condensed interim consolidated statements of income and other comprehensive income

(unaudited)

		Three months					Six months
Periods ended June 30 (millions except per share amounts)	Note	2020			2019		2020			2019
OPERATING REVENUES
Service		$	3,250		$	3,086	$	6,495		$	6,106
Equipment		406			501		824			970
Revenues arising from contracts with customers	6	3,656			3,587		7,319			7,076
Other operating income	7	72			10		103			27
		3,728			3,597		7,422			7,103
OPERATING EXPENSES
Goods and services purchased		1,458			1,466		2,870			2,887
Employee benefits expense	8	911			758		1,784			1,464
Depreciation	17	505			470		1,028			940
Amortization of intangible assets	18	220			163		422			310
		3,094			2,857		6,104			5,601
OPERATING INCOME		634			740		1,318			1,502
Financing costs	9	202			189		394			357
INCOME BEFORE INCOME TAXES		432			551		924			1,145
Income taxes	10	117			31		256			188
NET INCOME		315			520		668			957
OTHER COMPREHENSIVE INCOME	11
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges		(97		)	10		125			(39		)
Foreign currency translation adjustment arising from translating financial statements of foreign operations		(10		)	11		42			17
		(107		)	21		167			(22		)
Items never subsequently reclassified to income
Employee defined benefit plan re-measurements		(669		)	8		(353		)	32
		(776		)	29		(186		)	10
COMPREHENSIVE INCOME		$	(461	)	$	549	$	482		$	967
NET INCOME ATTRIBUTABLE TO:
Common Shares		$	290		$	517	$	640		$	945
Non-controlling interests		25			3		28			12
		$	315		$	520	$	668		$	957
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Common Shares		$	(477	)	$	543	$	451		$	949
Non-controlling interests		16			6		31			18
		$	(461	)	$	549	$	482		$	967
NET INCOME PER COMMON SHARE*	12
Basic		$	0.23		$	0.43	$	0.51		$	0.79
Diluted		$	0.23		$	0.43	$	0.51		$	0.79

TOTAL WEIGHTED AVERAGE COMMON SHARES OUTSTANDING*
Basic		1,278			1,203		1,263			1,202
Diluted		1,280			1,203		1,264			1,202

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

condensed interim consolidated statements of financial position

(unaudited)

As at (millions)	Note	June 30, 2020		December 31, 2019
ASSETS
Current assets
Cash and temporary investments, net		$	971	$	535
Accounts receivable	6(b)	2,004		1,962
Income and other taxes receivable		18		127
Inventories	1(c)	335		437
Contract assets	6(c)	538		737
Prepaid expenses	20	544		547
Current derivative assets	4(d)	10		8
		4,420		4,353
Non-current assets
Property, plant and equipment, net	17	14,559		14,232
Intangible assets, net	18	13,630		12,844
Goodwill, net	18	6,132		5,309
Contract assets	6(c)	212		328
Other long-term assets	20	1,355		919
		35,888		33,632
		$	40,308	$	37,985

LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Short-term borrowings	22	$	100	$	100
Accounts payable and accrued liabilities	23	2,873		2,749
Income and other taxes payable		155		55
Dividends payable	13	372		352
Advance billings and customer deposits	24	696		675
Provisions	25	83		288
Current maturities of long-term debt	26	562		1,332
Current derivative liabilities	4(d)	9		23
		4,850		5,574
Non-current liabilities
Provisions	25	613		590
Long-term debt	26	17,956		17,142
Other long-term liabilities	27	1,157		806
Deferred income taxes		3,352		3,214
		23,078		21,752
Liabilities		27,928		27,326
Owners’ equity
Common equity	28	12,046		10,548
Non-controlling interests		334		111
		12,380		10,659
		$	40,308	$	37,985
Contingent Liabilities	29

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

condensed interim consolidated statements of changes in owners’ equity

(unaudited)

		Common equity
		Equity contributed									Accumulated
		Common Shares (Note 28)									other						Non-
(millions)	Note	Number of shares*	Share capital		Contributed surplus			Retained earnings			comprehensive income			Total			controlling interests		Total
Balance as at January 1, 2019		1,197	$	5,390	$	383		$	4,321		$	11		$	10,105		$	74	$	10,179
Net income		—	—		—			945			—			945			12		957
Other comprehensive income	11	—	—		—			32			(28		)	4			6		10
Dividends	13	—	—		—			(668		)	—			(668		)	—		(668		)
Dividends reinvested and optional cash payments	13(b), 14(c)	2	46		—			—			—			46			—		46
Equity accounted share-based compensation		—	1		(1		)	—			—			—			—		—
Issue of Common Shares in business combination		3	72		—			—			—			72			—		72
Balance as at June 30, 2019		1,202	$	5,509	$	382		$	4,630		$	(17	)	$	10,504		$	92	$	10,596
Balance as at January 1, 2020		1,209	$	5,660	$	398		$	4,371		$	119		$	10,548		$	111	$	10,659
Net income		—	—		—			640			—			640			28		668
Other comprehensive income	11	—	—		—			(353		)	164			(189		)	3		(186		)
Dividends	13	—	—		—			(743		)	—			(743		)	—		(743		)
Dividends reinvested and optional cash payments	13(b), 14(c)	11	262		—			—			—			262			—		262
Equity accounted share-based compensation	14(b)	—	—		58			—			—			58			—		58
Common Shares issued	28(a)	58	1,453		—			—			—			1,453			—		1,453
Change of ownership interests of subsidiary	28(d)	—	—		17			—			—			17			192		209
Balance as at June 30, 2020		1,278	$	7,375	$	473		$	3,915		$	283		$	12,046		$	334	$	12,380

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

condensed interim consolidated statements of cash flows

(unaudited)

		Three months						Six months
Periods ended June 30 (millions)	Note	2020			2019			2020			2019
OPERATING ACTIVITIES
Net income		$	315		$	520		$	668		$	957
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		725			633			1,450			1,250
Deferred income taxes	10	36			(39		)	(25		)	(8		)
Share-based compensation expense, net	14(a)	41			20			64			39
Net employee defined benefit plans expense	15(a)	25			19			52			39
Employer contributions to employee defined benefit plans		(12		)	(12		)	(27		)	(28		)
Non-current contract assets		51			15			116			36
Non-current unbilled customer finance receivables	20	(53		)	9			(94		)	15
Loss from equity accounted investments	7, 21	5			1			13			1
Other		(75		)	(22		)	(42		)	51
Net change in non-cash operating working capital	31(a)	404			16			464			(402		)
Cash provided by operating activities		1,462			1,160			2,639			1,950
INVESTING ACTIVITIES
Cash payments for capital assets, excluding spectrum licences	31(a)	(694		)	(645		)	(1,474		)	(1,438		)
Cash payments for spectrum licences		—			(931		)	—			(931		)
Cash payments for acquisitions, net	18(b)	(107		)	(26		)	(1,211		)	(188		)
Advances to, and investment in, real estate joint ventures and associate	21	(8		)	(9		)	(88		)	(17		)
Real estate joint venture receipts	21	1			1			3			2
Other		(15		)	10			(12		)	10
Cash used by investing activities		(823		)	(1,600		)	(2,782		)	(2,562		)
FINANCING ACTIVITIES	31(b)
Common Shares issued		—			—			1,495			—
Dividends paid to holders of Common Shares	13(a)	(240		)	(307		)	(462		)	(610		)
Issue (repayment) of short-term borrowings, net		—			(400		)	—			—
Long-term debt issued	26	1,000			2,422			2,377			3,588
Redemptions and repayment of long-term debt	26	(1,479		)	(1,617		)	(2,967		)	(2,534		)
Shares of subsidiary issued to non-controlling interests	28(d)	—			—			209			—
Other		(7		)	(29		)	(73		)	(29		)
Cash provided (used) by financing activities		(726		)	69			579			415
CASH POSITION
Increase (decrease) in cash and temporary investments, net		(87		)	(371		)	436			(197		)
Cash and temporary investments, net, beginning of period		1,058			588			535			414
Cash and temporary investments, net, end of period		$	971		$	217		$	971		$	217
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS
Interest paid		$	(199	)	$	(147	)	$	(376	)	$	(326	)
Interest received		$	3		$	3		$	6		$	5
Income taxes paid, net
In respect of comprehensive income		$	(11	)	$	(122	)	$	(104	)	$	(458	)
In respect of business acquisitions		(2		)	—			(33		)	(15		)
		$	(13	)	$	(122	)	$	(137	)	$	(473	)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

notes to condensed interim consolidated financial statements

(unaudited)

JUNE 30, 2020

TELUS Corporation is one of Canada’s largest telecommunications companies, providing a wide range of telecommunications services and products, including wireless and wireline voice and data. Data services include: internet protocol; television; hosting, managed information technology and cloud-based services; healthcare solutions; customer care and business services; and home and business smart technology (including security).

TELUS Corporation was incorporated under the Company Act (British Columbia) on October 26, 1998, under the name BCT.TELUS Communications Inc. (BCT). On January 31, 1999, pursuant to a court-approved plan of arrangement under the Canada Business Corporations Act among BCT, BC TELECOM Inc. and the former Alberta-based TELUS Corporation (TC), BCT acquired all of the shares of BC TELECOM Inc. and TC in exchange for Common Shares and Non-Voting Shares of BCT, and BC TELECOM Inc. was dissolved. On May 3, 2000, BCT changed its name to TELUS Corporation and in February 2005, TELUS Corporation transitioned under the Business Corporations Act (British Columbia), successor to the Company Act (British Columbia). TELUS Corporation maintains its registered office at Floor 7, 510 West Georgia Street, Vancouver, British Columbia, V6B 0M3.

The terms “TELUS”, “we”, “us”, “our” or “ourselves” are used to refer to TELUS Corporation and, where the context of the narrative permits or requires, its subsidiaries.

Notes to condensed interim consolidated financial statements		Page
General application
1.	Condensed interim consolidated financial statements	7
2.	Accounting policy developments	7
3.	Capital structure financial policies	7
4.	Financial instruments	10
Consolidated results of operations focused
5.	Segment information	16
6.	Revenue from contracts with customers	18
7.	Other operating income	19
8.	Employee benefits expense	20
9.	Financing costs	20
10.	Income taxes	21
11.	Other comprehensive income	22
12.	Per share amounts	24
13.	Dividends per share	24
14.	Share-based compensation	25
15.	Employee future benefits	28
16.	Restructuring and other costs	29
Consolidated financial position focused
17.	Property, plant and equipment	30
18.	Intangible assets and goodwill	31
19.	Leases	33
20.	Other long-term assets	34
21.	Real estate joint ventures and investment in associate	34
22.	Short-term borrowings	37
23.	Accounts payable and accrued liabilities	37
24.	Advance billings and customer deposits	37
25.	Provisions	38
26.	Long-term debt	39
27.	Other long-term liabilities	42
28.	Owners’ equity	42
29.	Contingent liabilities	44
Other
30.	Related party transactions	45
31.	Additional statement of cash flow information	47

notes to condensed interim consolidated financial statements

(unaudited)

in accumulated other comprehensive income), cash and temporary investments, and short-term borrowings arising from securitized trade receivables.

We manage our capital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of our business. In order to maintain or adjust our capital structure, we may adjust the amount of dividends paid to holders of Common Shares, purchase Common Shares for cancellation pursuant to normal course issuer bids, issue new shares, issue new debt, issue new debt to replace existing debt with different characteristics and/or increase or decrease the amount of trade receivables sold to an arm’s-length securitization trust.

During 2020, our financial objectives, which are reviewed annually, were unchanged from 2019, excepting for a change in methodology of our dividend payout ratio. We believe that our financial objectives are supportive of our long-term strategy.

We monitor capital utilizing a number of measures, including: net debt to earnings before interest, income taxes, depreciation and amortization (EBITDA*) — excluding restructuring and other costs ratio; coverage ratios; and dividend payout ratios.

Debt and coverage ratios

Net debt to EBITDA — excluding restructuring and other costs is calculated as net debt at the end of the period, divided by 12-month trailing EBITDA — excluding restructuring and other costs. This measure, historically, is substantially similar to the leverage ratio covenant in our credit facilities. Net debt and EBITDA — excluding restructuring and other costs are measures that do not have any standardized meanings prescribed by IFRS-IASB and are therefore unlikely to be comparable to similar measures presented by other companies. The calculation of these measures is set out in the following table. Net debt is one component of a ratio used to determine compliance with debt covenants.

As at, or for the 12-month periods ended, June 30 ($ in millions)	Objective	2020		2019
Components of debt and coverage ratios
Net debt 1		$	17,664	$	16,602
EBITDA — excluding restructuring and other costs 2		$	5,769	$	5,649
Net interest cost 3		$	797	$	706
Debt ratio
Net debt to EBITDA — excluding restructuring and other costs	2.20 – 2.704	3.06		2.94
Coverage ratios
Earnings coverage 5		3.6		4.2
EBITDA — excluding restructuring and other costs interest coverage 6		7.2		8.0

(1) Net debt and total capitalization are calculated as follows:

As at June 30	Note	2020			2019
Long-term debt	26	$	18,518		$	16,579
Debt issuance costs netted against long-term debt		96			105
Derivative (assets) liabilities, net		(392		)	92
Accumulated other comprehensive income amounts arising from financial instruments used to manage interest rate and currency risks associated with U.S. dollar-denominated long-term debt — excluding tax effects		313			(57		)
Cash and temporary investments, net		(971		)	(217		)
Short-term borrowings	22	100			100
Net debt		17,664			16,602
Common equity		12,046			10,504
Less: accumulated other comprehensive income included in common equity above		(283		)	17
Total capitalization		$	29,427		$	27,123

(2) EBITDA — excluding restructuring and other costs is calculated as follows:

	EBITDA (Note 5)			Restructuring and other costs (Note 16)			EBITDA — excluding restructuring and other costs
Add
Six-month period ended June 30, 2020	$	2,768		$	130		$	2,898
Year ended December 31, 2019	5,554			134			5,688
Deduct
Six-month period ended June 30, 2019	(2,752		)	(65		)	(2,817		)
EBITDA — excluding restructuring and other costs	$	5,570		$	199		$	5,769

* EBITDA does not have any standardized meaning prescribed by IFRS-IASB and is therefore unlikely to be comparable to similar measures presented by other issuers; we define EBITDA as operating revenues less goods and services purchased and employee benefits expense. We have issued guidance on, and report, EBITDA because it is a key measure that management uses to evaluate the performance of our business, and it is also utilized in measuring compliance with certain debt covenants.

notes to condensed interim consolidated financial statements

(unaudited)

(3) Net interest cost is defined as financing costs, excluding employee defined benefit plans net interest, recoveries on long-term debt prepayment premium and repayment of debt, calculated on a 12-month trailing basis (expenses recorded for long-term debt prepayment premium, if any, are included in net interest cost) (see Note 9).

(4) Our long-term objective range for this ratio is 2.20 — 2.70 times. The ratio as at June 30, 2020, is outside the long-term objective range. We may permit, and have permitted, this ratio to go outside the objective range (for long-term investment opportunities), but we will endeavour to return this ratio to within the objective range in the medium term (following upcoming spectrum auctions), as we believe that this range is supportive of our long-term strategy. We are in compliance with the leverage ratio covenant in our credit facilities, which states that we may not permit our net debt to operating cash flow ratio to exceed 4.00:1.00 (see Note 26(d)); the calculation of the debt ratio is substantially similar to the calculation of the leverage ratio covenant in our credit facilities.

(5) Earnings coverage is defined by Canadian Securities Administrators National Instrument 41-101 as net income before borrowing costs and income tax expense, divided by borrowing costs (interest on long-term debt; interest on short-term borrowings and other; long-term debt prepayment premium), and adding back capitalized interest, all such amounts excluding amounts attributable to non-controlling interests.

(6) EBITDA — excluding restructuring and other costs interest coverage is defined as EBITDA — excluding restructuring and other costs, divided by net interest cost. This measure is substantially similar to the coverage ratio covenant in our credit facilities.

Net debt to EBITDA — excluding restructuring and other costs was 3.06 times as at June 30, 2020, up from 2.94 times one year earlier. The effect of the increase in net debt was exceeded by the effect of growth in EBITDA — excluding restructuring and other costs. The earnings coverage ratio for the twelve-month period ended June 30, 2020, was 3.6 times, down from 4.2 times one year earlier. Higher borrowing costs reduced the ratio by 0.5 and a decrease in income before borrowing costs and income taxes decreased the ratio by 0.1. The EBITDA — excluding restructuring and other costs interest coverage ratio for the twelve-month period ended June 30, 2020, was 7.2 times, down from 8.0 times one year earlier. Growth in EBITDA — excluding restructuring and other costs increased the ratio by 0.2, while an increase in net interest costs reduced the ratio by 1.0.

Dividend payout ratio

Commencing in 2020, so as to be consistent with the way we manage our business, we updated our revised dividend payout ratio presented to be a historical measure calculated as the sum of the last four quarters’ dividends declared for Common Shares as recorded in the financial statements, net of dividend reinvestment plan effects (see Note 13), divided by the sum of free cash flow* amounts for the most recent four quarters for interim reporting periods (divided by annual free cash flow if the reported amount is in respect of a fiscal year).

For the 12-month periods ended June 30	Objective	2020		2019
Determined using management measures
Dividend payout ratio — net of dividend reinvestment plan effects	60%–75% 1	61	%	133	%
Determined using most comparable IFRS-IASB measures
Ratio of dividends declared to cash provided by operating activities less capital expenditures (excluding spectrum licences)		84	%	122	%

(1) Our objective range for the dividend payout ratio is 60%-75% of free cash flow on a prospective basis.

12-month periods ended June 30 (millions)	2020			2019
Dividends declared	$	1,433		$	1,307
Amount of dividends declared reinvested in Common Shares	(516		)	(90		)
Dividends declared, net of dividend reinvestment plan effects	$	917		$	1,217

* Free cash flow does not have any standardized meaning prescribed by IFRS-IASB and is therefore unlikely to be comparable to similar measures presented by other issuers; we define free cash flow as EBITDA (operating revenues less goods and services purchased and employee benefits expense) excluding certain working capital changes (such as trade receivables and trade payables), proceeds from divested assets and other sources and uses of cash, as found in the consolidated statements of cash flows. We have issued guidance on, and report, free cash flow because it is a key measure that management, and investors, use to evaluate the performance of our business.

notes to condensed interim consolidated financial statements

(unaudited)

Our calculation of free cash flow, and the reconciliation to cash provided by operating activities, is as follows:

12-month periods ended June 30 (millions)	Note	2020			2019
EBITDA	5	$	5,570		$	5,336
Deduct non-cash gains from sale of property, plant and equipment		(13		)	(43		)
Restructuring and other costs, net of disbursements		22			43
Effects of contract asset, acquisition and fulfilment and TELUS Easy Payment device financing		43			(172		)
Effects of lease principal	31(b)	(346		)	(152		)
Leases accounted for as finance leases prior to adoption of IFRS 16		136			26
Deduct non-recurring gains and equity income related to real estate joint ventures	21(b)	—			(171		)
Donation to TELUS Friendly Future Foundation in Common Shares		—			100
Items from consolidated statements of cash flows:
Share-based compensation, net	14	23			2
Net employee defined benefit plans expense	15	91			85
Employer contributions to employee defined benefit plans		(40		)	(46		)
Interest paid		(764		)	(654		)
Interest received		8			9
Capital expenditures (excluding spectrum licences)	5	(2,911		)	(2,889		)
Free cash flow before income taxes		1,819			1,474
Income taxes paid, net of refunds		(308		)	(562		)
Free cash flow		1,511			912
Add (deduct):
Capital expenditures (excluding spectrum licences)	5	2,911			2,889
Adjustments to reconcile to Cash provided by operating activities		194			163
Cash provided by operating activities		$	4,616		$	3,964

4 financial instruments

(a) Credit risk

Excluding credit risk, if any, arising from currency swaps settled on a gross basis, the best representation of our maximum exposure (excluding income tax effects) to credit risk, which is a worst-case scenario and does not reflect results we expect, is set out in the following table:

As at (millions)	June 30, 2020		December 31, 2019
Cash and temporary investments, net	$	971	$	535
Accounts receivable	2,323		2,187
Contract assets	750		1,065
Derivative assets	423		84
	$	4,467	$	3,871

Cash and temporary investments, net

Credit risk associated with cash and temporary investments is managed by ensuring that these financial assets are placed with: governments; major financial institutions that have been accorded strong investment grade ratings by a primary rating agency; and/or other creditworthy counterparties. An ongoing review evaluates changes in the status of counterparties.

Accounts receivable

Credit risk associated with accounts receivable is inherently managed by the size and diversity of our large customer base, which includes substantially all consumer and business sectors in Canada. We follow a program of credit evaluations of customers and limit the amount of credit extended when deemed necessary. Accounts are considered to be past due (in default) when customers have failed to make the contractually required payments when due, which is generally within 30 days of the billing date. Any late payment charges are levied at an industry-based market or negotiated rate on outstanding non-current customer account balances.

notes to condensed interim consolidated financial statements

(unaudited)

As at (millions)		June 30, 2020							December 31, 2019
	Note	Gross		Allowance			Net 1		Gross		Allowance			Net 1
Customer accounts receivable, net of allowance for doubtful accounts
Less than 30 days past billing date		$	826	$	(22	)	$	804	$	803	$	(10	)	$	793
30-60 days past billing date		262		(15		)	247		331		(8		)	323
61-90 days past billing date		129		(14		)	115		74		(5		)	69
More than 90 days past billing date		114		(27		)	87		73		(14		)	59
Unbilled customer finance receivables		717		(26		)	691		523		(18		)	505
		$	2,048	$	(104	)	$	1,944	$	1,804	$	(55	)	$	1,749
Current		$	1,719	$	(94	)	$	1,625	$	1,570	$	(46	)	$	1,524
Non-current	20	329		(10		)	319		234		(9		)	225
		$	2,048	$	(104	)	$	1,944	$	1,804	$	(55	)	$	1,749

(1) Net amounts represent customer accounts receivable for which an allowance had not been made as at the dates of the Consolidated statements of financial position (see Note 6(b)).

We maintain allowances for lifetime expected credit losses related to doubtful accounts. Current economic conditions (including forward-looking macroeconomic data), historical information (including credit agency reports, if available), reasons for the accounts being past due and the line of business from which the customer accounts receivable arose are all considered when determining whether to make allowances for past-due accounts. The same factors are considered when determining whether to write off amounts charged to the allowance for doubtful accounts against the customer accounts receivable; amounts charged to the customer accounts receivable allowance for doubtful accounts that were written off but were still subject to enforcement activity as at June 30, 2020, totalled $541 million (December 31, 2019 – $449 million). The doubtful accounts expense is calculated on a specific-identification basis for customer accounts receivable above a specific balance threshold and on a statistically derived allowance basis for the remainder. No customer accounts receivable are written off directly to the doubtful accounts expense.

The following table presents a summary of the activity related to our allowance for doubtful accounts.

	Three months						Six months
Periods ended June 30 (millions)	2020			2019			2020			2019
Balance, beginning of period	$	56		$	43		$	55		$	53
Additions (doubtful accounts expense)	46			10			58			21
Accounts written off, net of recoveries	(6		)	(11		)	(18		)	(33		)
Other	8			—			9			1
Balance, end of period	$	104		$	42		$	104		$	42

Contract assets

Credit risk associated with contract assets is inherently managed by the size and diversity of our large customer base, which includes substantially all consumer and business sectors in Canada. We follow a program of credit evaluations of customers and limit the amount of credit extended when deemed necessary.

As at (millions)	June 30, 2020							December 31, 2019
	Gross		Allowance			Net (Note 6(c))		Gross		Allowance			Net (Note 6(c))
Contract assets, net of impairment allowance
To be billed and thus reclassified to accounts receivable during:
The 12-month period ending one year hence	$	730	$	(41	)	$	689	$	952	$	(42	)	$	910
The 12-month period ending two years hence	209		(12		)	197		322		(14		)	308
Thereafter	16		(1		)	15		21		(1		)	20
	$	955	$	(54	)	$	901	$	1,295	$	(57	)	$	1,238

We maintain allowances for lifetime expected credit losses related to contract assets. Current economic conditions, historical information (including credit agency reports, if available), and the line of business from which the contract asset arose are all considered when determining impairment allowances. The same factors are considered when determining whether to write off amounts charged to the impairment allowance for contract assets against contract assets.

Derivative assets (and derivative liabilities)

Counterparties to our share-based compensation cash-settled equity forward agreements and foreign exchange derivatives are major financial institutions that have been accorded investment grade ratings by a primary credit rating agency. The total dollar amount of credit exposure under contracts with any one financial institution is limited and counterparties’ credit ratings are monitored. We do not give or receive collateral on swap agreements and hedging items

notes to condensed interim consolidated financial statements

(unaudited)

due to our credit rating and those of our counterparties. While we are exposed to the risk of potential credit losses due to the possible non-performance of our counterparties, we consider this risk remote. Our derivative liabilities do not have credit risk-related contingent features.

(b) Liquidity risk

As a component of our capital structure financial policies, discussed further in Note 3, we manage liquidity risk by:

· maintaining a daily cash pooling process that enables us to manage our available liquidity and our liquidity requirements according to our actual needs;

· maintaining an agreement to sell trade receivables to an arm’s-length securitization trust and bilateral bank facilities (Note 22), a commercial paper program (Note 26(c)) and syndicated credit facilities (Note 26(d),(e));

· maintaining an in-effect shelf prospectus;

· continuously monitoring forecast and actual cash flows; and

· managing maturity profiles of financial assets and financial liabilities.

Our debt maturities in future years are as disclosed in Note 26(g). As at June 30, 2020, we could offer $2.5 billion of debt or equity securities pursuant to a shelf prospectus that is in effect until June 2022 (December 31, 2019 – $2.0 billion pursuant to a shelf prospectus that was in effect until August 2021). We believe that our investment grade credit ratings contribute to reasonable access to capital markets.

We closely match the contractual maturities of our derivative financial liabilities with those of the risk exposures they are being used to manage.

The expected maturities of our undiscounted financial liabilities do not differ significantly from the contractual maturities, other than as noted below. The contractual maturities of our undiscounted financial liabilities, including interest thereon (where applicable), are set out in the following tables:

	Non-derivative								Derivative
					Composite long-term debt
	Non-interest				Long-term debt,
	bearing				excluding				Currency swap agreement							Currency swap agreement
As at June 30, 2020	financial		Short-term		leases 1		Leases		amounts to be exchanged 2							amounts to be exchanged
(millions)	liabilities		borrowings 1		(Note 26)		(Note 26)		(Receive)			Pay		Other		(Receive)			Pay		Total
2020 (balance of year)	$	2,329	$	—	$	352	$	213	$	(80	)	$	73	$	4	$	(251	)	$	244	$	2,884
2021	161		101		867		398		(160		)	151		1		(203		)	205		1,521
2022	10		—		1,904		252		(160		)	151		8		—			—		2,165
2023	8		—		1,137		214		(160		)	150		—		—			—		1,349
2024	8		—		1,694		177		(160		)	150		—		—			—		1,869
2025-2029	20		—		9,153		475		(2,451		)	2,393		—		—			—		9,590
Thereafter	—		—		10,975		418		(3,168		)	3,020		—		—			—		11,245
Total	$	2,536	$	101	$	26,082	$	2,147	$	(6,339	)	$	6,088	$	13	$	(454	)	$	449	$	30,623
					Total (Note 26(g))							$	27,978

(1) Cash outflows in respect of interest payments on our short-term borrowings, commercial paper and amounts drawn under our credit facilities (if any) have been calculated based upon the interest rates in effect as at June 30, 2020.

(2) The amounts included in undiscounted non-derivative long-term debt in respect of U.S. dollar-denominated long-term debt, and the corresponding amounts in the long-term debt currency swaps receive column, have been determined based upon the currency exchange rates in effect as at June 30, 2020. The hedged U.S. dollar-denominated long-term debt contractual amounts at maturity, in effect, are reflected in the long-term debt currency swaps pay column as gross cash flows are exchanged pursuant to the currency swap agreements.

notes to condensed interim consolidated financial statements

(unaudited)

	Non-derivative										Derivative
							Composite long-term debt
	Non-interest				Construction		Long-term
As at	bearing				credit facilities		debt,				Currency swap agreement							Currency swap agreement
December 31,	financial		Short-term		commitment		excluding				amounts to be exchanged 2							amounts to be exchanged
2019 (millions)	liabilities		borrowings 1		(Note 21)		leases 1		Leases		(Receive)			Pay		Other		(Receive)			Pay		Total
2020	$	2,639	$	3	$	10	$	1,657	$	373	$	(1,140	)	$	1,153	$	—	$	(917	)	$	921	$	4,699
2021	43		103		—		1,698		338		(119		)	118		—		—			—		2,181
2022	7		—		—		2,235		207		(119		)	118		8		—			—		2,456
2023	5		—		—		1,021		189		(119		)	118		—		—			—		1,214
2024	5		—		—		1,595		157		(119		)	118		—		—			—		1,756
2025-2029	4		—		—		7,311		429		(1,919		)	1,944		—		—			—		7,769
Thereafter	—		—		—		10,102		388		(3,019		)	3,020		—		—			—		10,491
Total	$	2,703	$	106	$	10	$	25,619	$	2,081	$	(6,554	)	$	6,589	$	8	$	(917	)	$	921	$	30,566
							Total							$	27,735

(2) The amounts included in undiscounted non-derivative long-term debt in respect of U.S. dollar-denominated long-term debt, and the corresponding amounts in the long-term debt currency swaps receive column, have been determined based upon the currency exchange rates in effect as at December 31, 2019. The hedged U.S. dollar-denominated long-term debt contractual amounts at maturity, in effect, are reflected in the long-term debt currency swaps pay column as gross cash flows are exchanged pursuant to the currency swap agreements.

(c) Market risks

Net income and other comprehensive income for the six-month periods ended June 30, 2020 and 2019, could have varied if the Canadian dollar: U.S. dollar exchange rate, the U.S. dollar: European euro exchange rate, market interest rates and our Common Share price varied by reasonably possible amounts from their actual statement of financial position date amounts.

The sensitivity analysis of our exposure to currency risk at the reporting date has been determined based upon a hypothetical change taking place at the relevant statement of financial position date. The U.S. dollar-denominated and European euro-denominated balances and derivative financial instrument notional amounts as at the statement of financial position dates have been used in the calculations.

The sensitivity analysis of our exposure to interest rate risk at the reporting date has been determined based upon a hypothetical change taking place at the beginning of the relevant fiscal year and being held constant through to the statement of financial position date. The relevant statement of financial position date principal and notional amounts have been used in the calculations.

The sensitivity analysis of our exposure to other price risk arising from share-based compensation at the reporting date has been determined based upon a hypothetical change taking place at the relevant statement of financial position date. The relevant notional number of Common Shares at the relevant statement of financial position date, which includes those in the cash-settled equity swap agreements, has been used in the calculations.

Income tax expense, which is reflected net in the sensitivity analysis, reflects the applicable statutory income tax rates for the reporting periods.

Six-month periods ended June 30	Net income					Other comprehensive income						Comprehensive income
(increase (decrease) in millions)	2020			2019		2020			2019			2020			2019
Reasonably possible changes in market risks 1
10% change in C$: US$ exchange rate
Canadian dollar appreciates	$	4		$	—	$	(66	)	$	(55	)	$	(62	)	$	(55	)
Canadian dollar depreciates	$	(4	)	$	—	$	66		$	55		$	62		$	55
10% change in US$: € exchange rate
U.S. dollar appreciates	$	—		$	—	$	(55	)	$	—		$	(55	)	$	—
U.S. dollar depreciates	$	—		$	—	$	55		$	—		$	55		$	—
25 basis point change in interest rates
Interest rates increase
Canadian interest rate	$	—		$	—	$	118		$	94		$	118		$	94
US interest rate	$	—		$	—	$	(129	)	$	(90	)	$	(129	)	$	(90	)
Combined	$	—		$	—	$	(11	)	$	4		$	(11	)	$	4
Interest rates decrease
Canadian interest rate	$	—		$	—	$	(124	)	$	(99	)	$	(124	)	$	(99	)
US interest rate	$	—		$	—	$	137		$	95		$	137		$	95
Combined	$	—		$	—	$	13		$	(4	)	$	13		$	(4	)

notes to condensed interim consolidated financial statements

(unaudited)

Six-month periods ended June 30	Net income						Other comprehensive income						Comprehensive income
(increase (decrease) in millions)	2020			2019			2020			2019			2020			2019
25% 2 change in Common Share price 3
Price increases	$	(8	)	$	(4	)	$	3		$	1		$	(5	)	$	(3	)
Price decreases	$	13		$	19		$	(3	)	$	(1	)	$	10		$	18

(1) These sensitivities are hypothetical and should be used with caution. Changes in net income and/or other comprehensive income generally cannot be extrapolated because the relationship of the change in assumption to the change in net income and/or other comprehensive income may not be linear. In this table, the effect of a variation in a particular assumption on the amount of net income and/or other comprehensive income is calculated without changing any other factors; in reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.

The sensitivity analysis assumes that we would realize the changes in exchange rates and market interest rates; in reality, the competitive marketplace in which we operate would have an effect on this assumption.

No consideration has been made for a difference in the notional number of Common Shares associated with share-based compensation awards made during the reporting period that may have arisen due to a difference in the Common Share price.

(2) To facilitate ongoing comparison of sensitivities, a constant variance of approximate magnitude has been used. Reflecting a six-month data period and calculated on a monthly basis, the volatility of our Common Share price as at June 30, 2020, was 22.8% (2019 – 12.5%).

(3) The hypothetical effects of changes in the price of our Common Shares are restricted to those which would arise from our share-based compensation awards that are accounted for as liability instruments and the associated cash-settled equity swap agreements.

(d) Fair values

Derivative

The derivative financial instruments that we measure at fair value on a recurring basis subsequent to initial recognition are set out in the following table.

As at (millions)	June 30, 2020							December 31, 2019
	Designation	Maximum maturity date	Notional amount		Fair value 1 and carrying value		Price or rate	Maximum maturity date	Notional amount		Fair value 1 and carrying value		Price or rate
Current Assets 2
Derivatives used to manage
Currency risk arising from U.S. dollar-denominated purchases	HFH 3	2021	$	249	$	8	US$1.00: C$1.32	—	$	—	$	—	—
Currency risk arising from U.S. dollar revenues	HFT 4	2021	$	76	2		US$1.00: C$1.36	2020	$	36	1		US$1.00: C$1.30
Changes in share-based compensation costs (Note 14(b))	HFH 3	—	$	—	—		—	2020	$	72	4		$	24.40	*
Currency risk associated with European euro-denominated business acquisition	HFH 3	—	$	—	—		—	2020	$	472	3		€1.00: US$1.12
					$	10					$	8
Other Long-Term Assets 2
Derivatives used to manage
Currency risks arising from U.S. dollar-denominated long-term debt 6 (Note 26(b)-(c))	HFH 3	2049	$	5,495	$	413	US$1.00: C$1.30	2048	$	3,068	$	76	US$1.00: C$1.28

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

As at (millions)	June 30, 2020									December 31, 2019
	Designation	Maximum maturity date	Notional amount		Fair value 1 and carrying value		Price or rate			Maximum maturity date	Notional amount		Fair value 1 and carrying value		Price or rate
Current Liabilities 2
Derivatives used to manage
Currency risk arising from U.S. dollar-denominated purchases	HFH 3	2021	$	123	$	3	US$1.00: C$1.40			2020	$	412	$	6	US$1.00: C$1.32
Changes in share-based compensation costs (Note 14(b))	HFH 3	2020	$	72	4		$	24.39	*	—	$	—	—		—
Currency risk arising from U.S. dollar-denominated long-term debt (Note 26(b)-(c))	HFH 3	—	$	—	—		—			2020	$	1,037	17		US$1.00: C$1.32
Currency risk arising from European euro functional currency operations purchased with U.S. dollar-denominated long-term debt 7 (Notes 18(b), 26(e))	HFH 5	2024	$	33	2		€1.00: US$1.09			—	$	—	—		—
Interest rate risk associated with non-fixed rate credit facility amounts drawn (Note 26(e))	HFH 3	2022	$	8	—		2.64		%	2022	$	8	—		2.64	%
					$	9							$	23
Other Long-Term Liabilities 2
Derivatives used to manage
Currency risk arising from U.S. dollar-denominated long-term debt 6 (Note 26(b)-(c))	HFH 3	—	$	—	$	—	—			2049	$	2,485	22		US$1.00: C$1.34
Currency risk arising from European euro functional currency operations purchased with U.S. dollar-denominated long-term debt 7 (Notes 18(b), 26(e))	HFH 5	2025	$	563	19		€1.00: US$1.09			—	$	—	—		—
Interest rate risk associated with non-fixed rate credit facility amounts drawn (Note 26(e))	HFH 3	2022	$	133	8		2.64		%	2022	$	130	4		2.64	%
					$	27							$	26

(1) Fair value measured at reporting date using significant other observable inputs (Level 2).

(2) Derivative financial assets and liabilities are not set off.

(3) Designated as held for hedging (HFH) upon initial recognition (cash flow hedging item); hedge accounting is applied. Unless otherwise noted, hedge ratio is 1:1 and is established by assessing the degree of matching between the notional amounts of hedging items and the notional amounts of the associated hedged items.

(4) Designated as held for trading (HFT) and classified as fair value through net income upon initial recognition; hedge accounting is not applied.

(5) Designated as a hedge of a net investment in a foreign operation and hedge accounting is applied. Hedge ratio is 1:1 and is established by assessing the degree of matching between the notional amounts of hedging items and the notional amounts of the associated hedged items.

(6) We designate only the spot element as the hedging item. As at June 30, 2020, the foreign currency basis spread included in the fair value of the derivative instruments, and which is used for purposes of assessing hedge ineffectiveness, was $92 (December 31, 2019 – $38).

(7) We designate only the spot element as the hedging item. As at June 30, 2020, the foreign currency basis spread included in the fair value of the derivative instruments, and which is used for purposes of assessing hedge ineffectiveness was $2.

Non-derivative

Our long-term debt, which is measured at amortized cost, and the fair value thereof, are set out in the following table.

As at (millions)

June 30, 2020

December 31, 2019

Carrying
value

Fair value

Carrying
value

Fair value

Long-term debt, excluding leases (Note 26)

16,797

18,121

16,813

17,930

(e) Recognition of derivative gains and losses

The following table sets out the gains and losses, excluding income tax effects, arising from derivative instruments that are classified as cash flow hedging items and their location within the Consolidated statements of income and other comprehensive income.

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

Credit risk associated with such derivative instruments, as discussed further in (a), would be the primary source of hedge ineffectiveness. There was no ineffective portion of the derivative instruments classified as cash flow hedging items for the periods presented.

		Amount of gain (loss) recognized in other comprehensive income						Gain (loss) reclassified from other comprehensive income to income (effective portion) (Note 11)
		(effective portion) (Note 11)							Amount
Periods ended June 30 (millions)	Note	2020			2019			Location	2020			2019
THREE-MONTH
Derivatives used to manage currency risk
Arising from U.S. dollar-denominated purchases		$	(13	)	$	(7	)	Goods and services purchased	$	5		$	4
Arising from U.S. dollar-denominated long-term debt 1	26(b)-(c)	(216		)	(29		)	Financing costs	(129		)	(58		)
Arising from net investment in a foreign operation 2		(21		)	—			Financing costs	(3		)	—
		(250		)	(36		)		(127		)	(54		)
Derivatives used to manage other market risk
Arising from changes in share-based compensation costs and other	14(b)	—			(5		)	Employee benefits expense	1			(1		)
		$	(250	)	$	(41	)		$	(126	)	$	(55	)
SIX-MONTH
Derivatives used to manage currency risk
Arising from U.S. dollar-denominated purchases		$	18		$	(15	)	Goods and services purchased	$	7		$	9
Arising from U.S. dollar-denominated long-term debt 1	26(b)-(c)	424			(151		)	Financing costs	223			(123		)
Arising from net investment in a foreign operation 2		(22		)	—			Financing costs	—			—
		420			(166		)		230			(114		)
Derivatives used to manage other market risk
Arising from changes in share-based compensation costs and other	14(b)	(10		)	5			Employee benefits expense	(1		)	6
		$	410		$	(161	)		$	229		$	(108	)

(1) Amounts recognized in other comprehensive income are net of the change in the foreign currency basis spread (which is used for purposes of assessing hedge ineffectiveness) included in the fair value of the derivative instruments; such amount for the three-month and six-month periods ended June 30, 2020, were $(4) (2019 – $NIL) and $54 (2019 – $7), respectively.

(2) Amounts recognized in other comprehensive income are net of the change in the foreign currency basis spread (which is used for purposes of assessing hedge ineffectiveness) included in the fair value of the derivative instruments; such amount for the three-month and six-month periods ended June 30, 2020, were $2 and $2, respectively.

The following table sets out the gains and losses arising from derivative instruments that are classified as held for trading and that are not designated as being in a hedging relationship, and their location within the Consolidated statements of income and other comprehensive income.

		Gain recognized in income on derivatives
		Three months				Six months
Periods ended June 30 (millions)	Location	2020		2019		2020		2019
Derivatives used to manage currency risk	Financing costs	$	3	$	3	$	4	$	5

5 segment information

General

Operating segments are components of an entity that engage in business activities from which they earn revenues and incur expenses (including revenues and expenses related to transactions with the other component(s)), the operations of which can be clearly distinguished and for which the operating results are regularly reviewed by a chief operating decision-maker to make resource allocation decisions and to assess performance. Effective January 1, 2020, we embarked upon modifying our internal and external reporting processes, systems and internal controls to accommodate the technology convergence-driven cessation of the historical distinction between our wireless and wireline operations at the level of regularly reported discrete performance measures that are provided to our chief operating decision-maker. Prior to the World Health Organization characterizing COVID-19 as a pandemic, we had anticipated transitioning to a new segment reporting structure during 2020, but did not, and do not, anticipate a substantive change to our products and services revenue reporting from such transition; we will continue to report wireless and wireline operations until such transition is substantially completed, but the timing of such transition may be impacted as we prioritize managing through the pandemic.

The wireless segment includes network revenues and equipment sales arising from mobile technologies. The wireline segment includes data revenues (which include internet protocol; television; hosting, managed information

notes to condensed interim consolidated financial statements

(unaudited)

technology and cloud-based services; customer care and business services; certain healthcare solutions; and home and business security), voice and other telecommunications services revenues (excluding wireless arising from mobile technologies), and equipment sales. Segmentation has been based on similarities in technology (mobile versus fixed), the technical expertise required to deliver the services and products, customer characteristics, the distribution channels used and regulatory treatment. Intersegment sales are recorded at the exchange value, which is the amount agreed to by the parties.

The segment information regularly reported to our Chief Executive Officer (our chief operating decision-maker), and the reconciliations thereof to our products and services view of revenues, other revenues and income before income taxes, are set out in the following table.

Three-month periods ended	Wireless					Wireline				Eliminations						Consolidated
June 30 (millions)	2020			2019		2020		2019		2020			2019			2020		2019
Operating revenues
External revenues
Service	$	1,485		$	1,534	$	1,765	$	1,552	$	—		$	—		$	3,250	$	3,086
Equipment	347			444		59		57		—			—			406		501
Revenues arising from contracts with customers	1,832			1,978		1,824		1,609		—			—			3,656		3,587
Other operating income	(1		)	5		73		5		—			—			72		10
	1,831			1,983		1,897		1,614		—			—			3,728		3,597
Intersegment revenues	15			14		64		60		(79		)	(74		)	—		—
	$	1,846		$	1,997	$	1,961	$	1,674	$	(79	)	$	(74	)	$	3,728	$	3,597
EBITDA 1	$	870		$	919	$	489	$	454	$	—		$	—		$	1,359	$	1,373
CAPEX, excluding spectrum licences 2	$	234		$	223	$	522	$	547	$	—		$	—		$	756	$	770

										Operating revenues — external (above)						$	3,728	$	3,597
										Goods and services purchased						1,458		1,466
										Employee benefits expense						911		758
										EBITDA (above)						1,359		1,373
										Depreciation						505		470
										Amortization						220		163
										Operating income						634		740
										Financing costs						202		189
										Income before income taxes						$	432	$	551

Six-month periods ended	Wireless					Wireline				Eliminations						Consolidated
June 30 (millions)	2020			2019		2020		2019		2020			2019			2020		2019
Operating revenues
External revenues
Service	$	3,008		$	3,034	$	3,487	$	3,072	$	—		$	—		$	6,495	$	6,106
Equipment	709			863		115		107		—			—			824		970
Revenues arising from contracts with customers	3,717			3,897		3,602		3,179		—			—			7,319		7,076
Other operating income	(2		)	10		105		17		—			—			103		27
	3,715			3,907		3,707		3,196		—			—			7,422		7,103
Intersegment revenues	29			27		127		116		(156		)	(143		)	—		—
	$	3,744		$	3,934	$	3,834	$	3,312	$	(156	)	$	(143	)	$	7,422	$	7,103
EBITDA 1	$	1,804		$	1,827	$	964	$	925	$	—		$	—		$	2,768	$	2,752
CAPEX, excluding spectrum licences 2	$	428		$	400	$	993	$	1,016	$	—		$	—		$	1,421	$	1,416

										Operating revenues — external (above)						$	7,422	$	7,103
										Goods and services purchased						2,870		2,887
										Employee benefits expense						1,784		1,464
										EBITDA (above)						2,768		2,752
										Depreciation						1,028		940
										Amortization						422		310
										Operating income						1,318		1,502
										Financing costs						394		357
										Income before income taxes						$	924	$	1,145

notes to condensed interim consolidated financial statements

(unaudited)

(1) Earnings before interest, income taxes, depreciation and amortization (EBITDA) does not have any standardized meaning prescribed by IFRS-IASB and is therefore unlikely to be comparable to similar measures presented by other issuers; we define EBITDA as operating revenues less goods and services purchased and employee benefits expense. We have issued guidance on, and report, EBITDA because it is a key measure that management uses to evaluate the performance of our business, and it is also utilized in measuring compliance with certain debt covenants.

(2) Total capital expenditures (CAPEX); see Note 31(a) for a reconciliation of capital expenditures, excluding spectrum licences to cash payments for capital assets, excluding spectrum licences reported in the Consolidated statements of cash flows.

6 revenue from contracts with customers

(a) Revenues

In the determination of the minimum transaction prices in contracts with customers, amounts are allocated to fulfilling, or completion of fulfilling, future contracted performance obligations. These unfulfilled, or partially unfulfilled, future contracted performance obligations are largely in respect of services to be provided over the duration of the contract. The following table sets out our aggregate estimated minimum transaction prices allocated to remaining unfulfilled, or partially unfulfilled, future contracted performance obligations and the timing of when we might expect to recognize the associated revenues; actual amounts could differ from these estimates due to a variety of factors, including the unpredictable nature of: customer behaviour; industry regulation; the economic environments in which we operate; and competitor behaviour.

As at (millions)	June 30, 2020		December 31, 2019
Estimated minimum transaction price allocated to remaining unfulfilled, or partially unfulfilled, performance obligations to be recognized as revenue in a future period 1, 2
During the 12-month period ending one year hence	$	2,227	$	2,405
During the 12-month period ending two years hence	748		930
Thereafter	33		40
	$	3,008	$	3,375

(1) Excludes constrained variable consideration amounts, amounts arising from contracts originally expected to have a duration of one year or less and, as a permitted practical expedient, amounts arising from contracts that are not affected by revenue recognition timing differences arising from transaction price allocation or from contracts under which we may recognize and bill revenue in an amount that corresponds directly with our completed performance obligations.

(2) IFRS-IASB requires the explanation of when we expect to recognize as revenue the amounts disclosed as the estimated minimum transaction price allocated to remaining unfulfilled, or partially unfulfilled, performance obligations. The estimated amounts disclosed are based upon contractual terms and maturities. Actual minimum transaction price revenues recognized, and the timing thereof, will differ from these estimates primarily due to the frequency with which the actual durations of contracts with customers do not match their contractual maturities.

