The financial statements of The North West Company Inc. are presented in Appendix A at the end of this book. (a) Using the statement of earnings (statement of income), answer the following questions: 1. What amount did the company report as basic earnings per share for the years ending January 31,2019 and 2018 ? (Round the answers to 2 decimal places, e.g. 2.59.) 2. What was its weighted average number of shares for each year? The North West Company Inc. In this appendix and the next, we illustrate current financial reporting with two different sets of corporate financial statements that are prepared in accordance with International Financial Reporting Standards. The financial statement package for North West includes the consolidated statement of financial position (which North West calls balance sheet), statement of income (which North West calls statement of earnings), statement of comprehensive income, statement of changes in equity (which North West calls statement of changes in shareholders' equity), and statement of cash flows. The financial statements are preceded by two reports: management's responsibility for the financial statements and the auditor's report on these statements. Only selected notes to the financial statements related to the topics included in this textbook have been included in this appendix. The complete set of financial statements and annual report for North West can be found on sedar.com in the Issuer Profiles/Companies/Section. In addition, material about working with annual reports, including the financial statements, is included on WileyPLUS. We encourage you to scan North West's financial statements to familiarize yourself with the contents of this appendix. You will also have the opportunity to use these financial statements in conjunction with relevant chapter material in the textbook. As well, these statements can be used to solve the Financial Reporting and Financial Analysis cases in the Expand Your Critical Thinking section of the end of chapter material. As you near the end of your financial accounting course, we challenge you to reread North West's financial statements to see how much greater your understanding of them has become. Management's Responsibility for Financial Statements The management of The North West Company Inc. is responsible for the preparation, presentation and integrity of the accompanying consolidated financial statements and all other information in the annual report. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and include certain amounts that are based on the best estimates and judgment by management. In order to meet its responsibility and ensure integrity of financial information, management has established a code of business ethics, and maintains appropriate internal controls and accounting systems. An internal audit function is maintained that is designed to provide reasonable assurance that assets are safeguarded, transactions are authorized and recorded and that the financial records are reliable. Ultimate responsibility for financial reporting to shareholders rests with the Board of Directors. The Audit Committee of the Board of Directors, consisting of independent Directors, meets periodically with management and with the internal and external auditors to review the audit results, internal controls and the selection and consistent application of appropriate accounting policies. Internal and external auditors have unlimited access to the Audit Committee. The Audit Committee meets separately with management and the external auditors to review the financial statements and other contents of the annual report and recommend approval by the Board of Directors. The Audit Committee also recommends the independent auditor for appointment by the shareholders. PricewaterhouseCoopers LLP, an independent firm of auditors appointed by the shareholders, have completed their audit and submitted their report as follows. Edward S. Kennedy PRESIDENT \& CEO THE NORTH WEST COMPANY INC. April 10, 2019 Independent Auditor's Report To the Shareholders of The North West Company Inc. Our opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of The North West Company Inc. and its subsidiaries, (together, the Company) as at January 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS). What we have audited The Company's consolidated financial statements comprise: - the consolidated balance sheets as at January 31, 2019 and 2018; - the consolidated statements of earnings for the years then ended; - the consolidated statements of comprehensive income for the years then ended; - the consolidated statements of changes in shareholders' 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 a summary of significant accounting policies. 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 responsibilitie 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 othe ethical responsibilities in accordance with these requirements. 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 on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of t' er information, we are required to report that fact. We have nothing to report in this regard. When we read the information, other than the consolidated financial statements and our. or's report thereon, included in the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. 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 signiticant audit tindings, 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 ther relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. The engagement partner on the audit resulting in this independent auditor's report is Nicole Murray. PricewaterhouseCoopers LLp Chartered Professional Accountants Winnipeg, Manitoba See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF EARNINGS (\$ in thousands, except per share amounts) SALES (1). Certain prior period figures have been reclassified as described in Note 3 . See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (\$ in thousands) NET EARNINGS FOR THE YEAR \begin{tabular}{|r|r|} \hline Year Ended January 31, 2019 & Year Ended January 31,2018 \\ \hline $90,632 & $69,691 \\ \hline \end{tabular} Other comprehensive income/(loss), net of tax: Items that may be reclassified to net earnings: \begin{tabular}{|l|l|l} Exchange differences on translation of foreign controlled subsidiaries & 8,049 & (7,934) \\ \hline \end{tabular} Items that will not be subsequently reclassified to net earnings: Remeasurements of defined benefit plans (Note 12) Remeasurements of defined benefit plan of equity investee Total other comprehensive income/(loss), net of tax COMPREHENSIVE INCOME FOR THE YEAR OTHER COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO The North West Company Inc. \begin{tabular}{|l|r|r|r|} \hline Non-controlling interests & \multicolumn{8}{|c|}{} & \\ \hline TOTAL OTHER COMPREHENSIVE INCOME/(LOSS) & $12,977 \\ \hline COMPREHENSIVE INCOME ATTRIBUTABLE TO & & \\ \hline The North West Company Inc. & $(6,932) \\ \hline Non-controlling interests & $98,890 & 4,719 \\ \hline TOTAL COMPREHENSIVE INCOME & $103,609 \\ \hline \end{tabular} See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (\$ in thousands) (1) Accumulated Other Comprehensive Income See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (\$ in thousands) Year Ended January 31, 2019 Year Ended January 31,2018 CASH PROVIDED BY (USED IN) Operating activities (\$ in thousands, except per share amounts) january 31,2019 and 2018 1. Organization The North West Company Inc. (NWC or the Company) is a corporation amalgamated under the Canada Business Corporations Act (CBCA) and governed by the laws of Canada. The Company, through its subsidiaries, is a leading retailer to rural and remote communities and urban neighbourhoods in the following regions: northern Canada, western Canada, rural Alaska, the South Pacific and the Caribbean. These regions comprise two reportable operating segments: Canadian Operations and International Operations. In 2017, the Company acquired 76% of the outstanding shares of Roadtown Wholesale Trading Ltd. (RTW), operating primarily as Riteway Food Markets in the British Virgin Islands. The Company also acquired 100% of the outstanding common shares of North Star Air Ltd., a Thunder Bay based airline providing cargo and passenger services within northwestern Ontario, Canada. See Note 24 for a discussion of these acquisitions. The address of its registered office is 77 Main Street, Winnipeg, Manitoba. These consolidated financial statements have been approved for issue by the Board of Directors of the Company on April 10, 2019. 2. Basis of Preparation A. Statement of Compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the B. Basis of Measurement The consolidated financial statements have been prepared on a going concern basis, under the historical cost convention, except for the following which are measured at fair value, as applicable: - Liabilities for share-based payment plans (Note 13) - Defined benefit pension plan (Note 12) - Assets and liabilities acquired in a business combination (Note 24) The methods used to measure fair values are discussed further in the notes to these financial statements. C. Functional and Presentation Currency The presentation currency of the consolidated financial statements is Canadian dollars, which is the Company's functional currency. All financial information is presented in Canadian dollars, unless otherwise stated, and has been rounded to the nearest thousand. 3. Significant Accounting Policies The accounting policies set out below have been applied to all years presented in these consolidated financial statements, and have been applied consistently by both the Company and its subsidiaries using uniform accounting policies for like transactions and other events in similar circumstances. D. Inventories Inventories are valued at the lower of cost and net realizable value. The cost of warehouse inventories is determined using the weighted-average cost method. The cost of retail inventories is determined primarily using the retail method of accounting for general merchandise inventories and the cost method of accounting for food inventories on a first-in, first-out basis. Cost includes the cost to purchase goods net of vendor allowances plus other costs incurred in bringing inventories to their present location and condition. Net realizable value is estimated based on the amount at which inventories are expected to be sold, taking into consideration fluctuations in retail prices due to obsolescence, damage or seasonality. Inventories are written down to net realizable value if net realizable value declines below carrying amount. When circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in selling price, the amount of the write-down previously recorded is reversed. E. Property and Equipment Property and equipment are stated at cost less accumulated amortization and any impairment losses. Cost includes any directly attributable costs, borrowing costs on qualifying construction projects, and the costs of dismantling and removing the items and restoring the site on which they are located. When major components of an item of property and equipment have different useful lives, they are accounted for as separate items. Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Assets under construction and land are not amortized. Amortization is calculated from the dates assets are available for use using the straight-line method to allocate the cost of assets less their residual values over their estimated useful lives. Estimated useful lives of Property and Equipment are as follows: 5. Accounts Receivable The carrying values of accounts receivable are a reasonable approximation of their fair values. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. Credit risk for trade accounts receivable is discussed in Note 14. Corporate and other accounts receivable have a lower risk profile relative to trade accounts receivable because they are largely due from government or corporate entities. Movements in the allowance for doubtful accounts for customer and commercial accounts receivables are as follows: 6. Inventories Retail inventories are valued at the lower of cost and net realizable value. Valuing retail inventories requires the Company to use estimates related to: adjusting to cost inventories valued at retail; future retail sales prices and reductions; and inventory losses during periods between the last physical count and the balance sheet date. Included in cost of sales for the year ended January 31 , 2019, the Company recorded $1,522 (January 31,2018 - $1,335 ) for the write-down of inventories as a result of net realizable value being lower than cost. There was no reversal of inventories written down previously that are no longer estimated to sell below cost during the year ended January 31 , 2019 or 2018 . ine company reviews its property ana equipment tor inaicators or impairment. vuring the prior year enaea January 31 , 2018 the company wrote-oir assets with a net dook value or $7,008 due to the impact of hurricanes in the Caribbean which were reimbursed by insurance proceeds. There were no significant financial write-off's due to store fires and no assets were identified as impaired at January 31,2019 and 2018 . Interest attributable to the construction of qualifying assets was capitalized using an average rate of 3.8% and 3.4% for the years ended January 31,2019 and 2018 respectively. Interest capitalized in additions amounted to $374 (January 31,2018 - \$502). Accumulated interest capitalized in the cost total above amounted to $2,652 (January 31 , 2018 - $2,27 8. Goodwill \& Intangible Assets Goodwill Impairment Testing A goodwill asset balance of $36,846 (January 31,2018$34,501 ) relates to acquisition of subsidiaries by the Company's International Operations. A goodwill asset balance of $8,357 (January 31,2018 - $6,730 ) relates to acquisitions by the Company's Canadian Operations. These balances were tested by means of comparing the recoverable amount of the operating segment to its carrying value. The recoverable amount is the greater of its value in use or its fair value less costs of disposal. The recoverable amount was estimated from the product of financial performance and trading multiples observed for comparable public companies. Values assigned to the key assumptions represent management's best estimates and have been based on data from both external and internal sources. This fair value measurement was categorized as a Level 3 fair value measurement based on the inputs in the valuation technique used. Key assumptions used in the estimation of enterprise value are as follows: - Financial performance was measured with actual and budgeted earnings based on sales and expense growth specific to each store and the Company's administrative offices. Financial budgets and forecasts are approved by senior management and consider historical sales volume and price growth; - The ratio of enterprise value to financial