## Regulation 

The Company’s Energy Transportation and Energy Distribution activities are subject to regulation by various authorities, including the National Energy Board (NEB), the Federal Energy Regulatory Commission (FERC), and the Ontario Energy Board (OEB). These and other regulatory bodies exercise statutory authority over matters such as construction, rates and underlying accounting practices, and ratemaking agreements with customers. In order to achieve a proper matching of revenues and expenses, the timing of recognition of certain revenues and expenses in these operations may differ from that otherwise expected under generally accepted accounting principles. 

## Foreign Currency Translation 

The functional currency of the Company’s foreign operations, except for certain financing and investing operations, is the U.S. dollar. These operations are self-sustaining and translated into Canadian dollars using the current rate method. Gains and losses resulting from these translation adjustments are included as a separate component of shareholders’ equity. 

The functional currency of the Company’s foreign financing and investing operations is the Canadian dollar. These operations are integrated with those of the parent company and are translated into Canadian dollars using the temporal method. Gains and losses resulting from these translation adjustments are included in earnings. 

## Revenue Recognition 

Revenues are recorded when products have been delivered or services have been performed. The Energy Transportation and Energy Distribution operations are subject to regulation by various authorities and, accordingly, there are circumstances where revenues recognized do not match the cash tolls or the billed amounts. In these situations, revenue is recognized in a manner that is consistent with the underlying rate design as mandated by the regulatory authority or under the terms of enforceable, committed long-term delivery contracts. 

## Income Taxes 

The regulated operations of the Company recover income tax expense based on the taxes payable method when prescribed by the regulators for ratemaking purposes or when stipulated in ratemaking agreements. Under this method, no provision is made for future income taxes as a result of temporary differences. This method is also followed for accounting purposes as there is reasonable expectation that all such taxes will be recovered through rates when they become payable. For all other operations, the liability method of accounting for income taxes is followed. Future income tax assets and liabilities are determined based on temporary differences between the tax basis of assets and liabilities and their carrying values for accounting purposes. The liability method requires future income tax assets and liabilities be measured at the tax rate that is expected to apply when the temporary differences reverse. 

## Cash 

Cash includes short-term and demand deposits which are recorded at cost. The short-term deposits are highly marketable securities with a maturity of three months or less. 

## Gas in Storage 

Natural gas in storage is recorded in inventory at prices approved by the OEB in the determination of customer sales rates. The actual cost of gas purchased includes the effect of natural gas price risk management activities. The difference between the approved price and the actual cost of the gas purchased is deferred for future disposition by the OEB. 

