AECON GROUP INC 37 1 CORPORATE INFORMATION Aecon Group Inc Aecon or the Company is a publicly traded construction and infrastructure development company incorporated in Canada Aecon and its subsidiaries provide services to private and public sector clients throughout Canada and on a selected basis internationally Its registered offce is located in Toronto Ontario at 20 Carlson Court Suite 800 M9W 7K6 Aecon operates in three principal segments within the construction and infrastructure development industry Infrastructure Industrial and Concessions 2 DATE OF AUTHORIZATION FOR ISSUE The consolidated fnancial statements of the Company were authorized for issue on March 12 2013 by the Board of Directors of the Company 3 BASIS OF PRESENTATION Basis of presentation The Company prepares its consolidated fnancial statements in accordance with International Financial Reporting Standards IFRS Statement of compliance These consolidated fnancial statements have been prepared in accordance with and comply with IFRS as issued by the International Accounting Standards Board IASB Basis of measurement The consolidated fnancial statements have been prepared under the historical cost convention except for the revaluation of certain fnancial assets and fnancial liabilities to fair value including derivative instruments and availableforsale investments Principles of consolidation The consolidated fnancial statements include the accounts of the Company and all of its subsidiaries as well as its pro rata share of the assets liabilities revenue expenses proft or loss and cash fows of its joint ventures along with its investment in and share of the earnings of construction projects accounted for by the equity method Use of signifcant accounting estimates The preparation of the Companys consolidated fnancial statements requires management to make judgments estimates and assumptions that affect the reported amounts of revenue expenses assets and liabilities and the disclosure of contingent liabilities Uncertainty about these assumptions and estimates could result in a material adjustment to the carrying value of the asset or liability affected The main judgments and estimates made by management in applying accounting policies primarily relate to the following as applicable further details of assumptions made are disclosed in individual notes throughout the consolidated fnancial statements Judgments and estimates used in recognizing the results of contracts on a percentage of completion basis including the determination of the stage of completion the estimation of total contract revenue and costs the assessment of the probability of customer approval and acceptance of change orders and claims and the measurement of change orders and claims Estimates in determining various provisions including assessments of possible legal and tax contingencies assessments of remediation costs as well as interest and discount rates used in estimating decommissioning liabilities See Note 17 for additional information Estimates in calculating income taxes the Company is subject to income taxes in numerous jurisdictions and signifcant judgment is required in determining the worldwide provision for income taxes There are transactions and calculations for which the ultimate tax determination is uncertain The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due Where the fnal tax outcome of these matters is different from the amounts that were initially recorded such differences will impact the Companys income tax expense and current and deferred income tax assets and liabilities in the period in which such determinations are made See Note 17 for additional information Estimates relating to the valuation of fnancial instruments that are not traded in an active market and which have fair values determined using valuation techniques such fnancial instruments include the embedded derivatives within the Companys convertible debentures equity share investments classifed as available for sale when the shares do not trade in an active market and holdbacks receivable and payable See Note 32 for additional information Assumptions employed in the actuarial calculation of pension liabilities and other employee benefts obligations examples of signifcant actuarial and accounting assumptions impacting the reporting of employee beneft obligations and expenses are the discount rate assumption and the expected return on assets assumption Any changes in these assumptions will impact the carrying amount of pension obligations Management determines the appropriate discount rate at the end of each year by considering the interest rates of highquality corporate bonds that are denominated in the currency in which the benefts will be paid and that have terms to maturity approximating the terms of the pension obligation See Note 22 for additional information Estimates used in the fair valuing of stock option grants these estimates include assumptions about the volatility rating of the Companys stock See Note 25 for additional information NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31 2012 AND 2011 IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS