Hydra Québec

September 5, 2012

International Accounting Standards Board 30 Cannon Street London EC4M 6XH UNITED KINGDOM

Dear Sir/Madam:

Lise Croteau Vice President, Accounting and Control Hydra-Québec 75, boul. René-Lévesque 0 ., 6e ét. Montréal (Québec) H2Z 1A4 CANADA

Re: Comments on Exposure DraftAnnual Improvements to IFRSs 2010- 2012 Cycle

Hydro-Québec is a major North American producer, transmission provider and distributor of electricity, operating mainly in the province of Québec, Canada. Its sole shareholder is the Québec govemment. In Québec, the transmission and distribution of electricity are regulated by the Régie de l'énergie, which sets rates on the basis of cost of service plus a reasonable retum on the rate base. ·

On behalf of Hydro-Québec, I thank you for giving us the opportunity to comment on your exposure draft entitled Annual Improvements to IFRSs 2010- 2012 Cycle.

Overall, we agree with the recommendations of this document and with the clarifications it provides. Attached are our detailed responses to the questions in the exposure draft.

Should you wish to discuss any aspects of this comment letter in more detail, please do not hesitate to contact me.

Yours sincerely,

~~~'--­Lise Croteau, FCPA, FCA Vice President, Accounting and Control

Exposure Draft Annuallmprovements to IFRSs 2010-2012 Cycle

Comments to be received by 5 September 2012 IFRS 2, Share-based Pavment

Question 1 Do you agree with the Board's proposai to amend the IFRS as described in the exposure draft? If not, why and what alternative do you propose?

We choose not to respond to this proposai, as there is no share-based payment at Hydra-Québec.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, wh y and what alternative do y ou propose?

W e choose not to respond to the proposed transitional provisions and effective date, as there is no share-based payment at Hydro-Québec.

IFRS 3, Business Combinations (and IFRS 9, Financial instruments)

Question 1 Do y ou agree with the Board' s proposai to am end the IFRS as described in the exposure draft? If not, wh y and what alternative do you propose?

We agree with the proposai. The amendment of IFRS 3, paragraph 40, is useful for ensuring clarity. The amendment of IFRS 3, paragraph 58, is consistent with IFRS 9 and clarifies the fair value requirement for subsequent measurement of contingent consideration.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? Ifnot,.why and what alternative do you propose?

We agree with the proposed transitional provisions and effective date of 1 January 2015. Prospective application is reasonable for such amendment. Retrospective application would be too time-consuming and impractical.

IFRS 8, Operating Segments

Question 1 Do you agree with the Board's proposai to amend the IFRS as described in the exposure draft? If not, why and what alternative do you propose?

W e agree with the proposai. W e do not aggregate operating statements. W e already disclose total assets for each operating segment in our financial statements.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, why and what alternative do y ou propose?

We agree with the proposed transitional provisions and effective date of 1 January 2014.

Hydra-Québec 1

IFRS 13, Fair Value Measurement

Question 1 Do y ou agree with the Board' s proposai to amend the IFRS as described in the exposure draft? If not, wh y and what alternative do you propose?

We agree with the amendment to the Basis for Conclusions on IFRS 13, Fair Value Measurement. We believe that this amendment has no impact on financial statements.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, wh y and what alternative do you propose?

Not applicable. No transitional provision and no effèctive date are mentioned in the exposure draft. We agree that there should be no effective date.

lAS 1, Presentation o(Financial Statements

Question 1 Do you agree with the Board's proposai to amend the IFRS as described in the exposure draft? If not, why and what alternative do you propose?

We agree with the proposai. This clarification of non-current liabilities is consistent with our view regarding liabilities to refinance or roll over the obligation for at least 12 months.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, why and what alternative do y ou propose?

We agree with the proposed transitional provisions and effective date.

lAS 7, Statement of Cash Flows

Question 1 Do you agree with the Board's proposai to amend the IFRS as described in the exposure draft? If not, why and what alternative do you propose?

We agree with the proposai. Capitalized interest payments should be included the same category as the as sets they were paid for.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, wh y and what alternative do you propose?

We agree with the proposed transitional provisions and effective date.

Hydra-Québec 2

lAS 12, Income Taxes

Question 1 Do you agree with the Board's proposai to amend the IFRS as described in the exposure draft? If not, why and what alternative do you pt:opose?

We choose not respond to the proposai, as Hydro-Québec is not required to pay any income taxes.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, wh y and what alternative do you propose?

We choose not respond to the proposed transitional provisions and effective date, as Hydra­Québec is not required to pay any income taxes.

lAS 16, Propertv. Plant and Equipment and lAS 38, Intangible Assets

Question 1 Do you agree with the Board's proposai to amend the IFRS as described in the exposure draft? If not, why and what alternative do you propose?

W e agree with the proposai.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, wh y and what alternative do you propose?

We agree with the proposed transitional provisions and effective date.

lAS 24, Related Party Disclosures

Question 1 Do y ou agree with the Board' s proposai to am end the IFRS as described in the exposure draft? If not, wh y and what alternative do you propose?

W e choose not to res pond to the proposai, as we do not have key management personnel services provided by a management entity that is not otherwise a related party of the reporting entity.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, wh y and what alternative do you propose?

W e choose not to respond to the proposed transitional provisions and effective date, for the same reason as that given in the answer to Question 1.

Hydro-Québec 3

lAS 36, Impairment o(Assets

Question 1 Do you agree with the Board's proposai to amend the IFRS as described in the exposure draft? If not, why and what alternative do you propose?

W e agree with the proposai.

Question 2 Do you agree with the proposed transitional provisions and effective date for the issue as described in the exposure draft? If not, wh y and what alternative do you propose?

We agree with the proposed transitional provisions and effective date.

Hydro-Québec 4