(b) Accounts receivable

As at (millions)	Note	June 30, 2020			December 31, 2019
Customer accounts receivable		$	1,719		$	1,570
Accrued receivables — customer		220			180
Allowance for doubtful accounts	4(a)	(94		)	(46		)
		1,845			1,704
Accrued receivables — other		159			258
Accounts receivable — current		$	2,004		$	1,962

notes to condensed interim consolidated financial statements

(unaudited)

(c) Contract assets

		Three months						Six months
Periods ended June 30 (millions)	Note	2020			2019			2020			2019
Balance, beginning of period		$	1,069		$	1,449		$	1,238		$	1,475
Net additions arising from operations		176			350			347			671
Amounts billed in period and thus reclassified to accounts receivable 1		(343		)	(357		)	(688		)	(703		)
Change in impairment allowance, net	4(a)	(2		)	(2		)	3			(4		)
Other		1			1			1			2
Balance, end of period		$	901		$	1,441		$	901		$	1,441
To be billed and thus reclassified to accounts receivable during:
The 12-month period ending one year hence								$	689		$	1,019
The 12-month period ending two years hence								197			407
Thereafter								15			15
Balance, end of period								$	901		$	1,441
Reconciliation of contract assets presented in the Consolidated statements of financial position — current
Gross contract assets								$	689		$	1,019
Reclassification to contract liabilities of contracts with contract assets less than contract liabilities	24							(9		)	(5		)
Reclassification from contract liabilities of contracts with contract liabilities less than contract assets	24							(142		)	(155		)
								$	538		$	859

(1) For the three-month and six-month periods ended June 30, 2020, amounts billed for our wireless products and services and reclassified to accounts receivable totalled $268 (2019 – $330) and $557 (2019 – $650), respectively.

7 other operating income

		Three months					Six months
Periods ended June 30 (millions)	Note	2020			2019		2020			2019
Government assistance		$	3		$	5	$	6		$	12
Other sublet revenue	19	—			1		1			1
Investment income, gain (loss) on disposal of assets and other	21	(3		)	3		(9		)	12
Interest income	21(b)	1			1		2			2
Changes in business combination-related provisions	25	71			—		103			—
		$	72		$	10	$	103		$	27

We receive government assistance, as defined by IFRS-IASB, from a number of sources and include such amounts received in Other operating income. We recognize such amounts on an accrual basis as the subsidized services are provided or as the subsidized costs are incurred.

CRTC subsidy

Local exchange carriers’ costs of providing the level of residential basic telephone services that the CRTC requires to be provided in high cost serving areas are greater than the amounts the CRTC allows the local exchange carriers to charge for the level of service. To ameliorate the situation, the CRTC directs the collection of contribution payments, in a central fund, from all registered Canadian telecommunications service providers (including voice, data and wireless service providers) that are then disbursed to incumbent local exchange carriers as subsidy payments to partially offset the costs of providing residential basic telephone services in non-forborne high cost serving areas. The subsidy payment disbursements are based upon a total subsidy requirement calculated on a per network access line/per band subsidy rate. For the three-month and six-month periods ended June 30, 2020, our subsidy receipts were $2 million (2019 – $4 million) and $5 million (2019 – $8 million), respectively.

Government of Quebec

Salaries for qualifying employment positions in the province of Quebec, mainly in the information technology sector, are eligible for tax credits. In respect of such tax credits, for the three-month and six-month periods ended June 30, 2020, we recorded $1 million (2019 – $4 million) and $1 million (2019 – $4 million), respectively.

notes to condensed interim consolidated financial statements

(unaudited)

8 employee benefits expense

		Three months						Six months
Periods ended June 30 (millions)	Note	2020			2019			2020			2019
Employee benefits expense — gross
Wages and salaries		$	901		$	762		$	1,781		$	1,465
Share-based compensation	14	46			30			78			64
Pensions — defined benefit	15(a)	25			19			52			39
Pensions — defined contribution	15(b)	25			20			46			43
Restructuring costs	16(a)	10			19			20			34
Other		43			47			89			89
		1,050			897			2,066			1,734
Capitalized internal labour costs, net
Contract acquisition costs	20
Capitalized		(16		)	(12		)	(33		)	(24		)
Amortized		13			11			26			23
Contract fulfilment costs	20
Capitalized		(1		)	—			(2		)	(1		)
Amortized		1			—			2			1
Property, plant and equipment		(83		)	(90		)	(170		)	(175		)
Intangible assets subject to amortization		(53		)	(48		)	(105		)	(94		)
		(139		)	(139		)	(282		)	(270		)
		$	911		$	758		$	1,784		$	1,464

9 financing costs

		Three months						Six months
Periods ended June 30 (millions)	Note	2020			2019			2020			2019
Interest expense
Interest on long-term debt, excluding lease liabilities — gross		$	169		$	161		$	339		$	311
Interest on long-term debt, excluding lease liabilities - capitalized 1	18(a)	(9)			(4		)	(17		)	(4		)
Interest on long-term debt, excluding lease liabilities		160			157			322			307
Interest on lease liabilities	19	17			16			35			32
Interest on short-term borrowings and other		2			3			4			8
Interest accretion on provisions	25	4			5			9			11
Long-term debt prepayment premium	26(a)	18			—			18			—
		201			181			388			358
Employee defined benefit plans net interest	15	4			—			8			—
Foreign exchange		(1		)	11			1			4
		204			192			397			362
Interest income		(2		)	(3		)	(3		)	(5		)
		$	202		$	189		$	394		$	357
Net interest cost	3							$	403		$	361
Interest on long-term debt, excluding lease liabilities - capitalized 1								(17		)	(4		)
Employee defined benefit plans net interest								8			—
								$	394		$	357

(1) Interest on long-term debt, excluding lease liabilities, interest at a composite rate of 4.33% was capitalized to intangible assets with indefinite lives in the period.

notes to condensed interim consolidated financial statements

(unaudited)

10 income taxes

	Three months						Six months
Periods ended June 30 (millions)	2020			2019			2020			2019
Current income tax expense
For the current reporting period	$	83		$	71		$	285		$	197
Adjustments recognized in the current period for income taxes of prior periods	(2		)	(1		)	(4		)	(1		)
	81			70			281			196
Deferred income tax expense
Arising from the origination and reversal of temporary differences	32			83			(28		)	114
Revaluation of deferred income tax liability to reflect future income tax rates	(2		)	(121		)	(5		)	(121		)
Adjustments recognized in the current period for income taxes of prior periods	6			(1		)	8			(1		)
	36			(39		)	(25		)	(8		)
	$	117		$	31		$	256		$	188

Our income tax expense and effective income tax rate differ from those calculated by applying the applicable statutory rates for the following reasons:

Three-month periods ended June 30 ($ in millions)	2020					2019
Income taxes computed at applicable statutory rates	$	113		26.2	%	$	147		26.7	%
Revaluation of deferred income tax liability to reflect future income tax rates	(2		)	(0.5	)	(121		)	(22.0	)
Adjustments recognized in the current period for income taxes of prior periods	4			0.9		(2		)	(0.3	)
Other	2			0.5		7			1.2
Income tax expense per Consolidated statements of income and other comprehensive income	$	117		27.1	%	$	31		5.6	%

Six-month periods ended June 30 ($ in millions)	2020					2019
Income taxes computed at applicable statutory rates	$	243		26.3	%	$	308		26.9	%
Revaluation of deferred income tax liability to reflect future income tax rates	(5		)	(0.5	)	(121		)	(10.6	)
Adjustments recognized in the current period for income taxes of prior periods	4			0.4		(2		)	(0.2	)
Other	14			1.5		3			0.3
Income tax expense per Consolidated statements of income and other comprehensive income	$	256		27.7	%	$	188		16.4	%

notes to condensed interim consolidated financial statements

(unaudited)

11 other comprehensive income

.	Items that may subsequently be reclassified to income																							Item never reclassified to income					Item never reclassified to income
	Change in unrealized fair value of derivatives designated as cash flow hedges in current period (Note 4(e))
	Derivatives used to manage currency risk								Derivatives used to manage other market risks												Cumulative			Change in					Employee
Periods ended June 30 (millions)	Gains (losses) arising			Prior period (gains) losses transferred to net income		Total			Gains (losses) arising			Prior period (gains) losses transferred to net income			Total			Total			foreign currency translation adjustment			measurement of investment financial assets		Accumulated other comp. income			defined benefit plan re-measurements			Other comp. income
THREE-MONTH
Accumulated balance as at April 1, 2019						$	(70	)							$	2		$	(68	)	$	28		$	—	$	(40	)
Other comprehensive income (loss)
Amount arising	$	(36	)	$	54	18			$	(5	)	$	1		(4		)	14			11			—		25			$	16		$	41
Income taxes	$	(4	)	$	9	5			$	(2	)	$	1		(1		)	4			—			—		4			8			12
Net						13									(3		)	10			11			—		21			$	8		$	29
Accumulated balance as at June 30, 2019						$	(57	)							$	(1	)	$	(58	)	$	39		$	—	$	(19	)
Accumulated balance as at April 1, 2020						$	294								$	(7	)	$	287		$	94		$	12	$	393
Other comprehensive income (loss)
Amount arising	$	(250	)	$	127	(123		)	$	—		$	(1	)	(1		)	(124		)	(10		)	—		(134		)	$	(901	)	$	(1,035	)
Income taxes	$	(43	)	$	16	(27		)	$	1		$	(1	)	—			(27		)	—			—		(27		)	(232		)	(259		)
Net						(96		)							(1		)	(97		)	(10		)	—		(107		)	$	(669	)	$	(776	)
Accumulated balance as at June 30, 2020						$	198								$	(8	)	$	190		$	84		$	12	$	286

notes to condensed interim consolidated financial statements

(unaudited)

	Items that may subsequently be reclassified to income																							Item never reclassified to income					Item never reclassified to income
	Change in unrealized fair value of derivatives designated as cash flow hedges in current period (Note 4(e))
	Derivatives used to manage currency risk									Derivatives used to manage other market risks												Cumulative		Change in
Periods ended June 30 (millions)	Gains (losses) arising			Prior period (gains) losses transferred to net income			Total			Gains (losses) arising			Prior period (gains) losses transferred to net income			Total			Total			foreign currency translation adjustment		measurement of investment financial assets		Accumulated other comp. income			Employee defined benefit plan re-measurements			Other comp. income
SIX-MONTH
Accumulated balance as at January 1, 2019							$	(19	)							$	—		$	(19	)	$	22	$	—	$	3
Other comprehensive income (loss)
Amount arising	$	(166	)	$	114		(52		)	$	5		$	(6	)	(1		)	(53		)	17		—		(36		)	$	49		$	13
Income taxes	$	(32	)	$	18		(14		)	$	1		$	(1	)	—			(14		)	—		—		(14		)	17			3
Net							(38		)							(1		)	(39		)	17		—		(22		)	$	32		$	10
Accumulated balance as at June 30, 2019							$	(57	)							$	(1	)	$	(58	)	$	39	$	—	$	(19	)
Accumulated balance as at January 1, 2020							$	66								$	(1	)	$	65		$	42	$	12	$	119
Other comprehensive income (loss)
Amount arising	$	420		$	(230	)	190			$	(10	)	$	1		(9		)	181			42		—		223			$	(475	)	$	(252	)
Income taxes	$	100		$	(42	)	58			$	(2	)	$	—		(2		)	56			—		—		56			(122		)	(66		)
Net							132									(7		)	125			42		—		167			$	(353	)	$	(186	)
Accumulated balance as at June 30, 2020							$	198								$	(8	)	$	190		$	84	$	12	$	286
Attributable to:
Common Shares																										$	283
Non-controlling interests																										3
																										$	286

notes to condensed interim consolidated financial statements

(unaudited)

12 per share amounts

Basic net income per Common Share is calculated by dividing net income attributable to Common Shares by the total weighted average number of Common Shares outstanding during the period. Diluted net income per Common Share is calculated to give effect to share option awards and restricted share units.

The following table presents reconciliations of the denominators of the basic and diluted per share computations. Net income was equal to diluted net income for all periods presented.

	Three months		Six months
Periods ended June 30 (millions)	2020	2019*	2020	2019*
Basic total weighted average number of Common Shares outstanding	1,278	1,203	1,263	1,202
Effect of dilutive securities — Restricted share units	2	—	1	—
Diluted total weighted average number of Common Shares outstanding	1,280	1,203	1,264	1,202

For the three-month and six-month periods ended June 30, 2020, no outstanding equity-settled restricted share unit awards were excluded in the computation of diluted income per common share. For the three-month and six-month periods ended June 30, 2020, NIL and 2 million, respectively, outstanding TELUS Corporation share option awards were excluded in the calculation of diluted net income per Common Share.

13 dividends per share

(a) Dividends declared

Six-month periods ended June 30
(millions except per share
amounts)

2020

2019

Declared

Paid to

Declared

Paid to

Common Share dividends

Effective

Per share*

shareholders

Total

Effective

Per share*

shareholders

Total

Quarter 1 dividend

Mar. 11, 2020

0.29125

Apr. 1, 2020

371

Mar. 11, 2019

0.27250

Apr. 1, 2019

329

Quarter 2 dividend

Jun. 10, 2020

0.29125

Jul. 2, 2020

372

Jun. 10, 2019

0.28125

Jul. 2, 2019

339

0.58250

743

0.55375

668

On July 30, 2020, the Board of Directors declared a quarterly dividend of $0.29125 per share on our issued and outstanding Common Shares payable on October 1, 2020, to holders of record at the close of business on September 10, 2020. The final amount of the dividend payment depends upon the number of Common Shares issued and outstanding at the close of business on September 10, 2020.

(b) Dividend Reinvestment and Share Purchase Plan

We have a Dividend Reinvestment and Share Purchase Plan under which eligible holders of Common Shares may acquire additional Common Shares by reinvesting dividends and by making additional optional cash payments to the trustee. Under this plan, we have the option of offering Common Shares from Treasury or having the trustee acquire Common Shares in the stock market. We may, at our discretion, offer Common Shares at a discount of up to 5% from the market price under the plan. Effective with our dividends paid October 1, 2019, we offered Common Shares from Treasury at a discount of 2%. In respect of Common Shares held by eligible shareholders who have elected to participate in the plan, dividends declared during the three-month and six-month periods ended June 30, 2020, of $131 million (2019 — $15 million) and $253 million (2019 — $28 million), respectively, were to be reinvested in Common Shares.

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

14 share-based compensation

(a) Details of share-based compensation expense

Reflected in the Consolidated statements of income and other comprehensive income as Employee benefits expense and in the Consolidated statements of cash flows are the following share-based compensation amounts:

Periods ended June 30 (millions)		2020							2019
	Note	Employee benefits expense		Associated operating cash outflows			Statement of cash flows adjustment		Employee benefits expense		Associated operating cash outflows			Statement of cash flows adjustment
THREE-MONTH
Restricted share units	(b)	$	38	$	—		$	38	$	17	$	(1	)	$	16
Employee share purchase plan	(c)	5		(5		)	—		9		(9		)	—
Share option awards	(d)	3		—			3		4		—			4
		$	46	$	(5	)	$	41	$	30	$	(10	)	$	20
SIX-MONTH
Restricted share units	(b)	$	60	$	—		$	60	$	40	$	(7	)	$	33
Employee share purchase plan	(c)	14		(14		)	—		18		(18		)	—
Share option awards	(d)	4		—			4		6		—			6
		$	78	$	(14	)	$	64	$	64	$	(25	)	$	39

For the three-month and six-month periods ended June 30, 2020, the associated operating cash outflows in respect of restricted share units were net of cash inflows arising from cash-settled equity forward agreements of $1 million (2019 — $2 million) and $2 million (2019 — $3 million), respectively. For the three-month and six-month periods ended June 30, 2020, the income tax benefit arising from share-based compensation was $11 million (2019 — $8 million) and $19 million (2019 — $17 million), respectively.

(b) Restricted share units

TELUS Corporation restricted share units

We also award restricted share units that largely have the same features as our general restricted share units, but have a variable payout (0% — 200%) that depends upon the achievement of our total customer connections performance condition (with a weighting of 25%) and the total shareholder return on our Common Shares relative to an international peer group of telecommunications companies (with a weighting of 75%). The grant-date fair value of the notional subset of our restricted share units affected by the total customer connections performance condition equals the fair market value of the corresponding Common Shares at the grant date, and thus the notional subset has been included in the presentation of our restricted share units with only service conditions. The estimate, which reflects a variable payout, of the fair value of the notional subset of our restricted share units affected by the relative total shareholder return performance condition is determined using a Monte Carlo simulation. Grants of restricted share units in 2019 are accounted for as equity-settled as that was their expected manner of settlement when granted.

The following table presents a summary of outstanding TELUS Corporation non-vested restricted share units.

Number of non-vested restricted share units as at	June 30, 2020*	December 31, 2019*
Restricted share units without market performance conditions
Restricted share units with only service conditions	8,930,974	6,186,854
Notional subset affected by total customer connections performance condition	449,850	282,100
	9,380,824	6,468,954
Restricted share units with market performance conditions
Notional subset affected by relative total shareholder return performance condition	1,349,549	846,298
	10,730,373	7,315,252

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

The following table presents a summary of the activity related to TELUS Corporation restricted share units without market performance conditions.

Periods ended June 30, 2020	Three months						Six months
	Number of restricted share units 1				Weighted average grant-date		Number of restricted share units 1				Weighted average grant-date
	Non-vested		Vested		fair value		Non-vested		Vested		fair value
Outstanding, beginning of period *
Non-vested	9,060,044		—		$	24.06	6,468,954		—		$	23.37
Vested	—		12,342		$	19.10	—		30,800		$	22.02
Issued
Initial award	288,443		—		$	22.63	2,910,882		—		$	25.40
In lieu of dividends	121,198		308		$	21.52	195,615		308		$	22.92
Vested	(17,008	)	17,008		$	24.00	(28,311	)	28,311		$	23.84
Settled in cash	—		(17,149	)	$	24.01	—		(46,910	)	$	23.89
Forfeited and cancelled	(71,853	)	—		$	24.29	(166,316	)	—		$	23.80
Outstanding, end of period
Non-vested	9,380,824		—		$	23.98	9,380,824		—		$	23.98
Vested	—		12,509		$	19.15	—		12,509		$	19.15

(1) Excluding the notional subset of restricted share units affected by the relative total shareholder return performance condition.

With respect to 2.9 million TELUS Corporation restricted share units vesting in the year ending December 31, 2020, we have entered into cash-settled equity forward agreements that fix our cost at $24.39 per restricted share unit.

TELUS International (Cda) Inc. restricted share units

We also award restricted share units that largely have the same features as the TELUS Corporation restricted share units, but have a variable payout (0% — 150%) that depends upon the achievement of TELUS International (Cda) Inc. financial performance and non-market quality-of-service performance conditions.

The following table presents a summary of the activity related to TELUS International (Cda) Inc. restricted share units.

Periods ended June 30, 2020	Three months				Six months
	Number of non-vested restricted share units		Weighted average grant-date fair value		Number of non-vested restricted share units		Weighted average grant-date fair value
Outstanding, beginning of period	463,978		US$	27.55	465,245		US$	27.49
Granted	59,929		US$	52.85	59,929		US$	52.85
Forfeited	(1,475	)	US$	27.81	(2,742	)	US$	27.93
Outstanding, end of period	522,432		US$	30.45	522,432		US$	30.45

(c) Employee share purchase plan

We have an employee share purchase plan under which eligible employees up to a certain job classification can purchase our Common Shares through regular payroll deductions. In respect of Common Shares held within the employee share purchase plan, Common Share dividends declared during the three-month and six-month periods ended June 30, 2020, of $9 million (2019 — $8 million) and $18 million (2019 — $17 million), respectively, were to be reinvested in Common Shares acquired by the trustee from Treasury, with no discount applicable prior to October 1, 2019; subsequent to that date, a discount was applicable as set out in Note 13(b).

(d) Share option awards

TELUS Corporation share options

Employees may be granted options to purchase Common Shares at an exercise price equal to the fair market value at the time of grant. Share option awards granted under the plan may be exercised over specific periods not to exceed seven years from the time of grant. No share option awards were granted in fiscal 2019.

These share option awards have a net-equity settlement feature. The optionee does not have the choice of exercising the net-equity settlement feature; it is at our option whether the exercise of a share option award is settled as a share option or settled using the net-equity settlement feature.

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

The following table presents a summary of the activity related to the TELUS Corporation share option plan.

Periods ended June 30, 2020	Three months				Six months
	Number of share options		Weighted average share option price		Number of share options		Weighted average share option price 1
Outstanding, beginning of period*	2,522,700		$	21.19	—		$	—
Granted	558,600		$	22.88	3,081,300		$	21.50
Forfeited	(6,300	)	$	21.19	(6,300	)	$	21.19
Outstanding, end of period	3,075,000		$	21.50	3,075,000		$	21.50

(1) The weighted average remaining contractual life is 6.8 years. No options were exercisable as at the balance sheet date.

The weighted average fair value of share option awards granted, and the weighted average assumptions used in the fair value estimation at the time of grant, calculated by using the Black-Scholes model (a closed-form option pricing model), are as follows:

Periods ended June 30, 2020	Three months			Six months
Share option award fair value (per share option)	$	0.63		$	0.65
Risk free interest rate	0.37		%	0.97		%
Expected lives(1) (years)	4.25			4.25
Expected volatility	12.1		%	12.3		%
Dividend yield	5.1		%	5.4		%

(1) The maximum contractual term of the share option awards granted in 2020 was seven years.

Share option awards have a net-equity settlement feature. The optionee does not have the choice of exercising the net-equity settlement feature; it is at our option whether the exercise of a share option award is settled as a share option or settled using the net-equity settlement feature.

TELUS International (Cda) Inc. share options

Employees may receive equity share options (equity-settled) to purchase TELUS International (Cda) Inc. common shares at a price equal to, or a multiple of, the fair market value at the time of grant and/or phantom share options (cash-settled) that provide them with exposure to TELUS International (Cda) Inc. common share price appreciation. Share option awards granted under the plan may be exercised over specific periods not to exceed ten years from the time of grant. All equity share option awards and most phantom share option awards have a variable payout (0% — 100%) that depends upon the achievement of TELUS International (Cda) Inc. financial performance and non-market quality-of-service performance conditions.

The following table presents a summary of the activity related to the TELUS International (Cda) Inc. share option plan.

Periods ended June 30, 2020	Three months and six months
	US$ denominated			Canadian $ denominated
	Number of share options	Weighted average share option price 1		Number of share options	Share option price 2
Outstanding, beginning and end of period	996,620	US$	31.11	53,832	$	21.36

(1) The range of share option prices is US$21.90 — US$40.26 per TELUS International (Cda) Inc. equity share and the weighted average remaining contractual life is 7.0 years.

(2) The weighted average remaining contractual life is 5.9 years.

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

15 employee future benefits

(a) Defined benefit pension plans — details

Our defined benefit pension plan expense (recovery) was as follows:

Three-month periods ended June 30 (millions)	2020											2019
Recognized in	Employee benefits expense (Note 8)		Financing costs (Note 9)			Other comp. income (Note 11)			Total			Employee benefits expense (Note 8)		Financing costs (Note 9)			Other comp. income (Note 11)			Total
Current service cost	$	23	$	—		$	—		$	23		$	18	$	—		$	—		$	18
Past service costs	—		—			—			—			—		—			—			—
Net interest; return on plan assets
Interest expense arising from defined benefit obligations accrued	—		74			—			74			—		83			—			83
Return, including interest income, on plan assets 1	—		(71		)	(467		)	(538		)	—		(86		)	(131		)	(217		)
Interest effect on asset ceiling limit	—		1			—			1			—		3			—			3
	—		4			(467		)	(463		)	—		—			(131		)	(131		)
Administrative fees	2		—			—			2			1		—			—			1
Re-measurements arising from:
Financial assumptions 2	—		—			1,396			1,396			—		—			—			—
Changes in the effect of limiting net defined benefit assets to the asset ceiling	—		—			(28		)	(28		)	—		—			115			115
	$	25	$	4		$	901		$	930		$	19	$	—		$	(16	)	$	3

Six-month periods ended June 30 (millions)	2020											2019
Recognized in	Employee benefits expense (Note 8)		Financing costs (Note 9)			Other comp. income (Note 11)			Total			Employee benefits expense (Note 8)		Financing costs (Note 9)			Other comp. income (Note 11)			Total
Current service cost	$	46	$	—		$	—		$	46		$	36	$	—		$	—		$	36
Past service costs	3		—			—			3			—		—			—			—
Net interest; return on plan assets
Interest expense arising from defined benefit obligations accrued	—		148			—			148			—		167			—			167
Return, including interest income, on plan assets 1	—		(142		)	(32		)	(174		)	—		(172		)	(490		)	(662		)
Interest effect on asset ceiling limit	—		2			—			2			—		5			—			5
	—		8			(32		)	(24		)	—		—			(490		)	(490		)
Administrative fees	3		—			—			3			3		—			—			3
Re-measurements arising from:
Financial assumptions 2	—		—			507			507			—		—			—			—
Changes in the effect of limiting net defined benefit assets to the asset ceiling	—		—			—			—			—		—			441			441
	$	52	$	8		$	475		$	535		$	39	$	—		$	(49	)	$	(10	)

(1) The interest income on the plan assets portion of the employee defined benefit plans net interest amount included in Financing costs reflects a rate of return on plan assets equal to the discount rate used in determining the defined benefit obligations accrued.

(2) The discount rate used to estimate the defined benefit obligations accrued as at June 30, 2020, was 2.75% (December 31, 2019 — 3.10%).

(b) Defined contribution plans — expense

Our total defined contribution pension plan costs recognized were as follows:

	Three months				Six months
Periods ended June 30 (millions)	2020		2019		2020		2019
Union pension plan and public service pension plan contributions	$	5	$	5	$	10	$	11
Other defined contribution pension plans	20		15		36		32
	$	25	$	20	$	46	$	43

notes to condensed interim consolidated financial statements

(unaudited)

16 restructuring and other costs

(a) Details of restructuring and other costs

With the objective of reducing ongoing costs, we incur associated incremental non-recurring restructuring costs, as discussed further in (b) following. We may also incur atypical charges when undertaking major or transformational changes to our business or operating models or post-acquisition business integration. In other costs, we include incremental atypical external costs incurred in connection with business acquisition or disposition activity, as well as significant litigation costs, in respect of losses or settlements, adverse retrospective regulatory decisions and certain incremental atypical costs incurred due to the COVID-19 pandemic.

Restructuring and other costs are presented in the Consolidated statements of income and other comprehensive income, as set out in the following table:

	Restructuring (b)				Other (c)				Total
Periods ended June 30 (millions)	2020		2019		2020		2019		2020		2019
THREE-MONTH
Goods and services purchased	$	43	$	7	$	17	$	1	$	60	$	8
Employee benefits expense	10		19		—		2		10		21
	$	53	$	26	$	17	$	3	$	70	$	29
SIX-MONTH
Goods and services purchased	$	89	$	19	$	21	$	7	$	110	$	26
Employee benefits expense	20		34		—		5		20		39
	$	109	$	53	$	21	$	12	$	130	$	65

(b) Restructuring provisions

Employee-related provisions and other provisions, as presented in Note 25, include amounts in respect of restructuring activities. In 2020, restructuring activities included ongoing and incremental efficiency initiatives, some of which involved personnel-related costs and rationalization of real estate. These initiatives were intended to improve our long-term operating productivity and competitiveness.

(c) Other

During the three-month and six-month periods ended June 30, 2020, incremental external costs were incurred in connection with business acquisition activity. In connection with business acquisitions, non-recurring atypical business integration expenditures that would be considered neither restructuring costs nor part of the fair value of the net assets acquired have been included in other costs.

Also during the three-month and six-month periods ended June 30, 2020, other costs were incurred in connection with the COVID-19 pandemic. Incremental costs were incurred due to proactive steps we elected to take to keep our customers and employees safe, including adjustments to real estate cleaning and maintenance frequency, among other items. As well, costs that have been incurred in the normal course but which are unable to contribute normally to the earning of revenues have been deemed atypical.

notes to condensed interim consolidated financial statements

(unaudited)

17 property, plant and equipment

		Owned assets																	Right-of-use lease assets (Note 19)
(millions)	Note	Network assets			Buildings and leasehold improvements			Other			Land		Assets under construction			Total			Network assets		Real estate			Other			Total			Total
AT COST
As at January 1, 2020		$	31,713		$	3,314		$	1,373		$	48	$	421		$	36,869		$	219	$	1,267		$	60		$	1,546		$	38,415
Additions		393			15			24			5		666			1,103			54		131			7			192			1,295
Additions arising from business acquisitions	18(b)	4			12			7			—		—			23			—		41			1			42			65
Dispositions, retirements and other		(379		)	1			(122		)	—		—			(500		)	1		(24		)	(9		)	(32		)	(532		)
Assets under construction put into service		263			39			55			—		(357		)	—			—		—			—			—			—
Net foreign exchange differences		2			5			9			—		—			16			—		13			—			13			29
As at June 30, 2020		$	31,996		$	3,386		$	1,346		$	53	$	730		$	37,511		$	274	$	1,428		$	59		$	1,761		$	39,272
ACCUMULATED DEPRECIATION
As at January 1, 2020		$	21,060		$	2,052		$	875		$	—	$	—		$	23,987		$	6	$	174		$	16		$	196		$	24,183
Depreciation 1		767			62			75			—		—			904			14		101			9			124			1,028
Dispositions, retirements and other		(387		)	(10		)	(106		)	—		—			(503		)	—		(3		)	(3		)	(6		)	(509		)
Net foreign exchange differences		1			2			6			—		—			9			—		2			—			2			11
As at June 30, 2020		$	21,441		$	2,106		$	850		$	—	$	—		$	24,397		$	20	$	274		$	22		$	316		$	24,713
NET BOOK VALUE
As at December 31, 2019		$	10,653		$	1,262		$	498		$	48	$	421		$	12,882		$	213	$	1,093		$	44		$	1,350		$	14,232
As at June 30, 2020		$	10,555		$	1,280		$	496		$	53	$	730		$	13,114		$	254	$	1,154		$	37		$	1,445		$	14,559

(1) For the six-month period ended June 30, 2020, depreciation includes $5 in respect of impairment of real estate right-of-use lease assets.

As at June 30, 2020, our contractual commitments for the acquisition of property, plant and equipment totalled $205 million over a period ending December 31, 2022 (December 31, 2019 — $136 million over a period ending December 31, 2022).

notes to condensed interim consolidated financial statements

(unaudited)

18 intangible assets and goodwill

(a) Intangible assets and goodwill, net

		Intangible assets subject to amortization															Intangible assets with indefinite lives
(millions)	Note	Customer contracts, related customer relationships and subscriber base			Software 1			Access to rights-of-way and other			Assets under construction			Total			Spectrum licences		Total intangible assets			Goodwill 1, 2		Total intangible assets and goodwill
AT COST
As at January 1, 2020		$	1,032		$	5,870		$	135		$	254		$	7,291		$	9,937	$	17,228		$	5,673	$	22,901
Additions		—			42			1			281			324			—		324			—		324
Additions arising from business acquisitions	(b)	735			20			47			—			802			9		811			772		1,583
Dispositions, retirements and other (including capitalized interest)	9	48			(333		)	(29		)	—			(314		)	17		(297		)	—		(297		)
Assets under construction put into service		—			232			—			(232		)	—			—		—			—		—
Net foreign exchange differences		37			2			—			—			39			—		39			51		90
As at June 30, 2020		$	1,852		$	5,833		$	154		$	303		$	8,142		$	9,963	$	18,105		$	6,496	$	24,601
ACCUMULATED AMORTIZATION
As at January 1, 2020		$	285		$	4,028		$	71		$	—		$	4,384		$	—	$	4,384		$	364	$	4,748
Amortization		97			322			3			—			422			—		422			—		422
Dispositions, retirements and other		(13		)	(334		)	3			—			(344		)	—		(344		)	—		(344		)
Net foreign exchange differences		12			1			—			—			13			—		13			—		13
As at June 30, 2020		$	381		$	4,017		$	77		$	—		$	4,475		$	—	$	4,475		$	364	$	4,839
NET BOOK VALUE
As at December 31, 2019		$	747		$	1,842		$	64		$	254		$	2,907		$	9,937	$	12,844		$	5,309	$	18,153
As at June 30, 2020		$	1,471		$	1,816		$	77		$	303		$	3,667		$	9,963	$	13,630		$	6,132	$	19,762

(1) The opening balance of software and goodwill have been adjusted as set out in (c).

