Access
the financial statements for the year ended December 31, 2009, for Thomson
Reuters Corporation from the company’s website (www.thomsonreuters.com).
Instructions
(a)
What were the related-party transactions that the company had during the year?
(b)
Is the disclosure adequate or is there missing information? Is this information
useful?
(c)
What were the subsequent events that occurred for the company? What is the
cut-off date that has been used (i.e., the date of approval by the directors)?
(a) As
described in Note 23, the company had the following related party transactions:
·
The company is owned 55% by Woodbridge.
o During the year,
Woodbridge and some of its affiliates purchased some of the company’s products
under normal standard prices and payment conditions. However, the company did
not disclose the total amounts, or any amounts outstanding at the year end,
stating that the amounts were not significant to its operations or financial condition.
o In December,
2009, Thomson Reuters sold a subsidiary with significant tax losses to an
affiliate of Woodbridge for $30 million.
An independent professional business valuator provided an opinion that
the sale price was not less than fair value.
Only fully independent directors (i.e.
those not associated with Woodbridge) were allowed to vote on the sale.
o During the year,
the company paid administration service fees of $360,000 to Woodbridge. There is no indication whether these
reflected fair value for the services or not or if there any outstanding
balances still owing at the year end.
o Thomson Reuters
buys insurance coverage for which Woodbridge is also covered. During the year, Woodbridge paid $73,000 to
Thomson Reuters which would approximate what a third party insurer would charge
for similar coverage.
o The company has
undisclosed amounts in receivables from Woodbridge. Again, the amount is not provided as the
company indicates that it is not significant at the report date.
o Until April 2008,
the company paid Wood bridge an annual fee of $750,000 to indemnify up to $100
million in liabilities for directors and officers. This amount was less than normal market
prices would have been (although we are not told by how much). In 2008, this was replaced with conventional
insurance coverage. The coverage with
Wood bridge is in place for any claims arising before April 2014, which relate
to events occurring prior to April 2008.
· The company also
had the following transactions with affiliates and joint ventures which
occurred as part of normal business and at arm’s length:
o The company and
The Depository Trust and Clearing Corporation each have a 50% ownership in
Omega. During the year, Omega paid fees
for facility, technology and other services totaling $10 million and the
outstanding receivable is $2 million.
There is no information as to whether or not this represents fair market
value and whether terms of payments are normal business terms. .
o The Company and Shin Nippon Hoki Shuppan K.K. each own 50% of Westlaw
Japan K.K., a joint venture. During the
year, the company provided technology and other services valued at $3
million. The receivable at the year end
was negligible. There is no information as
to whether or not this represents fair market value and whether terms of
payments are normal business terms.
o The company owns 20% of Tradeweb New Markets. During the year, the company recognized
revenues of $18 million related to back office and trading platform functions
services provided to Tradeweb. At the
year end, the receivable outstanding was $3 million. There is no disclosure as to whether these
fees are market based, and if the receivable has normal collection credit
terms.
o
The company owns
3XSQ Associates from which it leases office space. The company’s investment in 3XSQ Associates
is reported using the equity method, although the percentage of ownership is
not disclosed in this note. The lease is
for 690,000 square feet and expires in 2021, and includes provisions for
portions to terminate early and various renewal options. The company incurred $37 million for rental
costs, taxes and other related expenses to this lease agreement. The amount payable at the year end was
negligible. The company did not disclose
if the lease was at fair market rates or not.
· The company also
purchased SuperLawyers, a company controlled by one of the directors for $15
million. The director’s father is CEO of
this company and has agreed to stay on until later in 2010. The director, Vance Opperman abstained from
voting on the transaction which was reviewed and approved by the Board. There
is no indication if this represents fair value for the acquisition.
· The company has
an agreement, which terminates in 2015 with Hewitt Associates to outsource
certain human resources administrative functions. A director of Thomson Reuters, Mr. Steven
Denning, was a director of Hewitt at the time of negotiating the contract in
2005 until 2009. During this period, Mr Denning did not participate in the
negotiations, nor vote on any dealings related to Hewitt. The total 10 year commitment for the services
is $165 million, of which $8 million was paid during 2009. At the year end, $1 million was payable to
Hewitt. Again, there is no indication if
these amounts represent normal market values.
· Finally the last
disclosure for related parties relates to the key management compensation. During 2009 and 2008, the company paid the
following total amounts to its directors and executive officers:
|
US$ millions
|
2009
|
2008
|
|
Salaries and
benefits
|
24
|
18
|
|
Termination
benefits
|
|
14
|
|
Share-based
payments
|
35
|
38
|
|
Total
|
59
|
70
|
(b) In general the information was useful and
mostly adequate. In all cases, the nature of the relationship was provided,
along with disclosure of the specific related party. The amount of the transactions and the reasons
for the transactions were also provided.
Even though this is not required by IFRS ,
users would appreciate knowing the amounts reflect fair values. In some areas the company did not disclose if
the transactions were at fair value and consistent with market conditions. In addition, the company did not disclose if
payment terms and conditions were consistent with normal business
practices. Finally, for some of the
transactions, if the amounts were insignificant, the amounts were not
disclosed. From a user perspective, even
these “minor” details would have been helpful since by their nature related
party transactions may not occur under normal market and business
conditions.
(c) Note 33 provides details of the subsequent
events, which are summarized below:
·
In February, 2010, the Board declared a dividend of
$0.29 per share which will be payable on March 26, 2010 to shareholders on
record on March 8, 2010.
·
In March 2010, a reorganization of the company and
Thomson Reuters UK was completed. The
result of this reorganization is that all creditors now are included in the
liabilities of the company as though the company had operated as a single
parent company structure rather than as a DLC structure.
·
As noted above under related parties, the company
entered into an agreement in March 2010 to buy SuperLawyers, which is
controlled by a director of Thomson Reuters, for $15 million.
·
As disclosed under Note 1, under general business
description, the directors approved the statements on March 2, 2010.
