Enhanced Investments - Financial Portal

Published: 2020-05-07

Consolidated financial statements
Consolidated income statements
FOR THE PERIOD ENDED MARCH 31
(IN MILLIONS OF CANADIAN DOLLARS, EXCEPT SHARE AMOUNTS) (UNAUDITED)NOTE	2020	2019
Operating revenues		3	5,680	5,734
Operating costs		3, 4	(3,238)	(3,325)
Severance, acquisition and other costs		5	(16)	(24)
Depreciation			(868)	(882)
Amortization			(234)	(221)
Finance costs
Interest expense			(279)	(283)
Interest on post-employment benefit obligations		10	(12)	(16)
Other (expense) income		6	(55)	101
Income taxes			(245)	(293)
Net earnings			733	791
Net earnings attributable to:
Common shareholders			680	740
Preferred shareholders			38	38
Non-controlling interest			15	13
Net earnings			733	791
Net earnings per common share		7
Basic and diluted			0.75	0.82
Average number of common shares outstanding – basic (millions)			904.1	898.4

Consolidatedfinancial statements
BCE Inc. 2020 First Quarter Shareholder Report	34

		Consolidated statements of comprehensive income
		FOR THE PERIOD ENDED MARCH 31
		(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED)	2020			2019
		733			791
		Other comprehensive income (loss), net of income taxes
		Items that will be subsequently reclassified to net earnings
				Net change in value of publicly-traded and privately-held investments, net of income taxes of nil for the three
				(3)			–
				Net change in value of derivatives designated as cash flow hedges, net of income taxes of ($116) million and
				318			(54)
		Items that will not be reclassified to net earnings
				Actuarial gains (losses) on post-employment benefit plans, net of income taxes of ($634) million and $34 million
				for the three months ended March 31, 2020 and 2019, respectively (1)	1,731			(93)
				Net change in value of derivatives designated as cash flow hedges, net of income taxes of ($21) million and
				57			(12)
		2,103			(159)
		2,836			632
		Total comprehensive income attributable to:
		2,778			583
		38			38
		20			11
		2,836			632
		(1) The discount rate used to value our post-employment benefit obligations at March 31, 2020 was 4.2% compared to 3.1% at December 31, 2019. The discount rate used to value our post-employment
		benefit obligations at March 31, 2019 was 3.3% compared to 3.8% at December 31, 2018.

	Consolidated	financial statements
BCE Inc. 2020 First Quarter Shareholder Report	35

Consolidated statements of financial position
(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED)NOTE	MARCH 31, 2020	DECEMBER 31, 2019
ASSETSCurrent assets
Cash				943	141
Cash equivalents				1,736	4
Trade and other receivables				2,990	3,038
Inventory				487	427
Contract assets				1,037	1,111
Contract costs				416	415
Prepaid expenses				280	194
Other current assets				419	190
Total current assets				8,308	5,520
Non-current assets
Contract assets				452	533
Contract costs				363	368
Property, plant and equipment			27,432		27,636
Intangible assets			13,513		13,352
Deferred tax assets				90	98
Investments in associates and joint ventures				730	698
Other non-current assets		8		3,960	1,274
Goodwill			10,667		10,667
Total non-current assets			57,207		54,626
Total assets			65,515		60,146
LIABILITIESCurrent liabilities
Trade payables and other liabilities				3,335	3,954
Contract liabilities				725	683
Interest payable				192	227
Dividends payable				767	729
Current tax liabilities				186	303
Debt due within one year				4,209	3,881
Total current liabilities				9,414	9,777
Non-current liabilities
Contract liabilities				211	207
Long-term debt		9	25,513		22,415
Deferred tax liabilities				4,444	3,561
Post-employment benefit obligations		10		1,603	1,907
Other non-current liabilities				906	871

Total non-current liabilities			32,677		28,961
Total liabilities			42,091		38,738
EQUITYEquity attributable to BCE shareholdersConsolidatedfinancial statements
Preferred shares				4,004	4,004
Common shares			20,386		20,363
Contributed surplus				1,156	1,178
Accumulated other comprehensive income				528	161
Deficit			(2,990)		(4,632)
Total equity attributable to BCE shareholders			23,084		21,074
Non-controlling interest				340	334
Total equity			23,424		21,408
Total liabilities and equity			65,515		60,146
BCE Inc. 2020 First Quarter Shareholder Report	36

		Consolidated statements of changes in equity
			ATTRIBUTABLE TO BCE SHAREHOLDERS
							ACCUM-
							ULATED
							OTHER
							COMPRE-		NON-
			CONTRI-				HENSIVE	CONTROL-
		FOR THE PERIOD ENDED MARCH 31, 2020		PREFERRED	COMMON	BUTED	INCOME		LING	TOTAL
		(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED)		SHARES	SHARES	SURPLUS				(LOSS)	DEFICIT	TOTAL								INTEREST	EQUITY
		Balance at December 31, 2019		4,004	20,363	1,178				161	(4,632)			21,074	334	21,408
		Net earnings										–	–			–	–	718	718			15	733
		Other comprehensive income										–	–			–	368	1,730	2,098			5	2,103
		Total comprehensive income										–	–			–	368	2,448	2,816			20	2,836
		Common shares issued under employee stock option plan										–	23			(1)	–	–	22			–	22
		Other share-based compensation										–	–			(21)	–	(15)	(36)			–	(36)
		Dividends declared on BCE common and preferred shares										–	–			–	–	(791)	(791)			–	(791)
		Dividends declared by subsidiaries to non-controlling
		interest										–	–			–	–	–	–			(14)	(14)
		Settlement of cash flow hedges transferred to the cost
		basis of hedged items										–	–			–	(1)	–	(1)			–	(1)
		Balance at March 31, 2020		4,004	20,386	1,156				528	(2,990)			23,084	340	23,424
			ATTRIBUTABLE TO BCE SHAREHOLDERS
							ACCUM-
							ULATED
							OTHER
							COMPRE-		NON-
			CONTRI-				HENSIVE	CONTROL-
		FOR THE PERIOD ENDED MARCH 31, 2019		PREFERRED	COMMON	BUTED	INCOME		LING	TOTAL
		(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED)		SHARES	SHARES	SURPLUS				(LOSS)	DEFICIT	TOTAL								INTEREST	EQUITY
		Balance at December 31, 2018		4,004	20,036	1,170				90	(4,937)			20,363	326	20,689
		Adoption of IFRS 16										–	–			–	–	(19)	(19)			(1)	(20)
		Balance at January 1, 2019		4,004	20,036	1,170				90	(4,956)			20,344	325	20,669
		Net earnings										–	–			–	–	778	778			13	791
		Other comprehensive loss										–	–			–	(65)	(92)	(157)			(2)	(159)
		Total comprehensive (loss) income										–	–			–	(65)	686	621			11	632
		Common shares issued under employee stock option plan										–	20			(1)	–	–	19			–	19
		Common shares issued under employee savings plan (ESP)										–	10			–	–	–	10			–	10
		Other share-based compensation										–	1			(16)	–	5	(10)			–	(10)
		Dividends declared on BCE common and preferred shares										–	–			–	–	(750)	(750)			–	(750)
		Dividends declared by subsidiaries to non-controlling
		interest										–	–			–	–	–	–			(27)	(27)
		Settlement of cash flow hedges transferred to the cost
		basis of hedged items										–	–			–	(5)	–	(5)			–	(5)

		Balance at March 31, 2019		4,004	20,067	1,153				20	(5,015)			20,229	309	20,538
	Consolidated	financial statements
BCE Inc. 2020 First Quarter Shareholder Report	37

Consolidated statements of cash flows
FOR THE PERIOD ENDED MARCH 31
(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED)NOTE	2020	2019
Cash flows from operating activitiesNet earnings
			733	791
Adjustments to reconcile net earnings to cash flows from operating activities Severance, acquisition and other costs		5	16	24
Depreciation and amortization			1,102	1,103
Post-employment benefit plans cost		10	87	85
Net interest expense			272	278
Losses on investments		6	1	4
Income taxes			245	293
Contributions to post-employment benefit plans			(79)	(81)
Payments under other post-employment benefit plans			(17)	(18)
Severance and other costs paid			(35)	(66)
Interest paid			(318)	(267)
Income taxes paid (net of refunds)			(233)	(289)
Acquisition and other costs paid			(9)	(29)
Net change in operating assets and liabilities			(314)	(312)
Cash flows from operating activities			1,451	1,516
Cash flows used in investing activities
Capital expenditures			(783)	(850)
Other investing activities			(7)	(24)
Cash flows used in investing activities			(790)	(874)
Cash flows from (used in) financing activities (Decrease) increase in notes payable			(230)	567
Increase in securitized trade receivables			400	31
Issue of long-term debt		9	3,281	–
Repayment of long-term debt		9	(711)	(204)
Issue of common shares			22	20
Purchase of shares for settlement of share-based payments			(94)	(76)
Cash dividends paid on common shares			(716)	(678)
Cash dividends paid on preferred shares			(36)	(26)
Cash dividends paid by subsidiaries to non-controlling interest			(14)	(27)
Other financing activities			(29)	(6)
Cash flows from (used in) financing activities			1,873	(399)
Net increase in cash			802	121
Cash at beginning of period			141	425
Cash at end of period			943	546
Net increase in cash equivalents			1,732	122
Cash equivalents at beginning of period			4	–
Cash equivalents at end of period			1,736	122
Consolidatedfinancial statements
BCE Inc. 2020 First Quarter Shareholder Report	38

		Notes to consolidated financial statements
		These consolidated interim financial statements (financial statements) should be read in conjunction with BCE’s 2019 annual consolidated financial
		statements, approved by BCE’s board of directors on March 5, 2020.
		These notes are unaudited.
		We, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint
		arrangements and associates.
		Note 1 Corporate Information
		BCE is incorporated and domiciled in Canada. BCE’s head office is located at 1, Carrefour Alexander-Graham-Bell, Verdun, Québec, Canada. BCE is a telecommunications and media company providing wireless, wireline, Internet and television (TV) services to residential, business and wholesale customers in Canada. Our Bell Media segment provides conventional TV, specialty TV, pay TV, streaming services, digital media services, radio broadcasting services and out-of-home advertising services to customers in Canada.
		Note 2 Basis of presentation and significant accounting policiesThese financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting
		Standards Board (IASB), under International Accounting Standard (IAS) 34 – Interim Financial Reporting and were approved by BCE’s board of directors
		on May 6, 2020. These financial statements were prepared using the same basis of presentation, accounting policies and methods of computation as outlined in Note 2, Significant accounting policies in our consolidated financial statements for the year ended December 31, 2019, except as noted below.
		These financial statements do not include all of the notes required in annual financial statements.
		All amounts are in millions of Canadian dollars, except where noted.
		ESTIMATES AND KEY JUDGMENTSWhen preparing the financial statements, management makes estimates and judgments relating to reported amounts of revenues and expenses, reported
		amounts of assets and liabilities and disclosure of contingent assets and liabilities. We base our estimates on a number of factors, including historical experience, current events including but not limited to the COVID-19 pandemic and actions that the company may undertake in the future, and other assumptions that we believe are reasonable under the circumstances. By their nature, these estimates and judgments are subject to measurement uncertainty and actual results could differ.
		ADOPTION OF AMENDED ACCOUNTING STANDARDSAs required, effective January 1, 2020, we adopted the following amended accounting standards.
		STANDARD	DESCRIPTION	IMPACT
		IFRIC Agenda Decision on IFRS 16 – Leases	International Financial Reporting Interpretations Committee (IFRIC) agenda decision clarifying the determination of the lease term for cancellable or renewable leases under IFRS 16.	This agenda decision did not have a significant impact on our
				financial statements.
		Amendments to IFRS 3 – Business Combinations	These amendments to the implementation guidance of	These amendments did not have any impact on our financial
			IFRS 3 clarify the definition of a business to assist entities to determine whether a transaction should be accounted for as a business combination or an asset acquisition.	statements. They may affect whether future acquisitions are accounted for as business combinations or asset acquisitions, along with the resulting allocation of the purchase price between the net identifiable assets acquired and goodwill.

	Notes to consolidated	financial statements
BCE Inc. 2020 First Quarter Shareholder Report	39

Note 3 Segmented information
Our results are reported in three segments: Bell Wireless, Bell Wireline and Bell Media. Our segments reflect how we manage our business and how we classify our operations for planning and measuring performance.
To align with changes in how we manage our business and assess performance, the operating results of our public safety land radio network business
are now included within our Bell Wireline segment effective January 1, 2020, with prior periods restated for comparative purposes. Previously, these results were included within our Bell Wireless segment. Our public safety land radio network business, which builds and manages land mobile radio networks primarily for the government sector, is now managed by our Bell Business Markets team in order to better serve our customers with end-to-end communications solutions.
The following tables present financial information by segment for the three month periods ended March 31, 2020 and 2019.
			BELL	BELL	BELL	INTERSEGMENT
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2020		NOTE	WIRELESS	WIRELINE	MEDIA	ELIMINATIONS	BCE
Operating revenues
External customers			2,022	3,000	658			–	5,680
Inter-segment			13	76	94			(183)	–
Total operating revenues			2,035	3,076	752			(183)	5,680
Operating costs		4	(1,107)	(1,717)	(597)			183	(3,238)
Segment profit (1)			928	1,359	155			–	2,442
Severance, acquisition and other costs		5					(16)
Depreciation and amortization							(1,102)
Finance costs
Interest expense							(279)
Interest on post-employment benefit obligations		10					(12)
Other expense		6					(55)
Income taxes							(245)
Net earnings							733
(1) The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs.
			BELL	BELL	BELL	INTERSEGMENT
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2019		NOTE	WIRELESS	WIRELINE	MEDIA	ELIMINATIONS	BCE
Operating revenues
External customers			2,064	3,030	640			–	5,734
Inter-segment			13	67	105			(185)	–
Total operating revenues			2,077	3,097	745			(185)	5,734
Operating costs		4	(1,185)	(1,745)	(580)			185	(3,325)
Segment profit (1)			892	1,352	165			–	2,409
Severance, acquisition and other costs		5					(24)
Depreciation and amortization							(1,103)
Finance costs
Interest expense							(283)
Interest on post-employment benefit obligations		10					(16)
Other income		6					101
Income taxes							(293)

Net earnings							791
(1) The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs.
Notes to consolidatedfinancial statements
BCE Inc. 2020 First Quarter Shareholder Report	40

		REVENUES BY SERVICES AND PRODUCTS
		FOR THE PERIOD ENDED MARCH 31	2020			2019
		Services (1)
		Wireless	1,535			1,528
		Wireline data	1,931			1,911
		Wireline voice	872			907
		Media	658			640
		Other wireline services	62			59
		Total services	5,058			5,045
		Products (2)
		Wireless	487			536
		Wireline data	123			142
		Wireline equipment and other	12			11
		Total products	622			689
		Total operating revenues	5,680			5,734
		(1) Our service revenues are generally recognized over time.(2) Our product revenues are generally recognized at a point in time.
		Note 4 Operating costs
		FOR THE PERIOD ENDED MARCH 31		NOTE	2020		2019
		Labour costs
		Wages, salaries and related taxes and benefits	(1,046)			(1,059)
		Post-employment benefit plans service cost (net of capitalized amounts)		10	(75)		(69)
		Other labour costs (1)	(227)			(229)
		Less:
		Capitalized labour	247			244
		Total labour costs	(1,101)			(1,113)
		Cost of revenues (2)	(1,659)			(1,745)
		Other operating costs (3)	(478)			(467)
		Total operating costs	(3,238)			(3,325)
		(1) Other labour costs include contractor and outsourcing costs.(2) Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers.(3) Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, information technology costs, professional service fees and rent.
		Note 5 Severance, acquisition and other costs
		FOR THE PERIOD ENDED MARCH 31	2020			2019
		Severance	(8)			(7)

		Acquisition and other	(8)			(17)
		Total severance, acquisition and other costs	(16)			(24)
		SEVERANCE COSTSSeverance costs consist of charges related to involuntary and voluntary employee terminations.
	Notes to consolidated	financial statements
		ACQUISITION AND OTHER COSTSAcquisition and other costs consist of transaction costs, such as legal and financial advisory fees, related to completed or potential acquisitions, employee severance costs related to the purchase of a business, the costs to integrate acquired companies into our operations and litigation costs, when they
		are significant.
BCE Inc. 2020 First Quarter Shareholder Report	41

Note 6 Other (expense) income
FOR THE PERIOD ENDED MARCH 31		2020	2019
Net mark-to-market (losses) gains on derivatives used to economically hedge equity settled share-based
compensation plans			(28)	100
Early debt redemption costs		(17)	–
Losses on retirements and disposals of property, plant and equipment and intangible assets			(16)	(5)
Impairment of assets			(7)	(4)
Losses on investments			(1)	(4)
Equity gains from investments in associates and joint ventures
Gain on investment (1)			10	–
Operations			9	11
Other			(5)	3
Total other (expense) income			(55)	101
(1) The $10 million gain in 2020 represents BCE’s share of an obligation to repurchase at fair value the minority interest in one of BCE’s joint ventures. The obligation is marked to market each reporting
period and the gain or loss on investment is recorded as equity gains or losses from investments in associates and joint ventures.
Note 7 Earnings per shareThe following table shows the components used in the calculation of basic and diluted earnings per common share for earnings attributable to
common shareholders.
FOR THE PERIOD ENDED MARCH 31			2020	2019
Net earnings attributable to common shareholders – basic			680	740
Dividends declared per common share (in dollars)			0.8325	0.7925
Weighted average number of common shares outstanding (in millions)
Weighted average number of common shares outstanding – basic			904.1	898.4
Assumed exercise of stock options (1)			0.4	0.3
Weighted average number of common shares outstanding – diluted (in millions)			904.5	898.7
(1) The calculation of the assumed exercise of stock options includes the effect of the average unrecognized future compensation cost of dilutive options. It excludes options for which the exercise price
is higher than the average market value of a BCE common share. The number of excluded options was 3,458,250 for the first quarter of 2020, compared to 12,703,673 for the first quarter of 2019.
Note 8 Other non-current assets
		NOTE			MARCH 31, 2020	DECEMBER 31, 2019
Net assets of post-employment benefit plans		2,613	558
Derivative assets		784	200
Long-term notes and other receivables			174	142
Publicly-traded and privately-held investments		126	129
Investments (1)		135	128
Other			128	117
Total other non-current assets			3,960	1,274

(1) These amounts have been pledged as security related to obligations for certain employee benefits and are not available for general use.
Note 9 Debt
Notes to consolidated	financial statements
Subsequent to quarter end, Bell Canada drew an additional $350 million in U.S. dollars ($491 million in Canadian dollars) under the same facilities. The
borrowings, which are included in long-term debt, have been hedged for foreign currency fluctuations through foreign exchange forward contracts.
See Note 11, Financial assets and liabilities, for additional details.
On March 25, 2020, Bell Canada issued 3.35% Series M-47 medium term note (MTN) debentures under its 1997 trust indenture, with a principal amount of $1 billion, which mature on March 12, 2025.
On March 16, 2020, Bell Canada redeemed, prior to maturity, its 4.95% Series M-24 MTN debentures, having an outstanding principal amount of $500 million, which were due on May 19, 2021. We incurred early debt redemption charges of $17 million, which were recorded in Other (expense) income in the income statement.
On February 13, 2020, Bell Canada issued 3.50% Series M-51 MTN debentures under its 1997 trust indenture, with a principal amount of $750 million, which mature on September 30, 2050.
BCE Inc. 2020 First Quarter Shareholder Report	42

		Note 10 Post-employment benefit plans
		POST-EMPLOYMENT BENEFIT PLANS COSTWe provide pension and other benefits for most of our employees. These include defined benefit (DB) pension plans, defined contribution (DC) pension plans and other post-employment benefits (OPEBs).
		COMPONENTS OF POST-EMPLOYMENT BENEFIT PLANS SERVICE COST
		FOR THE PERIOD ENDED MARCH 31	2020			2019
		DB pension	(54)			(48)
		DC pension	(36)			(34)
		OPEBs	(1)			(1)
		Less
		Capitalized benefit plans cost	16			14
		Total post-employment benefit plans service cost	(75)			(69)
		COMPONENTS OF POST-EMPLOYMENT BENEFIT PLANS FINANCING COST
		FOR THE PERIOD ENDED MARCH 31	2020			2019
		DB pension	(3)			(5)
		OPEBs	(9)			(11)
		Total interest on post-employment benefit obligations	(12)			(16)
		FUNDED STATUS OF POST-EMPLOYMENT BENEFIT PLANS COST
		The following table shows the funded status of our post-employment benefit obligations.
				FUNDED	PARTIALLY FUNDED (1)	UNFUNDED (2)	TOTAL
								MARCH 31,	DECEMBER 31,	MARCH 31,	DECEMBER 31,	MARCH 31,	DECEMBER 31,	MARCH 31,	DECEMBER 31,
		FOR THE PERIOD ENDED		2020					2019	2020	2019	2020	2019			2020	2019
		Present value of post-employment benefit obligations						(21,509)	(24,961)	(1,701)	(1,918)	(266)	(300)	(23,476)	(27,179)
		Fair value of plan assets						24,149	25,474	357	376	–	–					24,506	25,850
		Plan surplus (deficit)		2,640					513	(1,344)	(1,542)	(266)	(300)					1,030	(1,329)
		(1) The partially funded plans consist of supplementary executive retirement plans (SERPs) for eligible employees and certain OPEBs. The company partially funds the SERPs through letters of credit
		and a retirement compensation arrangement account with the Canada Revenue Agency. Certain paid-up life insurance benefits are funded through life insurance contracts.
		(2) Our unfunded plans consist of certain OPEBs, which are paid as claims are incurred.
		In Q1 2020, we recorded an increase in our post-employment benefit plans and a gain, before taxes, in Other comprehensive income (loss) of $2,365 million due to a decrease in the present value of our post-employment benefit obligations of $3,616 million as a result of an increase in the discount rate to
		4.2% at March 31, 2020 compared to 3.1% at December 31, 2019, partly offset by a decrease in the fair value of plan assets of $1,251 million as a result of
		an actual loss on plan assets of 4.2%.

	Notes to consolidated	financial statements
BCE Inc. 2020 First Quarter Shareholder Report	43

Note 11 Financial assets and liabilities

FAIR VALUE

The following table provides the fair value details of financial instruments measured at amortized cost in the consolidated statements of financial position.

MARCH 31, 2020

DECEMBER 31, 2019

CARRYING

CLASSIFICATION

FAIR VALUE METHODOLOGY

VALUE

FAIR VALUE

VALUE

FAIR VALUE

CRTC tangible benefits obligation

Trade payables and other

Present value of estimated future cash flows discounted using observable market interest rates

liabilities and other non-current liabilities

CRTC deferral account obligation

Trade payables and other

Present value of estimated future cash flows discounted using observable market interest rates

liabilities and other non-current liabilities

Debt securities and other debt

Debt due within one year and long-term debt

Quoted market price of debt

21,690

23,485

18,653

20,905

The following table provides the fair value details of financial instruments measured at fair value in the consolidated statements of financial position.

FAIR VALUE

QUOTED PRICES IN

ACTIVE MARKETS FOR

OBSERVABLE

NON-OBSERVABLE

CARRYING VALUE OF

IDENTICAL ASSETS

MARKET DATA

MARKET INPUTS

CLASSIFICATION

ASSET (LIABILITY)

(LEVEL 1)

(LEVEL 2) (1)

(LEVEL 3) (2)

March 31, 2020

Publicly-traded and privately-held investments

Other non-current assets

126

–

124

Derivative financial instruments

Other current assets, trade payables and other liabilities, other non-current assets and liabilities

1,018

–

1,018

–

Maple Leaf Sports & Entertainment Ltd. (MLSE) financial liability (3)

Trade payables and other liabilities

(135)

–

(135)

OtherOther non-current assets and liabilities

135

(58)

December 31, 2019

Publicly-traded and privately-held investments

Other non-current assets

129

–

127

Derivative financial instruments

Other current assets, trade payables and other liabilities, other non-current assets and liabilities

165

–

165

–

MLSE financial liability (3)

Trade payables and other liabilities

(135)

–

(135)

OtherOther non-current assets and liabilities

128

(58)

(1) Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates.(2) Non-observable market inputs such as discounted cash flows and earnings multiples. A reasonable change in our assumptions would not result in a significant increase (decrease) to our level 3

financial instruments.