(2) Accumulated amortization of goodwill is amortization recorded prior to 2002; there are no accumulated impairment losses in the accumulated amortization of goodwill.

As at June 30, 2020, our contractual commitments for the acquisition of intangible assets totalled $48 million over a period ending December 31, 2024 (December 31, 2019 — $45 million over a period ending December 31, 2024).

notes to condensed interim consolidated financial statements

(unaudited)

(b) Business acquisitions

Competence Call Center

On January 31, 2020, we acquired 100% of Competence Call Center, a provider of higher-value-added business services with a focus on customer relationship management and content moderation. The acquisition is complementary to, and was made with a view to growing, our existing lines of business and has been consolidated with our TELUS International (Cda) Inc. subsidiary.

The primary factor that contributed to the recognition of goodwill was the earnings capacity of the acquired business in excess of the net tangible and intangible assets acquired (such excess arising from the acquired workforce and the benefits of acquiring an established business). The amount assigned to goodwill is not expected to be deductible for income tax purposes.

Individually immaterial transactions

During the six-month period ended June 30, 2020, we acquired 100% ownership of businesses complementary to our existing lines of business. The primary factor that gave rise to the recognition of goodwill was the earnings capacity of the acquired businesses in excess of the net tangible and intangible assets acquired (such excess arising from the low level of tangible assets relative to the earnings capacities of the businesses). A portion of the amounts assigned to goodwill may be deductible for income tax purposes.

Acquisition-date fair values

Acquisition-date fair values assigned to the assets acquired and liabilities assumed are set out in the following table:

	Competence Call Center		Individually immaterial transactions		Total 1
Assets
Current assets
Cash	$	90	$	1	$	91
Accounts receivable 2	64		2		66
Other	2		1		3
	156		4		160
Non-current assets
Property, plant and equipment
Owned assets	21		2		23
Right-of-use lease assets	40		2		42
Intangible assets subject to amortization 3	754		48		802
Intangible assets with indefinite lives	—		9		9
Other	2		—		2
	817		61		878
Total identifiable assets acquired	973		65		1,038
Liabilities
Current liabilities
Accounts payable and accrued liabilities	42		4		46
Income and other taxes payable	65		—		65
Advance billings and customer deposits	—		5		5
Current maturities of long-term debt	11		5		16
	118		14		132
Non-current liabilities
Long-term debt	214		1		215
Deferred income taxes	218		10		228
	432		11		443
Total liabilities assumed	550		25		575
Net identifiable assets acquired	423		40		463
Goodwill	724		48		772
Net assets acquired	$	1,147	$	88	$	1,235
Acquisition effected by way of:
Cash consideration	$	1,147	$	84	$	1,231
Accounts payable and accrued liabilities	—		4		4
	$	1,147	$	88	$	1,235

(1) The purchase price allocation, primarily in respect of customer contracts, related customer relationships and leasehold interests and deferred income taxes, had not been finalized as of the date of issuance of these consolidated financial statements. As is customary in a business acquisition transaction, until the time of

notes to condensed interim consolidated financial statements

(unaudited)

acquisition of control, we did not have full access to the books and records of the acquired businesses. Upon having sufficient time to review the books and records of the acquired businesses, we expect to finalize our purchase price allocations.

(2) The fair value of accounts receivable is equal to the gross contractual amounts receivable and reflects the best estimates at the acquisition dates of the contractual cash flows expected to be collected.

(3) Customer contracts and customer relationships (including those related to customer contracts) are generally expected to be amortized over periods of 10 years; software is expected to be amortized over periods of 3-5 years.

Pro forma disclosures

The following pro forma supplemental information represents certain results of operations as if the business acquisitions noted above had been completed at the beginning of the fiscal 2020 year.

	Three months				Six months
Periods ended June 30, 2020 (millions except per share amounts)	As reported 1		Pro forma 2		As reported 1		Pro forma 2
Operating revenues	$	3,728	$	3,730	$	7,422	$	7,475
Net income	$	315	$	315	$	668	$	668
Net income per Common Share*
Basic	$	0.23	$	0.23	$	0.51	$	0.51
Diluted	$	0.23	$	0.23	$	0.51	$	0.51

(1) Operating revenues and net income for the three-month period ended June 30, 2020, include: $141 and $9, respectively, in respect of Competence Call Center. Operating revenues and net income (loss) for the six-month period ended June 30, 2020, include: $226 and $(11), respectively, in respect of Competence Call Center.

(2) Pro forma amounts for the three-month and six-month periods ended June 30, 2020, reflect the acquired businesses. The results of the acquired businesses have been included in our Consolidated statements of income and other comprehensive income effective the dates of acquisition.

The pro forma supplemental information is based on estimates and assumptions that are believed to be reasonable. The pro forma supplemental information is not necessarily indicative of our consolidated financial results in future periods or the actual results that would have been realized had the business acquisitions been completed at the beginning of the periods presented. The pro forma supplemental information includes incremental property, plant and equipment depreciation, intangible asset amortization, financing and other charges as a result of the acquisitions, net of the related tax effects.

(c) Business acquisitions — prior period

In 2019, we acquired businesses that were complimentary to our existing lines of business. As at December 31, 2019, purchase price allocations had not been finalized. During the six-month period ended June 30, 2020, the preliminary acquisition-date values for software, goodwill and deferred income taxes were increased (decreased) by $32 million, $(22 million) and $10 million, respectively; as required by IFRS-IASB, comparative amounts have been adjusted so as to reflect those increases (decreases) effective the acquisition date.

(d) Business acquisitions — subsequent to reporting period

Mobile Klinik

On July 1, 2020, we acquired 100% of Mobile Klinik, a storefront wireless device repair and sales business complementary to our existing wireless lines of business. Consideration of $165 million consisted of: cash of $138 million; working capital adjustments; and contingent consideration of $31 million, payment of which is dependent upon achieving revenue, profitability, store expansion and wireless subscriber addition targets through 2023. The investment was made with a view to growing our wireless business.

As of July 31, 2020, our initial provision for the net identifiable assets is in the range of $65 million — $85 million; as is customary in a business acquisition transaction, until the time of acquisition of control, we did not have full access to the books and records of the acquired business. Upon having sufficient time to review the books and records of the acquired business, as well as obtaining new and additional information about the facts and circumstances as of the acquisition date, we will adjust the provisional amounts for identifiable assets acquired and liabilities assumed and thus finalize our purchase price allocation.

19 leases

Maturity analyses of lease liabilities are set out in Note 4(b) and Note 26(g); the period interest expense in respect thereof is set out in Note 9. The additions to, the depreciation charges for, and the carrying amount of, right-of-use lease assets are set out in Note 17. We have not currently elected to exclude low-value and short-term leases from lease accounting.

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

		Three months				Six months
Periods ended June 30 (millions)	Note	2020		2019		2020		2019
Income from subleasing right-of-use lease assets
Co-location sublet revenue included in operating service revenues		$	5	$	4	$	9	$	9
Other sublet revenue included in other operating income	7	$	—	$	1	$	1	$	1
Lease payments		$	98	$	81	$	200	$	184

20 other long-term assets

As at (millions)	Note	June 30, 2020		December 31, 2019
Pension assets		$	1	$	155
Unbilled customer finance receivables	4(a)	319		225
Derivative assets	4(d)	413		76
Costs incurred to obtain or fulfill a contract with a customer		100		109
Real estate joint venture advances	21(b)	114		104
Investment in real estate joint venture	21(b)	2		3
Investment in associate	21	72		—
Portfolio investments 1		122		110
Prepaid maintenance		61		55
Other		151		82
		$	1,355	$	919

(1) Fair value measured at reporting date using significant other observable inputs (Level 2).

The costs incurred to obtain and fulfill contracts with customers are set out in the following table:

Periods ended June 30, 2020 (millions)	Three months									Six months
	Costs incurred to									Costs incurred to
	Obtain contracts with customers			Fulfill contracts with customers			Total			Obtain contracts with customers			Fulfill contracts with customers			Total
Balance, beginning of period	$	331		$	14		$	345		$	344		$	14		$	358
Additions	54			1			55			113			2			115
Amortization	(71		)	(1		)	(72		)	(143		)	(2		)	(145		)
Balance, end of period	$	314		$	14		$	328		$	314		$	14		$	328
Current 1										$	221		$	7		$	228
Non-current										93			7			100
										$	314		$	14		$	328

(1) Presented on the Consolidated statements of financial position in prepaid expenses.

21 real estate joint ventures and investment in associate

(a) General

Real estate joint ventures

In 2013, we partnered, as equals, with two arm’s-length parties in a residential, retail and commercial real estate redevelopment project, TELUS Sky, in Calgary, Alberta. The new-build tower, scheduled for completion in 2020, is to be built to the LEED Platinum standard.

Associate

On January 13, 2020, for cash consideration of approximately $73 million, we acquired a 28% basic equity interest in Miovision Technologies Incorporated, an associate that is complementary to, and is viewed to grow, our existing Internet of Things business; our judgment is that we obtained significant influence over the associate concurrent with obtaining the newly acquired equity interest.

notes to condensed interim consolidated financial statements

(unaudited)

(b) Real estate joint ventures

Summarized financial information

As at (millions)	June 30, 2020		December 31, 2019		As at (millions)	June 30, 2020			December 31, 2019
ASSETS					LIABILITIES AND OWNERS’ EQUITY
Current assets					Current liabilities
Cash and temporary investments, net	$	8	$	15	Accounts payable and accrued liabilities	$	40		$	25
Other	17		18		Construction holdback liabilities	—			15
	25		33			40			40
Non-current assets					Non-current liabilities
Investment property under development	331		318		Construction credit facilities	342			312
Other	14		2		Other	—			3
	345		320			342			315
						382			355
					Owners’ equity
					TELUS 1	(3		)	1
					Other partners	(9		)	(3		)
						(12		)	(2		)
	$	370	$	353		$	370		$	353

(1) The equity amounts recorded by the real estate joint venture differ from those recorded by us by the amount of the deferred gains on our real estate contributed and the valuation provision we have recorded in excess of that recorded by the real estate joint venture.

	Three months					Six months
Periods ended June 30 (millions)	2020			2019		2020			2019
Revenue	$	—		$	—	$	—		$	—
Depreciation and amortization	$	—		$	—	$	—		$	—
Interest expense 1	$	—		$	—	$	—		$	—
Net income (loss) and comprehensive income (loss) 2	$	(31	)	$	—	$	(33	)	$	(1	)

(1) During the three-month and six-month periods ended June 30, 2020, the real estate joint venture capitalized $1 (2019 — $3) and $4 (2019 — $6), respectively, of financing costs.

(2) As the real estate joint ventures are partnerships, no provision for income taxes of the partners is made in determining the real estate joint ventures’ net income and comprehensive income.

Our real estate joint ventures activity

Our real estate joint ventures investment activity is set out in the following table.

	2020									2019
Three-month periods ended June 30 (millions)	Loans and receivables 1			Equity 2			Total			Loans and receivables 1			Equity 2		Total
Related to real estate joint ventures’ statements of income and other comprehensive income
Comprehensive income attributable to us 3	$	—		$	(10	)	$	(10	)	$	—		$	—	$	—
Related to real estate joint ventures’ statements of financial position
Items not affecting currently reported cash flows
Construction credit facilities financing costs charged by us and other (Note 7)	1			—			1			1			—		1
Cash flows in the current reporting period
Construction credit facilities
Amounts advanced	3			—			3			9			—		9
Financing costs paid to us	(1		)	—			(1		)	(1		)	—		(1		)
Funds we advanced or contributed, excluding construction credit facilities	—			5			5			—			—		—
Net increase	3			(5		)	(2		)	9			—		9
Real estate joint ventures carrying amounts
Balance, beginning of period	111			(10		)	101			77			5		82
Valuation provision recorded in beginning of period balance now recorded in joint venture	—			6			6			—			—		—
Balance, end of period	$	114		$	(9	)	$	105		$	86		$	5	$	91

notes to condensed interim consolidated financial statements

(unaudited)

	2020									2019
Six-month periods ended June 30 (millions)	Loans and receivables 1			Equity 2			Total			Loans and receivables 1			Equity 2		Total
Related to real estate joint ventures’ statements of income and other comprehensive income
Comprehensive income attributable to us 3	$	—		$	(11	)	$	(11	)	$	—		$	—	$	—
Related to real estate joint ventures’ statements of financial position
Items not affecting currently reported cash flows
Construction credit facilities financing costs charged by us (Note 7)	2			—			2			2			—		2
Cash flows in the current reporting period
Construction credit facilities
Amounts advanced	10			—			10			17			—		17
Financing costs paid to us	(2		)	—			(2		)	(2		)	—		(2		)
Funds we advanced or contributed, excluding construction credit facilities	—			5			5			—			—		—
Funds repaid to us and earnings distributed	—			(1		)	(1		)	—			—		—
Net increase	10			(7		)	3			17			—		17
Real estate joint ventures carrying amounts
Balance, beginning of period	104			(2		)	102			69			5		74
Balance, end of period	$	114		$	(9	)	$	105		$	86		$	5	$	91

(1) Loans and receivables are included in our Consolidated statements of financial position as Real estate joint venture advances and are comprised of advances under construction credit facilities.

(2) We account for our interests in the real estate joint ventures using the equity method of accounting. As at June 30, 2020, and December 31, 2019, we had recorded equity losses in excess of our recorded equity investment in respect of one of the real estate joint ventures; such resulting balance has been included in long-term liabilities (Note 27).

(3) As the real estate joint ventures are partnerships, no provision for income taxes of the partners is made in determining the real estate joint ventures’ net income and comprehensive income.

We have entered into a lease agreement with the TELUS Sky real estate joint venture; for lease accounting purposes, the lease commenced during the three-month period ended March 31, 2019.

Real estate joint ventures commitments and contingent liabilities

Construction commitments

The TELUS Sky real estate joint venture is expected to spend a total of approximately $475 million (December 31, 2019 — $450 million) on the construction of a mixed-use tower. As at June 30, 2020, the real estate joint venture’s construction-related contractual commitments were approximately $23 million through to 2020 (December 31, 2019 — $37 million through to 2020).

Construction credit facilities

The TELUS Sky real estate joint venture has a credit agreement, maturing August 31, 2021, with Canadian financial institutions (as 66-2/3% lender) and TELUS Corporation (as 33-1/3% lender) to provide $342 million of construction financing for the project. The construction credit facilities contain customary real estate construction financing representations, warranties and covenants and are secured by demand debentures constituting first fixed and floating charge mortgages over the underlying real estate assets. The construction credit facilities are available by way of bankers’ acceptance or prime loan and bear interest at rates in line with similar construction financing facilities.

As at (millions)	Note	June 30, 2020		December 31, 2019
Construction credit facilities commitment — TELUS Corporation
Undrawn	4(b)	$	—	$	10
Advances		114		104
		114		114
Construction credit facilities commitment — other		228		228
		$	342	$	342

notes to condensed interim consolidated financial statements

(unaudited)

		Three months						Six months
Periods ended June 30 (millions)	Note	2020			2019			2020			2019
Balance, beginning of period		$	824		$	814		$	801		$	811
Revenue deferred in previous period and recognized in current period		(593		)	(642		)	(577		)	(647		)
Net additions arising from operations		571			638			573			641
Additions arising from business acquisitions	18(b)	—			1			5			6
Balance, end of period		$	802		$	811		$	802		$	811
Current								$	721		$	732
Non-current	27
Deferred revenues								70			65
Deferred customer activation and connection fees								11			14
								$	802		$	811
Reconciliation of contract liabilities presented in the consolidated statements of financial position — current
Gross contract liabilities								$	721		$	732
Reclassification to contract assets for contracts with contract liabilities less than contract assets								(142		)	(155		)
Reclassification from contract assets for contracts with contract assets less than contract liabilities								(9		)	(5		)
								$	570		$	572

25 provisions

(millions)	Asset retirement obligation			Employee- related			Written put options			Other			Total
As at April 1, 2020	$	497		$	41		$	182		$	122		$	842
Additions	—			10			—			75			85
Reversal	—			—			(70		)	(2		)	(72		)
Use	(1		)	(9		)	(103		)	(42		)	(155		)
Interest effect	4			—			—			—			4
Effects of foreign exchange, net	—			(1		)	(6		)	(1		)	(8		)
As at June 30, 2020	$	500		$	41		$	3		$	152		$	696
As at January 1, 2020	$	495		$	64		$	196		$	123		$	878
Additions	—			20			—			95			115
Reversal	—			—			(103		)	(16		)	(119		)
Use	(2		)	(43		)	(104		)	(51		)	(200		)
Interest effect	7			—			2			—			9
Effects of foreign exchange, net	—			—			12			1			13
As at June 30, 2020	$	500		$	41		$	3		$	152		$	696
Current	$	10		$	35		$	—		$	38		$	83
Non-current	490			6			3			114			613
As at June 30, 2020	$	500		$	41		$	3		$	152		$	696

Asset retirement obligation

We establish provisions for liabilities associated with the retirement of property, plant and equipment when those obligations result from the acquisition, construction, development and/or normal operation of the assets. We expect that the cash outflows in respect of the balance accrued as at the financial statement date will occur proximate to the dates these assets are retired.

