## 2. Statement of compliance (continued): 

## Income taxes 

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. Management reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. Subsequent to December 31, 2013, the Corporation received a notice of reassessment from the Canada Revenue Agency in respect of its taxation year ended July 14, 2009 (the “Reassessment”). Pursuant to the Reassessment, the deduction of approximately $10 million of non-capital losses by the Corporation was denied, resulting in reassessed taxes and interest of approximately $3.6 million. The Corporation has received legal advice that it should be entitled to deduct the non-capital losses and as such, the Corporation remains of the opinion that its July 14, 2009 tax return was filed correctly and will withstand such Reassessment. The Corporation intends to vigorously defend its tax filing position. In order to do that, the Corporation is required to pay 50% of the reassessed amount as a deposit to the Canada Revenue Agency. It is possible that the Corporation may be reassessed with respect to the deduction of its non-capital losses in respect of its tax filings subsequent to July 14, 2009, on the same basis. 

## 3. SIGNIFICANT ACCOUNTING POLICIES: 

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, unless otherwise indicated. 

## (a) Basis of consolidation 

(i) Subsidiaries 

Subsidiaries are entities controlled by the Corporation. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. 

(ii) Transactions eliminated on consolidation 

Intra-Corporation balances and transactions, and any unrealized income and expenses arising from intra-Corporation transactions, are eliminated in preparing the consolidated financial statements. 

## (b) Revenue recognition 

The Corporation recognizes revenue from the distributions and royalties it receives from the Private Company Partners as they become due under the partnership agreement, limited liability corporation agreement, or royalty agreement with each specific Partner. 

## (c) Financial instruments 

(i) Non-derivative financial assets 

The Corporation derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. 

## Loans and receivables 

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. 

Loans and receivables are comprised of cash and cash equivalents, and trade and other receivables. 

## Cash and cash equivalents 

Cash and cash equivalents are comprised of cash balances and banker’s acceptances with original maturities of three months or less. 

