19,464 2,920 23,384 271,810 2,500 266,000 Amortization of intangible assets is included within selling, general and administrative expenses on the consolidated statements of income. The following table presents the details of the Company's indefinite-life intangible assets: As at ics in thousand The Brick brand name (allocated to Brick division) The Brick franchise agreements (allocated to Brick division) Total December 31, 2020 245,000 21,000 266,000 December 31, 2019 245,000 21,000 266,000 The Company currently has no plans to change The Brick store banners and expects these assets to generate cash flows over an indefinite future period. Therefore, these intangible assets are considered to have indefinite useful lives for accounting purposes. The Brick franchise agreements have expiry dates with options to renew. The Company's intention is to renew these agreements at each renewal date indefinitely. The company expects the franchise agreements and franchise locations will generate cash flows over an indefinite future period. Therefore, these assets are also considered to have indefinite useful lives. The following table presents the details of the Company's finite-life intangible assets: As at cs in the Brick division customer relationships Computer software Total December 31, 2020 157 4,324 4,481 December 21, 2019 782 5,028 5,810 Leon's Furniture Limited Notes to the Consolidated Financial Statements For the years ended December 31, 2020 and 2019 Amounts in thousands of Canadian dollars, except share amounts and earnings per share For the purpose of the annual impairment testing goodwill is allocated to the following cau groups, which are the groups expected to benefit from the synergies of the business combinations and to which the goodwill is monitored by the Company: As at ics in thousand Appliance Canada (included within Leon's division) Brick division Total December 31, 2020 11,282 378,838 390, 120 December 31, 2019 11,282 378,838 390, 120 Impairment tests The Company performed impairment tests of goodwill, brand and franchise agreements intangible as at December 31, 2020 and 2019 in accordance with the accounting policy as described in Note 3. The recoverable amount of the CGUs was determined based on value-in-use calculations. These calculations used cash flow projections based on financial budgets approved by management covering a one-year period. Cash flows beyond the one-year period are extrapolated using the estimated growth rates stated below. The key assumptions used for the value-in-use calculation as at December 31, 2020 and 2019 were as follows: As at December 31, 2020 December 31, 2019 Growth rate 2.0% 2.0% Pre-tax discount rate 8.4% 9.0% The impairment tests performed resulted in no impairment of the goodwill and indefinite life intangibles as at December 31, 2020 and December 31, 2019. 11. Trade and Other Payables As at KS in thousands Trade payables Other payables Total December 31, 2020 171,616 133,228 304,844 December 31, 2019 134,013 122.526 256,539 12. Provisions Full circle Other Total Unpaid insurance claims 574 574 (510) KS in thousands Balance as at December 31, 2019 Provisions made during the year Provisions used during the year Unused provisions reversed Balance as at December 31, 2020 Unpaid warranty Product returns claims 8,077 2,090 407 (2,882) (15) (551) 5,180 1.946 11,606 4,263 1957) 927 2,005 23,274 7,249 14,349) (566) 25,608 638 14,912 2,932 Lease liabilities Carrying amounts of lease liabilities are as follows: les in the Balance as at December 31, 2019 Additions Disposals Interest Payments Balance as at December 31, 2020 Total 412,694 59,147 (62) 20,472 191,548) 400,703 Reported as: Current Non-current Total 73,476 327,227 400,703 Total les in thousandal Balance as at December 31, 2018 Additions Disposals Interest Payments Balance as at December 31, 2019 424,139 57,814 21,711 190,970) 412,694 Reported as: Current Non-current Total 70,601 342,093 412,694 For the year ended December 31, 2020, the Company recognized rent expense from short-term leases of $1,475, leases of low- value assets of $1,667 and variable lease payments of $36,116. For the year ended December 31, 2019, the Company recognized rent expense from short-term leases of $503, leases of low-value assets of $388 and variable lease payments of $39,222. Company as a lessor Lease revenue receivable The Company has entered into operating leases on its investment property portfolio consisting of certain land and building properties. These leases generally have terms between 5 and 15 years. Future minimum rentals receivable under non-cancellable operating are as follows: KS in thousands Total No later than 1 year 1,729 Later than 1 year and no later than 5 years 5,406 Later than 5 years 4,521 Total 11,656 17. Revenue a) Disaggregation of revenue For the Cs in thousands) Sales of goods by corporate stores Income from franchise operations Extended warranty revenue