Employee-related

The employee-related provisions are largely in respect of restructuring activities (as discussed further in Note 16(b)). The timing of the cash outflows in respect of the balance accrued as at the financial statement date is substantially short-term in nature.

Written put options

In connection with certain business acquisitions, we have established provisions for written put options in respect of non-controlling interests. Provisions for written put options are determined based on the net present value of estimated future earnings results and require us to make key economic assumptions about the future. No cash outflows for the written put options are expected prior to their initial exercisability.

notes to condensed interim consolidated financial statements

(unaudited)

Other

The provisions for other include: legal claims; non-employee-related restructuring activities; contract termination costs and onerous contracts related to business acquisitions; and costs incurred in connection with the COVID-19 pandemic. Other than as set out following, we expect that the cash outflows in respect of the balance accrued as at the financial statement date will occur over an indeterminate multi-year period.

As discussed further in Note 29, we are involved in a number of legal claims and we are aware of certain other possible legal claims. In respect of legal claims, we establish provisions, when warranted, after taking into account legal assessments, information presently available, and the expected availability of recourse. The timing of cash outflows associated with legal claims cannot be reasonably determined.

In connection with business acquisitions, we have established provisions for contingent consideration, contract termination costs and onerous contracts acquired.

26 long-term debt

(a) Details of long-term debt

As at (millions)	Note	June 30, 2020		December 31, 2019
Senior unsecured
TELUS Corporation senior notes	(b)	$	14,729	$	14,479
TELUS Corporation commercial paper	(c)	—		1,015
TELUS Communications Inc. debentures		622		621
Secured
TELUS International (Cda) Inc. credit facility	(e)	1,167		431
Other		279		267
		16,797		16,813
Lease liabilities	(f)	1,721		1,661
Long-term debt		$	18,518	$	18,474
Current		$	562	$	1,332
Non-current		17,956		17,142
Long-term debt		$	18,518	$	18,474

(b) TELUS Corporation senior notes

The notes are senior unsecured and unsubordinated obligations and rank equally in right of payment with all of our existing and future unsecured unsubordinated obligations, are senior in right of payment to all of our existing and future subordinated indebtedness, and are effectively subordinated to all existing and future obligations of, or guaranteed by, our subsidiaries. The indentures governing the notes contain certain covenants that, among other things, place limitations on our ability, and the ability of certain of our subsidiaries, to: grant security in respect of indebtedness; enter into sale-leaseback transactions; and incur new indebtedness.

Interest is payable semi-annually. The notes require us to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest to the date of repurchase upon the occurrence of a change in control triggering event, as defined in the supplemental trust indenture.

At any time prior to the respective maturity dates set out in the table below, the notes are redeemable at our option, in whole at any time, or in part from time to time, on not fewer than 30 days’ and not more than 60 days’ prior notice. On or after the respective redemption present value spread cessation dates set out in the table below, the notes are redeemable at our option, in whole but not in part, on not fewer than 30 days’ and not more than 60 days’ prior notice, at redemption prices equal to 100% of the principal amounts thereof. In addition, accrued and unpaid interest, if any, will be paid to the date fixed for redemption.

							Principal face amount				Redemption present value spread
Series	Issued	Maturity	Issue price		Effective interest rate 1		Originally issued		Outstanding at financial statement date		Basis points		Cessation date
3.60% Notes, Series CM	November 2013	January 2021 2	$	997.15	3.65	%	$	400 million	$	NIL	35	3	N/A
3.20% Notes, Series CO	April 2014	April 2021 2	$	997.39	3.24	%	$	500 million	$	NIL	30	3	Mar. 5, 2021
2.35% Notes, Series CT	March 2015	March 2022	$	997.31	2.39	%	$	1.0 billion	$	1.0 billion	35.5	3	Feb. 28, 2022
3.35% Notes, Series CJ	December 2012	March 2023	$	998.83	3.36	%	$	500 million	$	500 million	40	3	Dec. 15, 2022
3.35% Notes, Series CK	April 2013	April 2024	$	994.35	3.41	%	$	1.1 billion	$	1.1 billion	36	3	Jan. 2, 2024
3.75% Notes, Series CQ	September 2014	January 2025	$	997.75	3.78	%	$	800 million	$	800 million	38.5	3	Oct. 17, 2024

notes to condensed interim consolidated financial statements

(unaudited)

									Principal face amount								Redemption present value spread
Series	Issued	Maturity	Issue price				Effective interest rate 1		Originally issued				Outstanding at financial statement date				Basis points		Cessation date
3.75% Notes, Series CV	December 2015	March 2026	$	992.14			3.84	%	$	600 million			$	600 million			53.5	3	Dec. 10, 2025
2.75% Notes, Series CZ	July 2019	July 2026	$	998.73			2.77	%	$	800 million			$	800 million			33	3	May 8, 2026
2.80% U.S. Dollar Notes 4	September 2016	February 2027	US$		991.89		2.89	%	US$		600 million		US$		600 million		20	5	Nov. 16, 2026
3.70% U.S. Dollar Notes 4	March 2017	September 2027	US$		998.95		3.71	%	US$		500 million		US$		500 million		20	5	June 15, 2027
2.35% Notes, Series CAC	May 2020	January 2028	$	997.25			2.39	%	$	600 million			$	600 million			48	3	Nov. 27, 2027
3.625% Notes, Series CX	March 2018	March 2028	$	989.49			3.75	%	$	600 million			$	600 million			37	3	Dec. 1, 2027
3.30% Notes, Series CY	April 2019	May 2029	$	991.75			3.40	%	$	1.0 billion			$	1.0 billion			43.5	3	Feb. 2, 2029
3.15% Notes, Series CAA	December 2019	February 2030	$	996.49			3.19	%	$	600 million			$	600 million			39.5	3	Nov. 19, 2029
4.40% Notes, Series CL	April 2013	April 2043	$	997.68			4.41	%	$	600 million			$	600 million			47	3	Oct. 1, 2042
5.15% Notes, Series CN	November 2013	November 2043	$	995.00			5.18	%	$	400 million			$	400 million			50	3	May 26, 2043
4.85% Notes, Series CP	Multiple 6	April 2044	$	987.91		6	4.93	%6	$	500 million		6	$	900 million		6	46	3	Oct. 5, 2043
4.75% Notes, Series CR	September 2014	January 2045	$	992.91			4.80	%	$	400 million			$	400 million			51.5	3	July 17, 2044
4.40% Notes, Series CU	March 2015	January 2046	$	999.72			4.40	%	$	500 million			$	500 million			60.5	3	July 29, 2045
4.70% Notes, Series CW	Multiple 7	March 2048	$	998.06		7	4.71	%7	$	325 million		7	$	475 million		7	58.5	3	Sept. 6, 2047
4.60% U.S. Dollar Notes 4	June 2018	November 2048	US$		987.60		4.68	%	US$		750 million		US$		750 million		25	5	May 16, 2048
4.30% U.S. Dollar Notes 4	May 2019	June 2049	US$		990.48		4.36	%	US$		500 million		US$		500 million		25	5	Dec. 15, 2048
3.95% Notes, Series CAB	Multiple 8	February 2050	$	997.54		8	3.97	%8	$	400 million		8	$	800 million		8	57.5	3	Aug. 16, 2049

(1) The effective interest rate is that which the notes would yield to an initial debt holder if held to maturity.

(2) On May 22, 2020, we exercised our right to early redeem, on June 23, 2020, all of our 3.60% Notes, Series CM and all of our 3.20% Notes, Series CO. The long-term debt prepayment premium recorded in the three-month period ended June 30, 2020, was $18 million before income taxes (see Note 9).

(3) The redemption price is equal to the greater of (i) the present value of the notes discounted at the Government of Canada yield plus the redemption present value spread calculated over the period to maturity, other than in the case of the Series CT, Series CU, Series CV, Series CW, Series CX, Series CY, Series CZ, Series CAA, Series CAB and Series CAC notes, for which it is calculated over the period to the redemption present value spread cessation date, or (ii) 100% of the principal amount thereof.

(4) We have entered into foreign exchange derivatives (cross currency interest rate exchange agreements) that effectively converted the principal payments and interest obligations to Canadian dollar obligations as follows:

Series	Interest rate fixed at		Canadian dollar equivalent principal		Exchange rate
2.80% U.S. Dollar Notes	2.95	%	$	792 million	$	1.3205
3.70% U.S. Dollar Notes	3.41	%	$	667 million	$	1.3348
4.60% U.S. Dollar Notes	4.41	%	$	974 million	$	1.2985
4.30% U.S. Dollar Notes	4.27	%	$	672 million	$	1.3435

(5) The redemption price is equal to the greater of (i) the present value of the notes discounted at the U.S. Adjusted Treasury Rate plus the redemption present value spread calculated over the period to the redemption present value spread cessation date, or (ii) 100% of the principal amount thereof.

(6) $500 million of 4.85% Notes, Series CP were issued in April 2014 at an issue price of $998.74 and an effective interest rate of 4.86%. This series of notes was reopened in December 2015 and a further $400 million of notes were issued at an issue price of $974.38 and an effective interest rate of 5.02%.

(7) $325 million of 4.70% Notes, Series CW were issued in March 2017 at an issue price of $990.65 and an effective interest rate of 4.76%. This series of notes was reopened in February 2018 and a further $150 million of notes were issued at an issue price of $1,014.11 and an effective interest rate of 4.61% in March 2018.

(8) $400 million of 3.95% Notes, Series CAB were issued in December 2019 at an issue price of $991.54 and an effective interest rate of 4.00%. This series of notes was reopened in May 2020 and a further $400 million of notes were issued at an issue price of $1,003.53 and an effective interest rate of 3.93%.

(c) TELUS Corporation commercial paper

TELUS Corporation has an unsecured commercial paper program, which is backstopped by our $2.25 billion syndicated credit facility (see (d)) and is to be used for general corporate purposes, including capital expenditures and investments. This program enables us to issue commercial paper, subject to conditions related to debt ratings, up to a maximum aggregate amount at any one time of $1.4 billion (December 31, 2019 — $1.4 billion). Foreign currency forward contracts are used to manage currency risk arising from issuing commercial paper denominated in U.S. dollars. Commercial paper debt is due within one year and is classified as a current portion of long-term debt, as the amounts are fully supported, and we expect that they will continue to be supported, by the revolving credit facility, which has no repayment requirements within the next year. As at June 30, 2020, we had $NIL (December 31, 2019 — $1,015 million) of commercial paper outstanding, which was denominated in U.S. dollars (US$NIL; December 31, 2019 — US$781 million).

(d) TELUS Corporation credit facility

As at June 30, 2020, TELUS Corporation had an unsecured revolving $2.25 billion bank credit facility, expiring on May 31, 2023, with a syndicate of financial institutions, which is to be used for general corporate purposes, including the backstopping of commercial paper.

The TELUS Corporation credit facility bears interest at prime rate, U.S. Dollar Base Rate, a bankers’ acceptance rate or London interbank offered rate (LIBOR) (as such terms are used or defined in the credit facility), plus applicable

notes to condensed interim consolidated financial statements

(unaudited)

margins. The credit facility contains customary representations, warranties and covenants, including two financial quarter-end ratio tests. These tests are that our leverage ratio must not exceed 4.25:1.00 and our operating cash flow to interest expense ratio must not be less than 2.00:1.00, all as defined in the credit facility.

Continued access to the TELUS Corporation credit facility is not contingent upon TELUS Corporation maintaining a specific credit rating.

As at (millions)	June 30, 2020		December 31, 2019
Net available	$	2,250	$	1,235
Backstop of commercial paper	—		1,015
Gross available	$	2,250	$	2,250

We had $191 million of letters of credit outstanding as at June 30, 2020 (December 31, 2019 — $184 million), issued under various uncommitted facilities; such letter of credit facilities are in addition to the ability to provide letters of credit pursuant to our committed bank credit facility.

(e) TELUS International (Cda) Inc. credit facility

As at June 30, 2020, TELUS International (Cda) Inc. had a credit facility, secured by its assets, expiring on January 28, 2025 (December 31, 2019 — December 20, 2022), with a syndicate of financial institutions (as 87.5% lender) and, joined in 2020, TELUS Corporation (as 12.5% lender). The credit facility is comprised of a US$600 million (December 31, 2019 — US$350 million) revolving component and an amortizing US$600 million (December 31, 2019 — US$120 million) term loan component. The credit facility is non-recourse to TELUS Corporation. The outstanding revolving component and term loan component had a weighted average interest rate of 2.68% as at June 30, 2020. In connection with the acquisition of Competence Call Center during the three-month period ended March 31, 2020, as discussed further in Note 18(b), incremental amounts were drawn on the facility.

June 30, 2020

December 31, 2019

As at (millions)

Revolving
component

Term loan
component 1

Total

Revolving
component

Term loan
component

Total

Available

US$

204

US$

N/A

US$

204

US$

121

US$

N/A

US$

121

Outstanding

Due to other

347

518

865

229

107

336

Due to TELUS Corporation

123

N/A

US$

600

US$

592

US$

1,192

US$

350

US$

107

US$

457

(1) We have entered into a receive-floating interest rate, pay-fixed interest rate exchange agreement that effectively converts our interest obligations on US$103 of the debt to a fixed rate of 2.64%.

Relative to amounts owed to the syndicate of financial institutions, excluding TELUS Corporation, we have entered into foreign exchange derivatives (cross currency interest rate exchange agreements) that effectively convert an amortizing amount of US$415 of the principal payments and associated interest obligations to European euro obligations with an effective fixed interest rate of 0.65% and an effective fixed economic exchange rate of US$1.0932:€1.00. These have been accounted for as a net investment hedge in a foreign operation (see Note 4).

TELUS International (Cda) Inc.’s credit facility bears interest at prime rate, U.S. Dollar Base Rate, a bankers’ acceptance rate or London interbank offered rate (LIBOR) (all such terms as used or defined in the credit facility), plus applicable margins. The credit facility contains customary representations, warranties and covenants, including two financial quarter-end ratio tests. TELUS International (Cda) Inc.’s quarter-end net debt to operating cash flow ratio must not exceed: 4.75:1.00 during fiscal 2020; 4.25:1.00 during fiscal 2021; and 3.50:1.00 subsequently. The quarter-end operating cash flow to debt service (interest and scheduled principal repayment) ratio must not be less than 1.50:1.00, all as defined in the credit facility.

The term loan is subject to an amortization schedule which requires that 5% of the principal advanced be repaid each year of the term of the agreement, with the balance due at maturity.

(f) Lease liabilities

Lease liabilities are subject to amortization schedules, which results in the principal being repaid over various periods, including reasonably expected renewals. The weighted average interest rate on lease liabilities was approximately 4.37% as at June 30, 2020.

notes to condensed interim consolidated financial statements

(unaudited)

(g) Long-term debt maturities

Anticipated requirements to meet long-term debt repayments, calculated for long-term debts owing as at June 30, 2020, are as follows:

Composite long-term debt denominated in	Canadian dollars						U.S. dollars											Other currencies
Years ending December 31	Long-term debt, excluding		Leases				Long-term debt, excluding		Leases		Currency swap agreement amounts to be exchanged							Leases
(millions)	leases		(Note 19)		Total		leases		(Note 19)		(Receive) 1			Pay		Total		(Note 19)		Total
2020 (remainder of year)	$	7	$	144	$	151	$	18	$	11	$	(14	)	$	14	$	29	$	23	$	203
2021	188		267		455		36		23		(28		)	28		59		44		558
2022	1,263		144		1,407		36		22		(28		)	28		58		34		1,499
2023	529		122		651		36		18		(28		)	28		54		29		734
2024	1,115		110		1,225		36		8		(28		)	28		44		23		1,292
2025-2029	4,686		299		4,985		2,516		15		(1,935		)	1,907		2,503		46		7,534
Thereafter	4,788		301		5,089		1,704		1		(1,703		)	1,646		1,648		20		6,757
Future cash outflows in respect of composite long-term debt principal repayments	12,576		1,387		13,963		4,382		98		(3,764		)	3,679		4,395		219		18,577
Future cash outflows in respect of associated interest and like carrying costs 2	6,452		375		6,827		2,672		19		(2,575		)	2,409		2,525		49		9,401
Undiscounted contractual maturities (Note 4(b))	$	19,028	$	1,762	$	20,790	$	7,054	$	117	$	(6,339	)	$	6,088	$	6,920	$	268	$	27,978

(1) Where applicable cash flows reflect foreign exchange rates as at June 30, 2020.

