IFRS Investor Conference March 3, 2011 Forward-Looking Information - PDF document

1 IFRS Investor Conference March 3, 2011

Forward-Looking Information This publication for Loblaw Companies Limited and George Weston Limited (the “Companies”) contains forward-looking statements about the Companies’ objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects and opportunities. These forward-looking statements include preliminary unaudited financial highlights for its fiscal year 2010 prepared in accordance with International Financial Reporting Standards (“IFRS”) Standards ( IFRS ). Words such as anticipate , expect , believe , foresee , could , estimate , goal , intend , plan , Words such as “anticipate” “expect” “believe” “foresee” “could” “estimate” “goal” “intend” “plan” “seek”, “strive”, “will”, “may” and “should” and similar expressions, as they relate to the Companies and their management, are intended to identify forward-looking statements. These forward-looking statements are not historical facts but reflect the Companies’ current expectations concerning future results and events. These forward looking statements are subject to a number of risks and uncertainties that could cause actual results or These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other risks and uncertainties are discussed in the Companies’ materials filed with the Canadian securities regulatory authorities from time to time, including the Risks and Risk Management section of the Companies’ Management’s Discussion and Analysis (“MD&A”). These forward-looking statements reflect management’s current assumptions regarding these risks and uncertainties and their respective impact on the Companies. impact on the Companies. Other risks and uncertainties not presently known to the Companies or that the Companies presently believe are not material could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Companies’ expectations only as of the date of this document. The Companies disclaim any intention or obligation to Companies expectations only as of the date of this document. The Companies disclaim any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 2

Preliminary Unaudited IFRS Transitional Adjustments  These materials are intended to provide information on the significant changes to Loblaw and George Weston Limited (“GWL”) that will arise from the transition to IFRS from Canadian Generally Accepted Accounting Principles (“CGAAP”)  The significant impacts presented are preliminary unaudited and reflect certain policy choices, elections and exemptions and are based on IFRS effective as at J January 2, 2011 2 2011  Loblaw and GWL will file their first unaudited interim period consolidated financial statements for the first quarter of 2011 under IFRS and will file their first financial statements for the first quarter of 2011 under IFRS and will file their first audited annual consolidated financial statements under IFRS for the year ending December 31, 2011  The International Accounting Standards Board (“IASB”) continues to develop and issue proposed amendments to current standards and interpretations. As such the impact of first time adoption may change prior to the Company’s December 31, 2011 audited IFRS financial statements 3

IFRS vs. Canadian GAAP  Some standards in IFRS differ considerably from Canadian GAAP (e.g., fixed asset impairments, securitization, consolidation model – no VIE’s, additional financial instruments) additional financial instruments)  Applying IFRS requires further professional judgement as there are additional accounting policy choices and less interpretative guidance dditi l ti li h i d l i t t ti id  Within IFRS there are more potential differences in application / Within IFRS there are more potential differences in application / interpretation  IFRS IFRS requires extensive disclosures and reconciliations on first time i t i di l d ili ti fi t ti adoption and enhanced disclosure for certain standards going forward 4

Significant Optional Elections on Adoption (IFRS 1) for Loblaw • On adoption, IFRS permits the capitalization of borrowing costs on a prospective basis with all previously capitalized IAS 23 interest costs being eliminated through opening retained interest costs being eliminated through opening retained B Borrowing i earnings Costs • Impact on Loblaw – Assets & equity reduced for previously capitalized borrowing costs • On adoption, IFRS permits the recognition of all cumulative IAS 19 unamortized actuarial gains and losses for all defined benefit Employee plans through opening retained earnings Benefits • Impact on Loblaw – Cumulative unamortized actuarial losses recognized through equity • On adoption, IFRS permits prospective application of the IFRS 3 Business Combinations standard Business • Impact on Loblaw – Business combinations occurring prior to Combinations Combinations the transition to IFRS, such as T&T, will not be restated the transition to IFRS, such as T&T, will not be restated 5

Significant Impacts on Adoption IFRS Major Difference Impact on Loblaw Standard • De-recognition of the carrying value • Transition: Assets and equity will Property Property, of fixed assets replaced prior to the of fixed assets replaced prior to the decrease to reflect the retrospective decrease to reflect the retrospective Plant and end of their useful lives application of historical de-recognition $58M Equipment • Eligible expenditures – IFRS • Going forward: Net earnings may be equity IAS 16 prohibits capitalization of certain subject to certain volatility should fixed impact expenditures and requires assets be replaced prior to the end of capitalization of internal costs it li ti f i t l t their useful lives th i f l li • Transition: Assets and liabilities will • Allocation of minimum lease increase, with a decrease in equity as payments differs under IFRS for a result of recognizing additional a result of recognizing additional Leases Leases land and building leases land and building leases finance leases IAS 17 • Lease classification – no “bright • Going forward: EBITDA will increase line” tests for determination of $27M and net earnings will decrease as a operating vs. finance (capital) equity result of additional leases being lease under IFRS; test focuses impact impact capitalized, such that rent expense more on substance over form decreases, but interest expense • Immediate recognition of certain increases and depreciation expense gains on sale leaseback increases transactions 6

Significant Impacts on Adoption IFRS Major Difference Impact on Loblaw Standard • IFRS 1 election discussed above • Transition: Equity will decrease, • Measurement date – plans are Measurement date plans are primaril as a res lt of the IFRS 1 primarily as a result of the IFRS 1 E Employee l valued as at year-end date election to recognize cumulative Benefits • Limits on defined benefit assets and unamortized actuarial losses on IAS 19 minimum funding requirements transition $305M • Policy choice: going forward will • Going forward: EBITDA will increase, equity equity recognize actuarial gains/losses in primarily as a result of the election to impact other comprehensive income recognize actuarial gains and losses (“OCI”) immediately through OCI • Policy choice: presentation of interest and expected returns on p plan assets within interest expense • Consolidation is assessed under the • Transition: Assets and liabilities will IFRS Control Model for all entities increase, equity will decrease as a result including Special Purpose Entities of the Company consolidating certain Consolidation $ $98M (SPEs) SPEs that were not consolidated under IAS 27 • The concept of control is CGAAP, partially offset by certain other equity determined based on the “power to entities no longer being consolidated impact govern” under IFRS • Going forward: Net earnings will likely g g y increase as a result of the deconsolidation of VIE stores 7