performance was determined using a range of market trading multiples from comparable companies; - Costs to sell have been estimated as a fixed percentage of enterprise value. This is consistent with the approach of an independent market participant. No impairment has been identified on goodwill, and management considers reasonably foreseeable changes in key assumptions are unlikely to produce a goodwill impairment. As at January 31,2019 , the Company had incurred $13,271 (January 31,2018 - $11,762 ) for intangible assets that were not yet available for use, and therefore not subject to amortization. Intangible Asset Impairment Testing The Company determines the fair value of the store banners using the Relief from Royalty approach. This method requires management to make long-term assumptions about future sales, terminal growth rates, royalty rates and discount rates. Sales forecasts for the following financial year together with medium and terminal growth rates ranging from 2% to 5% are used to estimate future sales, to which a royalty rate of o.5\% is applied. The present value of this royalty stream is compared to the carrying value of the asset. No impairment has been identified on intangible assets and management considers reasonably foreseeable changes in key assumptions are unlikely to produce an intangible asset impairment. 10. Other Assets 11. Long-Term Debt 1. The committed, revolving U.S. loan facility provides the International Operations with up to US $40,000 for working capital requirements and general business purposes. This facility matures October 31,2020 , bears a floating rate of interest based on U.S. LIBOR plus a spread and is secured by certain accounts receivable and inventories of the International Operations. At January 31, 2019, the International Operations had drawn US $NIL (January 31,2018 - US $1,444 ) on this facility. 2. The US $52,000 loan facilities mature September 26,2022 and bear interest at U.S. LIBOR plus a spread. These loan facilities are secured by certain assets of the Company and rank pari passu with the US $70,000 senior notes, the $100,000 senior notes and the $300,000 Canadian Operations loan facilities. At January 31,2019 , the Company had drawn US $27,936 (January 31,2018 - US $27,936 ) on these facilities. 3. These committed, revolving loan facilities provide the Company's Canadian Operations with up to $300,000 for working capital and general business purposes. These facilities 3. These committed, revolving loan facilities provide the Company's Canadian Operations with up to $300,000 for working capital and general business purposes. These facilities mature September 26, 2022, are secured by certain assets of the Company and rank pari passu with the US $70,000 senior notes, the $100,000 senior notes and the US $52,000 loan facilities. These facilities bear a floating interest rate based on Bankers Acceptances rates plus stamping fees or the Canadian prime interest rate. 4. The revolving U.S. loan facility provides the International Operations with up to US $1,500 for Roadtown Wholesale Trading Ltd.'s (RTW) working capital requirement. general business purposes. This facility bears a floating rate of interest based on a U.S. dollar base rate plus a spread and is secured by certain assets of RTW. 5. The Canadian Operations also have a $2,375 revolving loan facility to meet North Star Air Ltd's. (NSA) working capital requirements and for general business purposes. This facility bears a floating rate of interest and is secured by the assets of NSA. 6. The US $70,000 senior notes mature on June 16, 2021, have a fixed interest rate of 3.27% on US $55,000 and a floating interest rate on US $15,000 based on U.S. LIBOR plus a spread. The senior notes are secured by certain assets of the Company and rank pari passu with the $300,000 Canadian Operations loan facilities, the $100,000 senior notes and the US $52,000 loan facilities. 7. The $100,000 senior notes mature September 26,2029 , have a fixed interest rate of 3.74%, are secured by certain assets of the Company and rank pari passu with the $300,000 Canadian Operations loan facilities, the US $70,000 senior notes and the US $52,000 loan facilities. 8. The Promissory Note Payable in the amount of $3,600 is non-interest bearing, has annual principal payments of $900 and is secured by certain assets of the Company. Share Capital 23. Subsidiaries and Joint Ventures The Company's principal operating subsidiaries are set out below: The investment in joint venture comprises a 50% interest in a Canadian Arctic shipping company, Transport Nanuk Inc. At January 31 , 2019, the Company's share of the net assets of its joint venture amount to $10,375 (January 31,2018$9,294 ) comprised assets of $12,800 (January 31,2018$10,925 ) and liabilities of $2,425 (January 31,2018 - $1,631 ). During the year ended January 31,2019 , the Company purchased freight handling and shipping services from Transport Nanuk Inc. and its subsidiaries of $8,163 (January 31,2018 - $7,806 ). The financial statements of The North West Company Inc. are presented in Appendix A at the end of this book. (a) Using the statement of earnings (statement of income), answer the following questions: 1. What amount did the company report as basic earnings per share for the years ending January 31,2019 and 2018 ? (Round the answers to 2 decimal places, e.g. 2.59.) 2. What was its weighted average number of shares for each year? The North West Company Inc. In this appendix and the next, we illustrate current financial reporting with two different sets of corporate financial statements that are prepared in accordance with International Financial Reporting Standards. The financial statement package for North West includes the consolidated statement of financial position (which North West calls balance sheet), statement of income (which North West calls statement of earnings), statement of comprehensive income, statement of changes in equity (which North West calls statement of changes in shareholders' equity), and statement of cash flows. The financial statements are preceded by two reports: management's responsibility for the financial statements and the auditor's report on these statements. Only selected notes to the financial statements related to the topics included in this textbook have been included in this appendix. The complete set of financial statements and annual report for North West can be found on sedar.com in the Issuer Profiles/Companies/Section. In addition, material about working with annual reports, including the financial statements, is included on WileyPLUS. We encourage you to scan North West's financial statements to familiarize yourself with the contents of this appendix. You will also have the opportunity to use these financial statements in conjunction with relevant chapter material in the textbook. As well, these statements can be used to solve the Financial Reporting and Financial Analysis cases in the Expand Your Critical Thinking section of the end of chapter material. As you near the end of your financial accounting course, we challenge you to reread North West's financial statements to see how much greater your understanding of them has become. Management's Responsibility for Financial Statements The management of The North West Company Inc. is responsible for the preparation, presentation and integrity of the accompanying consolidated financial statements and all other information in the annual report. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and include certain amounts that are based on the best estimates and judgment by management. In order to meet its responsibility and ensure integrity of financial information, management has established a code of business ethics, and maintains appropriate internal controls and accounting systems. An internal audit function is maintained that is designed to provide reasonable assurance that assets are safeguarded, transactions are authorized and recorded and that the financial records are reliable. Ultimate responsibility for financial reporting to shareholders rests with the Board of Directors. The Audit Committee of the Board of Directors, consisting of independent Directors, meets periodically with management and with the internal and external auditors to review the audit results, internal controls and the selection and consistent application of appropriate accounting policies. Internal and external auditors have unlimited access to the Audit Committee. The Audit Committee meets separately with management and the external auditors to review the financial statements and other contents of the annual report and recommend approval by the Board of Directors. The Audit Committee also recommends the independent auditor for appointment by the shareholders. PricewaterhouseCoopers LLP, an independent firm of auditors appointed by the shareholders, have completed their audit and submitted their report as follows. Edward S. Kennedy PRESIDENT \& CEO THE NORTH WEST COMPANY INC. April 10, 2019 Independent Auditor's Report To the Shareholders of The North West Company Inc. Our opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of The North West Company Inc. and its subsidiaries, (together, the Company) as at January 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS). What we have audited The Company's consolidated financial statements comprise: - the consolidated balance sheets as at January 31, 2019 and 2018; - the consolidated statements of earnings for the years then ended; - the consolidated statements of comprehensive income for the years then ended; - the consolidated statements of changes in shareholders' 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 a summary of significant accounting policies. 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 responsibilitie 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 othe ethical responsibilities in accordance with these requirements. 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 on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of t' er information, we are required to report that fact. We have nothing to report in this regard. When we read the information, other than the consolidated financial statements and our. or's report thereon, included in the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. 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 signiticant audit tindings, 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 ther relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. The engagement partner on the audit resulting in this independent auditor's report is Nicole Murray. PricewaterhouseCoopers LLp Chartered Professional Accountants Winnipeg, Manitoba See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF EARNINGS (\$ in thousands, except per share amounts) SALES (1). Certain prior period figures have been reclassified as described in Note 3 . See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (\$ in thousands) NET EARNINGS FOR THE YEAR \begin{tabular}{|r|r|} \hline Year Ended January 31, 2019 & Year Ended January 31,2018 \\ \hline $90,632 & $69,691 \\ \hline \end{tabular} Other comprehensive income/(loss), net of tax: Items that may be reclassified to net earnings: \begin{tabular}{|l|l|l} Exchange differences on translation of foreign controlled subsidiaries & 8,049 & (7,934) \\ \hline \end{tabular} Items that will not be subsequently reclassified to net earnings: Remeasurements of defined benefit plans (Note 12) Remeasurements of defined benefit plan of equity investee Total other comprehensive income/(loss), net of tax COMPREHENSIVE INCOME FOR THE YEAR OTHER COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO The North West Company Inc. \begin{tabular}{|l|r|r|r|} \hline Non-controlling interests & \multicolumn{8}{|c|}{} & \\ \hline TOTAL OTHER COMPREHENSIVE INCOME/(LOSS) & $12,977 \\ \hline COMPREHENSIVE INCOME ATTRIBUTABLE TO & & \\ \hline The North West Company Inc. & $(6,932) \\ \hline Non-controlling interests & $98,890 & 4,719 \\ \hline TOTAL COMPREHENSIVE INCOME & $103,609 \\ \hline \end{tabular} See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (\$ in thousands) (1) Accumulated Other Comprehensive Income See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (\$ in thousands) Year Ended January 31, 2019 Year Ended January 31,2018 CASH PROVIDED BY (USED IN) Operating activities (\$ in thousands, except per share amounts) january 31,2019 and 2018 1. Organization The North West Company Inc. (NWC or the Company) is a corporation amalgamated under the Canada Business Corporations Act (CBCA) and governed by the laws of Canada. The Company, through its subsidiaries, is a leading retailer to rural and remote communities and urban neighbourhoods in the following regions: northern Canada, western Canada, rural Alaska, the South Pacific and the Caribbean. These regions comprise two reportable operating segments: Canadian Operations and International Operations. In 2017, the Company acquired 76% of the outstanding shares of Roadtown Wholesale Trading Ltd. (RTW), operating primarily as Riteway Food Markets in the British Virgin Islands. The Company also acquired 100% of the outstanding common shares of North Star Air Ltd., a Thunder Bay based airline providing cargo and passenger services within northwestern Ontario, Canada. See Note 24 for a discussion of these acquisitions. The address of its registered office is 77 Main Street, Winnipeg, Manitoba. These consolidated financial statements have been approved for issue by the Board of Directors of the Company on April 10, 2019. 2. Basis of Preparation A. Statement of Compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the B. Basis of Measurement The consolidated financial statements have been prepared on a going concern basis, under the historical cost convention, except for the following which are measured at fair value, as applicable: - Liabilities for share-based payment plans (Note 13) - Defined benefit pension plan (Note 12) - Assets and liabilities acquired in a business combination (Note 24) The methods used to measure fair values are discussed further in the notes to these financial statements. C. Functional and Presentation Currency The presentation currency of the consolidated financial statements is Canadian dollars, which is the Company's functional currency. All financial information is presented in Canadian dollars, unless otherwise stated, and has been rounded to the nearest thousand. 3. Significant Accounting Policies The accounting policies set out below have been applied to all years presented in these consolidated financial statements, and have been applied consistently by both the Company and its subsidiaries using uniform accounting policies for like transactions and other events in similar circumstances. D. Inventories Inventories are valued at the lower of cost and net realizable value. The cost of warehouse inventories is determined using the weighted-average cost method. The cost of retail inventories is determined primarily using the retail method of accounting for general merchandise inventories and the cost method of accounting for food inventories on a first-in, first-out basis. Cost includes the cost to purchase goods net of vendor allowances plus other costs incurred in bringing inventories to their present location and condition. Net realizable value is estimated based on the amount at which inventories are expected to be sold, taking into consideration fluctuations in retail prices due to obsolescence, damage or seasonality. Inventories are written down to net realizable value if net realizable value declines below carrying amount. When circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in selling price, the amount of the write-down previously recorded is reversed. E. Property and Equipment Property and equipment are stated at cost less accumulated amortization and any impairment losses. Cost includes any directly attributable costs, borrowing costs on qualifying construction projects, and the costs of dismantling and removing the items and restoring the site on which they are located. When major components of an item of property and equipment have different useful lives, they are accounted for as separate items. Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Assets under construction and land are not amortized. Amortization is calculated from the dates assets are available for use using the straight-line method to allocate the cost of assets less their residual values over their estimated useful lives. Estimated useful lives of Property and Equipment are as follows: 5. Accounts Receivable The carrying values of accounts receivable are a reasonable approximation of their fair values. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. Credit risk for trade accounts receivable is discussed in Note 14. Corporate and other accounts receivable have a lower risk profile relative to trade accounts receivable because they are largely due from government or corporate entities. Movements in the allowance for doubtful accounts for customer and commercial accounts receivables are as follows: 6. Inventories Retail inventories are valued at the lower of cost and net realizable value. Valuing retail inventories requires the Company to use estimates related to: adjusting to cost inventories valued at retail; future retail sales prices and reductions; and inventory losses during periods between the last physical count and the balance sheet date. Included in cost of sales for the year ended January 31 , 2019, the Company recorded $1,522 (January 31,2018 - $1,335 ) for the write-down of inventories as a result of net realizable value being lower than cost. There was no reversal of inventories written down previously that are no longer estimated to sell below cost during the year ended January 31 , 2019 or 2018 . ine company reviews its property ana equipment tor inaicators or impairment. vuring the prior year enaea January 31 , 2018 the company wrote-oir assets with a net dook value or $7,008 due to the impact of hurricanes in the Caribbean which were reimbursed by insurance proceeds. There were no significant financial write-off's due to store fires and no assets were identified as impaired at January 31,2019 and 2018 . Interest attributable to the construction of qualifying assets was capitalized using an average rate of 3.8% and 3.4% for the years ended January 31,2019 and 2018 respectively. Interest capitalized in additions amounted to $374 (January 31,2018 - \$502). Accumulated interest capitalized in the cost total above amounted to $2,652 (January 31 , 2018 - $2,27 8. Goodwill \& Intangible Assets Goodwill Impairment Testing A goodwill asset balance of $36,846 (January 31,2018$34,501 ) relates to acquisition of subsidiaries by the Company's International Operations. A goodwill asset balance of $8,357 (January 31,2018 - $6,730 ) relates to acquisitions by the Company's Canadian Operations. These balances were tested by means of comparing the recoverable amount of the operating segment to its carrying value. The recoverable amount is the greater of its value in use or its fair value less costs of disposal. The recoverable amount was estimated from the product of financial performance and trading multiples observed for comparable public companies. Values assigned to the key assumptions represent management's best estimates and have been based on data from both external and internal sources. This fair value measurement was categorized as a Level 3 fair value measurement based on the inputs in the valuation technique used. Key assumptions used in the estimation of enterprise value are as follows: - Financial performance was measured with actual and budgeted earnings based on sales and expense growth specific to each store and the Company's administrative offices. Financial budgets and forecasts are approved by senior management and consider historical sales volume and price growth; - The ratio of enterprise value to financial performance was determined using a range of market trading multiples from comparable companies; - Costs to sell have been estimated as a fixed percentage of enterprise value. This is consistent with the approach of an independent market participant. No impairment has been identified on goodwill, and management considers reasonably foreseeable changes in key assumptions are unlikely to produce a goodwill impairment. As at January 31,2019 , the Company had incurred $13,271 (January 31,2018 - $11,762 ) for intangible assets that were not yet available for use, and therefore not subject to amortization. Intangible Asset Impairment Testing The Company determines the fair value of the store banners using the Relief from Royalty approach. This method requires management to make long-term assumptions about future sales, terminal growth rates, royalty rates and discount rates. Sales forecasts for the following financial year together with medium and terminal growth rates ranging from 2% to 5% are used to estimate future sales, to which a royalty rate of o.5\% is applied. The present value of this royalty stream is compared to the carrying value of the asset. No impairment has been identified on intangible assets and management considers reasonably foreseeable changes in key assumptions are unlikely to produce an intangible asset impairment. 10. Other Assets 11. Long-Term Debt 1. The committed, revolving U.S. loan facility provides the International Operations with up to US $40,000 for working capital requirements and general business purposes. This facility matures October 31,2020 , bears a floating rate of interest based on U.S. LIBOR plus a spread and is secured by certain accounts receivable and inventories of the International Operations. At January 31, 2019, the International Operations had drawn US $NIL (January 31,2018 - US $1,444 ) on this facility. 2. The US $52,000 loan facilities mature September 26,2022 and bear interest at U.S. LIBOR plus a spread. These loan facilities are secured by certain assets of the Company and rank pari passu with the US $70,000 senior notes, the $100,000 senior notes and the $300,000 Canadian Operations loan facilities. At January 31,2019 , the Company had drawn US $27,936 (January 31,2018 - US $27,936 ) on these facilities. 3. These committed, revolving loan facilities provide the Company's Canadian Operations with up to $300,000 for working capital and general business purposes. These facilities 3. These committed, revolving loan facilities provide the Company's Canadian Operations with up to $300,000 for working capital and general business purposes. These facilities mature September 26, 2022, are secured by certain assets of the Company and rank pari passu with the US $70,000 senior notes, the $100,000 senior notes and the US $52,000 loan facilities. These facilities bear a floating interest rate based on Bankers Acceptances rates plus stamping fees or the Canadian prime interest rate. 4. The revolving U.S. loan facility provides the International Operations with up to US $1,500 for Roadtown Wholesale Trading Ltd.'s (RTW) working capital requirement. general business purposes. This facility bears a floating rate of interest based on a U.S. dollar base rate plus a spread and is secured by certain assets of RTW. 5. The Canadian Operations also have a $2,375 revolving loan facility to meet North Star Air Ltd's. (NSA) working capital requirements and for general business purposes. This facility bears a floating rate of interest and is secured by the assets of NSA. 6. The US $70,000 senior notes mature on June 16, 2021, have a fixed interest rate of 3.27% on US $55,000 and a floating interest rate on US $15,000 based on U.S. LIBOR plus a spread. The senior notes are secured by certain assets of the Company and rank pari passu with the $300,000 Canadian Operations loan facilities, the $100,000 senior notes and the US $52,000 loan facilities. 7. The $100,000 senior notes mature September 26,2029 , have a fixed interest rate of 3.74%, are secured by certain assets of the Company and rank pari passu with the $300,000 Canadian Operations loan facilities, the US $70,000 senior notes and the US $52,000 loan facilities. 8. The Promissory Note Payable in the amount of $3,600 is non-interest bearing, has annual principal payments of $900 and is secured by certain assets of the Company. Share Capital 23. Subsidiaries and Joint Ventures The Company's principal operating subsidiaries are set out below: The investment in joint venture comprises a 50% interest in a Canadian Arctic shipping company, Transport Nanuk Inc. At January 31 , 2019, the Company's share of the net assets of its joint venture amount to $10,375 (January 31,2018$9,294 ) comprised assets of $12,800 (January 31,2018$10,925 ) and liabilities of $2,425 (January 31,2018 - $1,631 ). During the year ended January 31,2019 , the Company purchased freight handling and shipping services from Transport Nanuk Inc. and its subsidiaries of $8,163 (January 31,2018 - $7,806 )