(2) Future cash outflows in respect of associated interest and like carrying costs for commercial paper and amounts drawn under our credit facilities (if any) have been calculated based upon the rates in effect as at June 30, 2020.

27 other long-term liabilities

As at (millions)	Note	June 30, 2020		December 31, 2019
Contract liabilities	24	$	70	$	70
Other		6		7
Deferred revenues		76		77
Pension benefit liabilities		934		580
Other post-employment benefit liabilities		58		53
Restricted share unit and deferred share unit liabilities		13		42
Derivative liabilities	4(d)	27		26
Investment in real estate joint ventures	21(b)	11		5
Other		27		10
		1,146		793
Deferred customer activation and connection fees	24	11		13
		$	1,157	$	806

28 owners’ equity

(a) Common Share capital — general

Our authorized share capital is as follows:

As at	June 30, 2020	December 31, 2019
First Preferred Shares	1 billion	1 billion
Second Preferred Shares	1 billion	1 billion
Common Shares	4 billion	4 billion	*

Only holders of Common Shares may vote at our general meetings, with each holder of Common Shares entitled to one vote per Common Share held at all such meetings so long as not less than 66-2/3% of the issued and outstanding Common Shares are owned by Canadians. With respect to priority in payment of dividends and in the distribution of

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

assets in the event of our liquidation, dissolution or winding-up, whether voluntary or involuntary, or any other distribution of our assets among our shareholders for the purpose of winding up our affairs, preferences are as follows: First Preferred Shares; Second Preferred Shares; and finally Common Shares.

During the three-month period ended March 31, 2020, we issued approximately 58 million* shares for gross proceeds of $1.5 billion.

As at June 30, 2020, approximately 32 million* Common Shares were reserved for issuance, from Treasury, under a dividend reinvestment and share purchase plan (see Note 13(b)), approximately 24 million* Common Shares were reserved for issuance, from Treasury, under a restricted share unit plan (see Note 14(b)) and approximately 93 million* Common Shares were reserved for issuance, from Treasury, under a share option plan (see Note 14(d)).

(b) Common Share split

On February 13, 2020, we announced a subdivision of our Common Shares on a two-for-one basis to be effected March 17, 2020. All references, unless otherwise indicated, to the number of shares authorized, the number of shares outstanding, the number of shares reserved; per share amounts and share-based compensation information in the consolidated financial statements have been retrospectively restated to reflect the impact of the subdivision.

(c) Purchase of Common Shares for cancellation pursuant to normal course issuer bid

As referred to in Note 3, we may purchase a portion of our Common Shares for cancellation pursuant to normal course issuer bids in order to maintain or adjust our capital structure. In December 2019, we received approval for a normal course issuer bid to purchase and cancel up to 16 million* of our Common Shares (up to a maximum amount of $250 million) from January 2, 2020, to January 1, 2021.

(d) Subsidiary with significant non-controlling interest

Our TELUS International (Cda) Inc. subsidiary is incorporated under the Business Corporations Act (British Columbia) and has geographically dispersed operations with principal places of business in Asia, Central America, Europe and North America. During the three-month period ended March 31, 2020, non-controlling shareholders purchased TELUS International (Cda) Inc. shares from treasury for $209 million, which resulted in the non-controlling interests’ ownership interest increasing to 37.7% as at March 31, 2020, up from 35.9% as at December 31, 2019. Associated with the transaction, an adjustment reflecting the approximately 1.8% increase in the non-controlling interest in the net book value of the subsidiary was credited to non-controlling interests in our Consolidated statement of changes in owners’ equity, and the net balance of proceeds was credited to contributed surplus.

On a continuing basis, we review our corporate organization and effect changes as appropriate so as to enhance the value of TELUS Corporation. This process can affect our subsidiaries, including TELUS International (Cda) Inc.; during the three-month period ended June 30, 2020, this process resulted in the non-controlling interests’ ownership interest decreasing to 36.2% as at June 30, 2020, with an adjustment reflecting the approximately 1.5% decrease in the non-controlling interest in the net book value of the subsidiary having been credited to non-controlling interests in our Consolidated statement of changes in owners’ equity, offset by an equal amount having been charged to contributed surplus.

Summarized financial information

	Three months				Six months
As at, or for the three-month and six-month periods ended (millions) 1	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019		December 31, 2019
Statement of financial position
Current assets					$	591			$	437
Non-current assets					$	2,763			$	1,057
Current liabilities					$	586			$	531
Non-current liabilities					$	1,838			$	647
Statement of income and other comprehensive income
Revenue	$	611	$	336	$	1,077	$	645
Net income	$	71	$	8	$	78	$	33
Comprehensive income	$	45	$	19	$	85	$	51

(1) As required by IFRS-IASB, this summarized financial information excludes inter-company eliminations.

* Amounts reflect retrospective application of March 17, 2020, share split (see Note 28(b)).

notes to condensed interim consolidated financial statements

(unaudited)

and false advertising and seek certification of a national class. A virtually identical class action was filed in Alberta at the same time, but the Alberta Court of Queen’s Bench declared that class action expired against us as of 2009. No steps have been taken in this proceeding since 2016.

Public Mobile class actions

In 2014 class actions were brought against us in Quebec and Ontario on behalf of Public Mobile’s customers, alleging that changes to the technology, services and rate plans made by us contravene our statutory and common law obligations. In particular, the Quebec action alleges that our actions constitute a breach of the Quebec Consumer Protection Act, the Quebec Civil Code, and the Ontario Consumer Protection Act. It has not yet proceeded to an authorization hearing. The Ontario class action alleges negligence, breach of express and implied warranty, breach of the Competition Act, unjust enrichment, and waiver of tort. No steps have been taken in this proceeding since it was filed and served.

Handset subsidy class action

In 2016 a class action was brought in Quebec against us and other telecommunications carriers alleging that we breached the Quebec Consumer Protection Act and the Civil Code of Quebec by making false or misleading representations relating to the handset subsidy provided to our wireless customers, and by charging our wireless customers inflated rate plan prices and termination fees higher than those permitted under the Act. The claim was later amended to also seek compensation for amounts paid by class members to unlock their mobile devices. The authorization hearing was held on April 30 and May 1, 2019, and on July 15, 2019, the Quebec Superior Court dismissed the authorization application. The Plaintiff has appealed this decision.

Other claims

Claims and possible claims received by us include:

Area code 867 blocking claim

In 2018 a claim was brought against us alleging breach of a Direct Connection Call Termination Services Agreement, breach of a duty of good faith, and intentional interference with economic relations. The plaintiffs allege that we have improperly blocked calls to area code 867 (including to customers of a plaintiff), for which a second plaintiff provides wholesale session initiation trunking services. The plaintiffs seek damages of $135 million. On April 23, 2019, the Ontario Superior Court stayed this claim on the ground that the court has no jurisdiction over, or is not the appropriate forum, for the subject matter of this action.

Summary

We believe that we have good defences to the above matters. Should the ultimate resolution of these matters differ from management’s assessments and assumptions, a material adjustment to our financial position and the results of our operations, including cash flows, could result. Management’s assessments and assumptions include that reliable estimates of any such exposure cannot be made considering the continued uncertainty about: the nature of the damages that may be sought by the plaintiffs; the causes of action that are being, or may ultimately be, pursued; and, in the case of the uncertified class actions, the causes of action that may ultimately be certified.

30 related party transactions

(a) Transactions with key management personnel

Our key management personnel have authority and responsibility for overseeing, planning, directing and controlling our activities and consist of our Board of Directors and our Executive Leadership Team.

Total compensation expense for key management personnel, and the composition thereof, is as follows:

	Three months				Six months
Periods ended June 30 (millions)	2020		2019		2020		2019
Short-term benefits	$	2	$	2	$	4	$	5
Post-employment pension 1 and other benefits	1		1		2		2
Share-based compensation 2	11		5		10		20
	$	14	$	8	$	16	$	27

(1) Our Executive Leadership Team members are members of our Pension Plan for Management and Professional Employees of TELUS Corporation and certain other non-registered, non-contributory supplementary defined benefit pension plans.

(2) In respect of restricted share units with neither an equity settlement feature nor market performance conditions, we accrue a liability equal to the product of the number of vesting restricted share units multiplied by the fair market value of the corresponding Common Shares at the end of the reporting period. Similarly,

notes to condensed interim consolidated financial statements

(unaudited)

31 additional statement of cash flow information

(a) Statements of cash flows — operating activities and investing activities

		Three months						Six months
Periods ended June 30 (millions)	Note	2020			2019			2020			2019
OPERATING ACTIVITIES
Net change in non-cash operating working capital
Accounts receivable		$	(1	)	$	(197	)	$	24		$	(223	)
Inventories		33			25			102			42
Contract assets		114			3			199			1
Prepaid expenses		52			(26		)	5			(110		)
Accounts payable and accrued liabilities		210			253			90			190
Income and other taxes receivable and payable, net		67			(53		)	145			(269		)
Advance billings and customer deposits		1			(3		)	16			3
Provisions		(72		)	14			(117		)	(36		)
		$	404		$	16		$	464		$	(402	)
INVESTING ACTIVITIES
Cash payments for capital assets, excluding spectrum licences
Capital asset additions
Gross capital expenditures
Property, plant and equipment	17	$	(693	)	$	(718	)	$	(1,295	)	$	(1,357	)
Intangible assets subject to amortization	18	(174		)	(166		)	(324		)	(299		)
		(867		)	(884		)	(1,619		)	(1,656		)
Additions arising from leases	17	110			110			192			232
Additions arising from non-monetary transactions		1			4			6			8
Capital expenditures	5	(756		)	(770		)	(1,421		)	(1,416		)
Change in associated non-cash investing working capital		62			125			(53		)	(22		)
		$	(694	)	$	(645	)	$	(1,474	)	$	(1,438	)

notes to condensed interim consolidated financial statements

(unaudited)

(b) Changes in liabilities arising from financing activities

				Statement of cash flows						Non-cash changes
(millions)	Beginning of period			Issued or received			Redemptions, repayments or payments			Foreign exchange movement (Note 4(e))			Other			End of period
THREE-MONTH PERIOD ENDED JUNE 30, 2019
Dividends payable to holders of Common Shares	$	329		$	—		$	(329	)	$	—		$	339		$	339
Dividends reinvested in shares from Treasury	—			—			22			—			(22		)	—
	$	329		$	—		$	(307	)	$	—		$	317		$	339
Short-term borrowings	$	500		$	—		$	(400	)	$	—		$	—		$	100
Long-term debt
TELUS Corporation senior notes	$	12,136		$	1,674		$	—		$	(70	)	$	(25	)	$	13,715
TELUS Corporation commercial paper	1,105			748			(1,554		)	(6		)	—			293
TELUS Communications Inc. debentures	621			—			—			—			—			621
TELUS International (Cda) Inc. credit facility	405			—			(2		)	(8		)	1			396
Lease liabilities	1,508			—			(64		)	(8		)	118			1,554
Derivatives used to manage currency risks arising from U.S. dollar-denominated long-term debt — liability (asset)	41			1,554			(1,551		)	76			(28		)	92
	15,816			3,976			(3,171		)	(16		)	66			16,671
To eliminate effect of gross settlement of derivatives used to manage currency risks arising from U.S. dollar-denominated long-term debt	—			(1,554		)	1,554			—			—			—
	$	15,816		$	2,422		$	(1,617	)	$	(16	)	$	66		$	16,671
THREE-MONTH PERIOD ENDED JUNE 30, 2020
Dividends payable to holders of Common Shares	$	371		$	—		$	(371	)	$	—		$	372		$	372
Dividends reinvested in shares from Treasury	—			—			131			—			(131		)	—
	$	371		$	—		$	(240	)	$	—		$	241		$	372
Short-term borrowings	$	100		$	—		$	—		$	—		$	—		$	100
Long-term debt
TELUS Corporation senior notes	$	14,763		$	1,000		$	(900	)	$	(132	)	$	(2	)	$	14,729
TELUS Corporation commercial paper	459			—			(454		)	(5		)	—			—
TELUS Communications Inc. debentures	621			—			—			—			1			622
TELUS International (Cda) Inc. credit facility	1,285			—			(68		)	(50		)	—			1,167
Other	281			—			(3		)	—			1			279
Lease liabilities	1,699			—			(81		)	(6		)	109			1,721
Derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt — liability (asset)	(655		)	461			(434		)	158			78			(392		)
	18,453			1,461			(1,940		)	(35		)	187			18,126
To eliminate effect of gross settlement of derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt	—			(461		)	461			—			—			—
	$	18,453		$	1,000		$	(1,479	)	$	(35	)	$	187		$	18,126

notes to condensed interim consolidated financial statements

(unaudited)

				Statement of cash flows						Non-cash changes
(millions)	Beginning of period			Issued or received			Redemptions, repayments or payments			Foreign exchange movement (Note 4(e))			Other			End of period
SIX-MONTH PERIOD ENDED JUNE 30, 2019
Dividends payable to holders of Common Shares	$	326		$	—		$	(655	)	$	—		$	668		$	339
Dividends reinvested in shares from Treasury	—			—			45			—			(45		)	—
	$	326		$	—		$	(610	)	$	—		$	623		$	339
Short-term borrowings	$	100		$	407		$	(407	)	$	—		$	—		$	100
Long-term debt
TELUS Corporation senior notes	$	12,186		$	1,674		$	—		$	(122	)	$	(23	)	$	13,715
TELUS Corporation commercial paper	774			1,901			(2,363		)	(19		)	—			293
TELUS Communications Inc. debentures	620			—			—			—			1			621
TELUS International (Cda) Inc. credit facility	419			13			(21		)	(17		)	2			396
Lease liabilities	1,483			—			(152		)	(13		)	236			1,554
Derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt — liability (asset)	(73		)	2,363			(2,361		)	141			22			92
	15,409			5,951			(4,897		)	(30		)	238			16,671
To eliminate effect of gross settlement of derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt	—			(2,363		)	2,363			—			—			—
	$	15,409		$	3,588		$	(2,534	)	$	(30	)	$	238		$	16,671
SIX-MONTH PERIOD ENDED JUNE 30, 2020
Dividends payable to holders of Common Shares	$	352		$	—		$	(723	)	$	—		$	743		$	372
Dividends reinvested in shares from Treasury	—			—			261			—			(261		)	—
	$	352		$	—		$	(462	)	$	—		$	482		$	372
Short-term borrowings	$	100		$	200		$	(200	)	$	—		$	—		$	100
Long-term debt
TELUS Corporation senior notes	$	14,479		$	1,000		$	(900	)	$	150		$	—		$	14,729
TELUS Corporation commercial paper	1,015			612			(1,692		)	65			—			—
TELUS Communications Inc. debentures	621			—			—			—			1			622
TELUS International (Cda) Inc. credit facility	431			765			(68		)	45			(6		)	1,167
Other	267			—			(191		)	—			203			279
Lease liabilities	1,661			—			(165		)	17			208			1,721
Derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt — liability (asset)	(37		)	1,699			(1,650		)	(194		)	(210		)	(392		)
	18,437			4,076			(4,666		)	83			196			18,126
To eliminate effect of gross settlement of derivatives used to manage currency risk arising from U.S. dollar-denominated long-term debt	—			(1,699		)	1,699			—			—			—
	$	18,437		$	2,377		$	(2,967	)	$	83		$	196		$	18,126