Insurance sales revenue Rental Income from investment property Total Year ended December 31, 2020 December 31, 2019 2,134,563 2,199,650 30,521 28,885 40,883 39,171 12,738 14,195 1,475 1,510 2,220,180 2,283,411 b) Customers' deposits For the C$ in thousands Opening balance as at January 1 Revenue recognized that was included in the customer deposit balance at the beginning of Year ended December 31, 2020 December 31, 2019 151,817 146,362 the year (145,954) (139,474) For the Year ended December 31, 2020 December 31, 2019 142,943 148,306 KS in thousands Opening balance as at January 1 Revenue recognized that was included in the ceferred warranty balance at the beginning of the year Recognition of deferred warranty during the year Total (54,736) 66,130 (71.4491 56,086 144,337 142.943 Reported as: Current Non-current Total 55,733 88,504 144,337 57,638 85,305 142,943 18. Expenses by Nature For the Year ended cs in the December 31, 2020 December 31, 2019 Salaries and benefits 391,178 388,279 Depreciation of property, plant and equipment and investment properties 108,970 118,775 Amortization of intangible assets 2,319 3,920 Occupancy expenses 87,470 92,745 (1) Salaries and benefits for the year ended December 31, 2020 include Canada Emergency Wage Subsidy ("CEWS") instalments of $31,559 (note 28) 19. Net Finance Costs For the Kinh Interest expense on lease obligations Interest expense on term credit facilities and revolving credit facilities Interest expense on convertible debentures Finance income Total Year ended December 31, 2020 December 31, 2019 20,472 21,711 1,787 5.027 154 1,951 (4,526) (3,505) 17,887 25,184 20. Income Tax Expense (a) The major components of income tax expense for the years ended December 31 are as follows: Year ended December 31, 2020 December 31, 2019 For the Sin the Consolidated statements of income Current Income tax expenses Based on taxable income of the current year Deferred income tax expense: Origination and reversal of temporary differences Income tax expense reported in the consolidated statements of income 54,378 42,808 (7,143) 47,235 (6,691) 36,117 26. Consolidated Statements of Cash Flows a) The net change in operating working capital balances consist of the following: For the les in thousand Trade receivables Inventories Prepaid expenses and other assets Trade and other payables Customers' deposits Other assets Other liabilities Provisions Deferred acquisition costs Deferred rent liabilities and lease inducements Total Year ended December 31, 2020 December 31, 2019 9.953 (18,403) 2,371 (5,126) (1,822) (938) 47,069 4,312 153,643 5455 625 3,976 2,334 11,582 (475) (8,214) (159) 217,674 (11,627) Leases Loans and borrowings 412,694 95,000 15,000] b) Changes in liabilities arising from financing activities comprise the following: Convertible Debentures (including Is in the sand equity component! Balance as at December 31, 2019 52,330 Cash changes: Long-term debt repayment Lease obligation repayment Non-cash changes: Additions Disposals Conversions of debenture (51,8771 Amortization Accretion 19 Balance as at December 31, 2020 472 191,548) 59,147 (62) 20,472 400,703 90,000 dx rates are as follow For the Sin thousand Income before income taxes Income tax expense based on statutory tax rate Year ended December 31, 2020 210,485 55,56B 26.40% December 31, 2019 143,046 38,165 26.68% Increase (decrease) in income taxes resulting from non-taxable items or adjustments of prior year taxes: Non-deductible items Remeasurement of deferred income tax asset for rate changes Income exempt from tax Prior year adjustments Other Income tax expense reported in the consolidated statements of income 609 (421) (204) 0.43% (0.29%) (0.14%) 410 (461) (138) (2,3071 (5,837) 47,235 0.19% (0.22%) (0.07%) (1.10%) (2.77%) 22.44% (2,032) 36,112 (1.42%) 25.25% (c) Deferred income tax balances and reconciliation are as follows: (0) Deferred income tax relates to the following: December 31, 2020 December 31, 2019 As at Sin thousands Deferred income tax assets (liabilities) Deferred tax income assets Deferred tax income abilities Total deferred Income tax assets liabilities) 14,993 (75,562) (60,569) 14,779 (82,302) (67,5231 (8) Deferred income tax movements are as follows: As at Balance, beginning of Other year Sin thouse Deferred warranty plan Deferred financing fees Deferred acquisition costs Property, plant and equipment Intangible assets Lease liabilities Other Mark to market Net deferred income tax expense - statements of income Movement in convertible debenture Net deferred income tax expense (benefit) -equity Total deferred income tax expense (benefit) 198) 56 (359) 198,9141 [76,793) 91,804 18,158 (95) (56,241) (1,282) (1,282) [67,5231 December 31, 2020 Consolidated Expense Balance, end (benefit of year (98) (45) 11 40 (319) 7,813 191,101) 221 (76,572) (6,627) 85,177 3,246 21,215 1,214 1,119 5,862 (60,568) 1,281 (1) 1,281 (1) 7,143 (60,569) (189) (189) (189)
