38 ANNUAL REPORT 2012 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 41 REVENUE RECOGNITION Construction contracts A construction contract is a contract specifcally negotiated for the construction of an asset or combination of assets including contracts for the rendering of services directly related to the construction of the asset Such contracts include fxedprice and costplus contracts Revenue recognition when the outcome of the contract can be estimated reliably When the outcome of a construction contract including contracts in which the Company participates through joint arrangements can be estimated reliably revenue from fxed priced and costplus construction contracts is recognized using the percentage of completion method based on the ratio of costs incurred to date over estimated total costs at the end of the reporting period Revenue recognition when the outcome of the contract cannot be estimated reliably When the outcome of a construction contract cannot be estimated reliably revenue is recognized to the extent of contract costs incurred where it is probable they will be recovered Revision of estimated total costs On an ongoing basis the estimated total costs for construction projects are revised based on the information available at the end of the reporting period Changes in estimated total costs are refected in the percentage of completion of applicable construction projects in the same period as the change in estimate occurs Recognition of contract costs Contract costs are recognized as expenses in proft or loss as incurred Contract costs include all amounts that relate directly to the specifc contract are attributable to contract activity and are specifcally chargeable to the customer under the terms of the contract Examples of such costs include direct material labour and equipment costs borrowing costs and those indirect costs relating to contract performance such as indirect labour and supplies depreciation on construction assets tools and repairs Contract losses Losses on contracts if any are recognized in full in the period when such losses become probable Change orders disputes and claims Contract revenue and costs are adjusted to refect change orders that have been approved as to both price and scope For change orders that have not been approved as to price contract revenue is recognized to the extent of costs incurred or if lower to the extent to which recovery is probable Proft on unpriced change orders is not recognized until pricing has been approved If there are disputes or claims regarding additional payments owing as a result of changes in contract specifcations delays additional work or changed conditions the Companys accounting policy is to record all costs for these change orders but not to record any revenue anticipated from these disputes until resolution is probable Revenue recognition other Revenue on consulting contracts to manage or supervise construction activity of others is recognized when consulting services are rendered Contract revenue is measured at the fair value of the consideration received or receivable Where deferral of payment has a material effect on the determination of such fair value the amount at which revenue is recognized is adjusted to account for the timevalueofmoney Unbilled revenue represents revenue earned in excess of amounts billed on uncompleted contracts Deferred revenue represents the excess of amounts billed to customers over revenue earned on uncompleted contracts Where advance payments are received from customers for the mobilization of project staff equipment and services the Company recognizes these amounts as liabilities and includes them in deferred revenue The operating cycle or duration of many of the Companys contracts exceeds one year All contract related assets and liabilities are classifed as current as they are expected to be realized or satisfed within the operating cycle of the contract Other revenue types Revenue related to aggregate sales is recognized on delivery of the product or when the signifcant risks and rewards of ownership have been transferred to the customer Interest income is recognized using the effective interest method 42 CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash at banks and on hand cash in joint ventures demand deposits and shortterm highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignifcant risk of changes in value The Company considers investments purchased with original maturities of three months or less to be cash equivalents 43 RESTRICTED CASH Restricted cash is cash where specifc restrictions exist on the Companys ability to use this cash Restricted cash includes cash which has been deposited as collateral for letters of credit issued by the Company or cash deposits made to secure future equity commitments in projects Restricted cash also includes cash that is held in subsidiaries that have regulatory restrictions or that operate in countries where exchange controls or other legal restrictions apply and therefore the cash is not available for general use by the Company 44 FINANCIAL INSTRUMENTS CLASSIFICATION AND MEASUREMENT Financial assets Financial assets are classifed as either fnancial assets at fair value through proft or loss loans and receivables heldtomaturity investments or availableforsale fnancial assets as appropriate The Company determines the classifcation of its fnancial assets at initial recognition When as a result of a change in intention or ability it is no longer appropriate to classify an investment as heldtomaturity the investment is reclassifed into the availableforsale category NOTES TO THE CONSOLIDA TED FINANCIAL ST A TEMENTS DECEMBER 31 2012 AND 2011 IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS