In accordance with the Licences, when an asset is impaired or disposed of within the original estimated useful life, the cost of the asset is reduced and the net book value is charged to accumulated depreciation. This treatment is in accordance with rate regulated accounting and differs from the GAAP treatment of a loss being recognised on the statement of earnings. The amount charged to accumulated depreciation is net of any proceeds received in conjunction with the disposal of the asset. Insurance proceeds are included within the criteria. 

In addition to the coverage discussed above, the Company has also purchased an excess layer of an additional $100.0 million limit on property and business interruption (excluding windstorm, earth movement and flood). 

The Company’s insurance policy includes business interruption which covers losses resulting from the necessary interruption of business caused by direct physical loss or damage to CUC’s covered property and loss of revenues resulting from damage to customers’ property. 

## Transition to New Accounting Standards 

Effective January 1, 2012, the Company is required to adopt a new set of accounting standards. Publicly accountable enterprises in Canada were required to adopt International Financial Reporting Standards (“IFRS”) effective January 1, 2011; however, qualifying entities with rate regulated activities were granted an optional one-year deferral for the adoption of IFRS due to continued uncertainty around the timing and adoption of a rate-regulated accounting standard by the International Accounting Standards Board (“IASB”). As a qualifying entity with rate-regulated activities, CUC elected to opt for the 

one-year deferral and, therefore, continued to prepare its financial statements in accordance with Part V of the Canadian Institute of Chartered Accountants Handbook for all interim and annual periods ending on or before December 31, 2011. 

On June 9, 2011 the OSC granted Exemptive Relief to qualifying entities with rate-regulated activities including CUC for financial years commencing on or after January 1, 2012 but before January 1, 2015, and interim periods therein. The Exemption will terminate in respect of financial statements for annual and interim periods commencing on or after the earlier of: (a) January 1, 2015; or (b) the date on which the Company ceases to have activities subject to rate regulation. 

The Company will apply US GAAP for the purpose of meeting financial and regulatory reporting requirements in Canada effective January 1, 2012. For a full discussion of the Company’s adoption of new accounting standards see section on “Future Accounting Pronouncements” in this MD&A. 

## Defined Benefit Pension Plan 

The Company maintains a defined benefit pension plan. There is no assurance that the pension plan assets will be able to earn the assumed rate of returns. The assumed long- term rate of return on pension plan assets, for the purposes of estimating pension expense for 2012, is 5%. This compares to assumed long-term rates of return of 5% used for 2011. The loss on pension plan assets during 2011 was 6% (2010: gain of 22%). 

Market driven changes impacting the performance of the pension plan assets may result in material variations in actual return on pension plan assets from the assumed return on the assets causing material changes in consolidated pension expense and 

funding requirements. Net pension expense is impacted by, among other things, the amortization of past service costs and actuarial gains or losses and expected return on plan assets. 

Market driven changes impacting other pension assumptions, including the assumed discount rate, may also result in future consolidated contributions to pension plans that differ significantly from current estimates as well as causing material changes in consolidated pension expense. The discount rate assumed for 2012 is 4.5% compared to the discount rate assumed during 2011 of 5.5%. 

There is also measurement uncertainty associated with pension expense, future funding requirements, the accrued benefit asset, accrued benefit liability and benefit obligation due to measurement uncertainty inherent in the actuarial valuation process. 

A discussion of the critical accounting estimates associated with pensions is provided in the “Critical Accounting Estimates”  section of this MD&A. 

## Future Accounting Pronouncements 

## Adoption of New Accounting Standards: 

Due to continued uncertainty around the timing and adoption of a rate regulated accounting standard by the International Accounting Standards Board, CUC has evaluated the option of adopting US GAAP, as opposed to IFRS, and has decided to adopt US GAAP effective January 1, 2012. 

Canadian securities rules allow a reporting issuer to prepare and file its financial statements in accordance with US GAAP by qualifying as a US SEC Issuer. An SEC Issuer is defined 

