46 Orbit G arant 2012 annual rep O rt N OTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) For the years ended June 30, 2012 and 2011 (in thousands of Canadian dollars, except for earnings per share and option data) Estimated impairment of goodwill The Company tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in s ummary of signifcant accounting policies. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. Current income taxes The Company is subject to income taxes in various jurisdictions. Judgement is required in determining the worldwide provisi on for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recogni zes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due i n the future. Where the fnal tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the c urrent and deferred income tax assets and liabilities in the period in which such determination is made. Management periodically evaluates positi ons taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It established provi sions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. Deferred income taxes The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the Company ’s latest approved budget forecast, which is adjusted for signifcant non-taxable income and expenses and specifc limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Company operates are also carefully taken into c onsideration. If a forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized wi thout a time limit, that deferred tax asset is usually recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by Management based on the specifc facts and circumstances. Provisions Provisions are recognized when (i) the Company has a present legal or constructive obligation as a result of a past event and i t is probable that an outfow of economic benefts will be required to settle the obligation, and when (ii) the amount of the obligation c an be reliably estimated. Provisions are reviewed at each balance sheet date and changes in estimates are refected in the consolidated statement of earni ngs in the reporting period in which changes occur. Contingent considerations The fair value recognized for contingent considerations has been estimated by Management based on the subsidiaries’ results and budget. However, the actual contingent considerations may vary due to unexpected changes in the subsidiaries’ activities. Stock options The Company uses the fair value method to account for stock options. In accordance with this method, compensation cost is meas ured at the fair value of the option at the grant date using the Black-Scholes option pricing model which is based on signifcant assumptions such as volatility, dividend yield and expected term. Functional currency The Company applied judgment in determining the functional currency of the Company and its subsidiaries. Functional currency was determined based on the currency that mainly infuences sales prices, labour, materials and other costs of providing services. 5. RECENT ACCOUNTING PRONOUNCEMENT The Company has not early adopted the following new standards and adoption impacts on the consolidated fnancial statements have not yet been determined: IFRS 9 – Financial instruments IFRS 9 simplifes the measurement and classifcation for fnancial assets by reducing the number of measurement categories and removing complex rule-driven embedded derivative guidance in IAS 39, Financial Instruments: Recognition and Measurement. The new s tandard also provides for a fair value option in the designation of non-derivative fnancial instruments and its related classifcati on and measurement. IFRS 9 is effective from periods beginning January 1, 2015 with early adoption permitted.