(3) Represents BCE’s obligation to repurchase the BCE Master Trust Fund’s (Master Trust Fund) 9% interest in MLSE at a price not less than an agreed minimum price should the Master Trust Fund exercise

its put option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recognized in Other (expense) income in the consolidated income statements. The option

has been exercisable since 2017.

CURRENCY EXPOSURESWe use forward contracts, options and cross currency basis swaps to manage foreign currency risk related to anticipated purchases and sales and certain foreign currency debt.

During Q1 2020, we entered into foreign exchange forward contracts with a notional amount of $1,102 million in U.S. dollars ($1,547 million in Canadian dollars) to hedge the foreign currency risk associated with amounts drawn under our $4 billion Canadian dollar committed credit facilities. The fair value gain of $16 million relating to these foreign exchange forward contracts is recognized in Other current assets and Other non-current assets in the consolidated statements of financial position and Other (expense) income in the consolidated income statements. In addition, subsequent to quarter end, we entered into foreign exchange forward contracts with a notional amount of $351 million in U.S. dollars ($492 million in Canadian dollars) to hedge the foreign currency risk associated with amounts drawn under the same facilities.

Notes to consolidatedfinancial statements

A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the U.S. dollar would result in a gain (loss) of $6 million ($16 million)

recognized in net earnings at March 31, 2020 and a gain (loss) of $236 million recognized in Other comprehensive income (loss) at March 31, 2020, with all other variables held constant.

A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the Philippines Peso would result in a gain (loss) of $3 million in Other

comprehensive income (loss) at March 31, 2020, with all other variables held constant.

BCE Inc. 2020 First Quarter Shareholder Report

The following table provides further details on our outstanding foreign currency forward contracts and options as at March 31, 2020.

BUY

AMOUNT

SELL

AMOUNT

TYPE OF HEDGE

CURRENCY

TO RECEIVE

CURRENCY

TO PAY

MATURITY

HEDGED ITEM

Cash flow

USD

1,360

CAD

1,774

2020

Commercial paper

Cash flow

USD

1,102

CAD

1,547

2020

Credit facilities

Cash flow

USD

528

CAD

685

2020

Anticipated transactions

Cash flow

PHP

1,478

CAD

2020

Anticipated transactions

Cash flow

USD

571

CAD

745

2021

Anticipated transactions

Economic – put options

USD

166

CAD

218

2020

Anticipated transactions

Economic – put options

USD

120

CAD

154

2021

Anticipated transactions

Economic – call options

USD

133

CAD

177

2020

Anticipated transactions

Economic – options (1)

USD

120

CAD

154

2021

Anticipated transactions

(1) In 2019, we entered into a series of foreign currency options having a leverage provision and a profit cap limitation.

INTEREST RATE EXPOSURESDuring Q1 2020, we entered into a series of interest rate options to economically hedge the dividend rate resets on $582 million of our preferred shares having varying reset dates in 2021. The fair value loss of $2 million relating to these interest rate options is recognized in Other non-current liabilities in

the consolidated statements of financial position and Other (expense) income in the consolidated income statements.

A 1% increase (decrease) in interest rates would result in a decrease (increase) of $58 million ($64 million) in net earnings at March 31, 2020.

EQUITY PRICE EXPOSURESWe use equity forward contracts on BCE’s common shares to economically hedge the cash flow exposure related to the settlement of equity settled share-based compensation plans and the equity price risk related to a cash-settled share-based payment plan. The fair value (loss) gain of ($28 mil ion) and $100 million for the three months ended March 31, 2020 and 2019, respectively, are recognized in Other non-current assets, Trade payables and other liabilities and Other non-current liabilities in the consolidated statements of financial position and Other (expense) income in the consolidated income statements.

A 5% increase (decrease) in the market price of BCE’s common shares at March 31, 2020 would result in a gain (loss) of $41 million recognized in net

earnings, with all other variables held constant.

COMMODITY PRICE EXPOSUREDuring Q1 2020, we entered into fuel swaps to economically hedge the purchase cost of 54 million litres of fuel in 2020 and 2021. The fair value loss of $4 million relating to these fuel swaps is recognized in Trade payables and other liabilities and Other non-current liabilities in the consolidated statements of financial position and Other (expense) income in the consolidated income statements.

A 25% increase (decrease) in the market price of fuel at March 31, 2020 would result in a gain (loss) of $3 million recognized in net earnings, with all

other variables held constant.

Note 12 Share-based paymentsThe following share-based payment amounts are included in the income statements as operating costs.

FOR THE PERIOD ENDED MARCH 31

2020

2019

ESP

(8)

(7)

Restricted share units (RSUs) and performance share units (PSUs)

(16)

(20)

Other (1)

(3)

(4)

Total share-based payments

(27)

(31)

(1) Includes deferred share plan (DSP), deferred share units (DSUs) and stock options.

Notes to consolidated

financial statements

BCE Inc. 2020 First Quarter Shareholder Report

The following tables summarize the change in unvested ESP contributions and outstanding RSUs/PSUs, DSUs and stock options for the period ended
March 31, 2020.
ESP
		NUMBER OF
		ESP SHARES
Unvested contributions, January 1, 2020		1,124,198
Contributions (1)		143,741
Dividends credited		14,022
Vested		(142,621)
Forfeited		(31,125)
Unvested contributions, March 31, 2020		1,108,215
(1) The weighted average fair value of the shares contributed during the three months ended March 31, 2020 was $60.
RSUs/PSUs
		NUMBER OF
		RSUs/PSUs
Outstanding, January 1, 2020		2,915,118
Granted (1)		855,801
Dividends credited		37,804
Settled		(919,730)
Forfeited		(6,864)
Outstanding, March 31, 2020		2,882,129
(1) The weighted average fair value of the RSUs/PSUs granted during the three months ended March 31, 2020 was $63.
DSUs
		NUMBER OF DSUs
Outstanding, January 1, 2020		4,623,099
Issued (1)		49,679
Settlement of RSUs/PSUs		90,435
Dividends credited		59,806
Settled		(30,086)
Outstanding, March 31, 2020		4,792,933
(1) The weighted average fair value of the DSUs issued during the three months ended March 31, 2020 was $63.
STOCK OPTIONS
			NUMBER OF	WEIGHTED AVERAGE
			OPTIONS	EXERCISE PRICE ($)
Outstanding, January 1, 2020			12,825,541	57
Granted			3,397,080	65
Exercised (1)			(419,546)	53
Outstanding, March 31, 2020			15,803,075	59

Exercisable, March 31, 2020			5,299,256	58
(1) The weighted average market share price for options exercised during the three months ended March 31, 2020 was $64.
Notes to consolidatedfinancial statements
BCE Inc. 2020 First Quarter Shareholder Report	46

		ASSUMPTIONS USED IN STOCK OPTION PRICING MODEL
		The fair value of options granted was determined using a variation of a binomial option pricing model that takes into account factors specific to the
		share incentive plans, such as the vesting period. The following table shows the principal assumptions used in the valuation.
			2020
		Weighted average fair value per option granted	$1.55
		Weighted average share price	$63
		Weighted average exercise price	$65
		Expected dividend growth	5%
		Expected volatility	12%
		Risk-free interest rate	1%
		Expected life (years)	4
		Expected dividend growth is commensurate with BCE’s dividend growth strategy. Expected volatility is based on the historical volatility of BCE’s share price. The risk-free rate used is equal to the yield available on Government of Canada bonds at the date of grant with a term equal to the expected life of the options.
		Note 13 COVID-19
		Although our telecommunications, media and broadcasting operations have been recognized by Canadian governments as essential services, our
		business has nonetheless, starting in the latter part of the first quarter, been negatively impacted by the emergency measures adopted to combat the spread of COVID-19 and the resulting economic conditions. All of our segments have been adversely affected, but we have seen a more pronounced impact on retail subscriber and promotional activity, wireless product sales, wireless roaming revenues, business customer spending and media advertising revenues. Given that measures taken to address the COVID-19 pandemic only started in the latter part of the first quarter, such measures had a relatively moderate impact on our Q1 2020 financial results. However, depending on the severity and duration of COVID-19 disruptions, our operations and financial results are expected to be negatively impacted more significantly in future periods.

	Notes to consolidated	financial statements
BCE Inc. 2020 First Quarter Shareholder Report	47