AECON GROUP INC 43 Decommissioning liabilities The Company has legal obligations associated with the retirement of pits and quarries utilized in aggregate mining operations As a result a provision is made for close down restoration and environmental rehabilitation costs which include the dismantling and demolition of infrastructure removal of residual materials and remediation of disturbed areas in the fnancial period when the related environmental disturbance occurs based on estimated future costs using information available at the consolidated balance sheet date The provision is discounted using a current market based pretax discount rate that refects the average life of the obligations and the risks specifc to the liability An increase in the provision due to the passage of time is recognized as a fnance cost and the provision is reduced by actual rehabilitation costs incurred The present value of the legal obligations incurred is recognized as an inventory production cost and is included in the cost of the aggregates produced The provision is reviewed at each reporting date for changes to obligations legislation or discount rates that impact estimated costs or lives of operations Changes in the amount or timing of the underlying future cash fows or changes in the discount rate are immediately recognized as an increase or decrease in the carrying amounts of related assets and the provision 416 LEASES Operating leases Leases in which a signifcant portion of the risks and rewards of ownership are retained by the lessor are classifed as operating leases Payments made under operating leases net of any incentives received from the lessor are charged to income on a straightline basis over the term of the lease Finance leases Leases of property plant and equipment where the Company has substantially all the risks and rewards of ownership are classifed as fnance leases Finance leases are capitalized at the commencement of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments The corresponding rental obligations net of fnance charges are included in obligations under fnance leases on the balance sheet The interest element of the fnance cost is charged to proft or loss over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period The property plant and equipment acquired under fnance leases are depreciated over the shorter of the useful life of the asset and the lease term 417 EMPLOYEE BENEFIT PLANS The Company recognizes the cost of retirement benefts over the periods in which employees are expected to render services in return for the benefts The Company sponsors defned beneft pension plans which had their membership frozen as of January 1 1998 and defned contribution pension plans for its salaried employees The Company matches employee contributions to the defned contribution plans which are based on a percentage of salaries For the defned contribution pension plans the contributions are recognized as employee beneft expense when they are earned For the defned beneft pension plans current service costs are charged to operations as they accrue based on services rendered by employees during the year Pension beneft obligations are determined annually by independent actuaries using managements best estimate assumptions The plans assets are measured at fair value The present value of the defned beneft obligation is determined by discounting the estimated future cash fows using interest rates of high quality corporate bonds that have terms to maturity approximating the terms of the related pension liability Actuarial gains and losses are recognized in other comprehensive income as they arise Past service costs are recognized immediately in proft or loss unless the changes to the pension plan are conditional on the employees remaining in service for a specifed period of time the vesting period In this case the past service costs are amortized on a straightline basis over the vesting period 418 CURRENT AND DEFERRED INCOME TAXES Current income tax is calculated on the basis of tax laws enacted or substantively enacted at the consolidated balance sheet date in the countries where the Company operates and generates taxable income Current tax includes adjustments to tax payable or recoverable in respect of previous periods Deferred income tax is provided using the asset and liability method on all temporary differences at the consolidated balance sheet date between the tax basis of assets and liabilities and their carrying amounts for fnancial reporting purposes However deferred income taxes are not recognized if they arise from the initial recognition of goodwill Deferred income tax is also not accounted for if it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting proft nor taxable proft or loss Deferred income tax is provided on temporary differences associated with investments in subsidiaries associates or joint ventures except where the timing of the reversal of temporary differences can be controlled and it is probable the temporary differences will not reverse in the foreseeable future Deferred income tax assets are recognized only to the extent that it is probable that taxable proft will be available against which deductible temporary differences carried forward tax credits or tax losses can be utilized Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which the asset is realized or the liability is settled based on tax rates and tax laws enacted or substantively enacted at the consolidated balance sheet date The carrying amount of deferred income tax assets is reviewed at each consolidated balance sheet date and reduced to the extent that it is no longer probable that suffcient taxable proft will be available to allow all or part of the deferred income tax asset to be utilized To the extent that an asset not previously recognized fulflls the criteria for recognition a deferred income tax asset is recorded Current and deferred tax relating to items recognized directly in equity and other comprehensive income are recognized in equity and other comprehensive income and not in proft or loss Current income tax assets and liabilities or deferred income tax assets and liabilities are offset if a legally enforceable right exists to offset current tax assets against current tax liabilities and the income taxes relate to the same taxable entity and the same tax authority