42 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) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These consolidated fnancial statements refect the frst-time adoption of International Financial Reporting Standards (“IFRS ”), which replaced Canadian Generally Accepted Accounting Principles (“GAAP”) as of January 1, 2011. All disclosures and explanations rel ated to the frst-time adoption of IFRS are presented in note 22, which provides information that is considered material to the unders tanding of the Company’s frst IFRS fnancial statements. It also presents a reconciliation of the 2011 fnancial fgures prepared under Canadi an GAAP to the 2011 fnancial fgures prepared under IFRS, including a reconciliation of the consolidated statements of earnings, c omprehensive earnings and cash fows for the year ended June 30, 2011, as well as a reconciliation of the consolidated balance sheets and equity as of July 1, 2010 and as of June 30, 2011. The IFRS consolidated fnancial statements have been prepared based on the following accounting policies: Basis of presentation The consolidated fnancial statements have been prepared in accordance with IFRS as issued by the International Accounting S tandards Board (“IASB”) and IFRS 1, First-time Adoption of IFRS. These consolidated fnancial statements should be read in conjunction with IFRS transition disclosures included in note 22. These consolidated fnancial statements were approved for issue by the Board of Di rectors of Orbit Garant Drilling Inc. on September 19, 2012. These consolidated fnancial statements have been prepared on a historical cost basis, except for the contingent liability, whic h have been measured at fair value and are presented in Canadian dollars, which is the currency of the primary economic environment in whic h the Company and its subsidiaries operate (“functional currency”). Principles of consolidation The consolidated fnancial statements incorporate the fnancial statements of the Company and entities controlled by the Company . A subsidiary is an entity controlled by the Company. Control is achieved where the Company has the power to govern the fnancial and operating policies of an entity so as to obtain benefts from its activities. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of earni ngs from the effective date of acquisition and up to the effective date of disposal, as appropriate. Intercompany transactions and balances are eliminated on consolidation. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the consideration given in exchange for control of the business acquired at the acquisition date. This consideration can be compris ed of cash, assets transferred, fnancial instruments issued, or future contingent payments. The identifable assets and liabilities of the business acquired are recognized at fair value at the acquisition date. Results of operations of a business acquired are included in the Company’s consolidated fnancial statements from the date of the business acquisition. Business acquisition and integration costs are expensed as incurred. Non-controlling interests in an entity acquired are presented in the consolidated balance sheet within equity, separately from the equity attributable to shareholders i n the “Equity” section in the consolidated balance sheet. Foreign currency translation Financial statements of foreign operations are translated using the rate in effect at the balance sheet date for assets and li abilities, and using the average exchange rates during the period for revenues and expenses. Adjustments arising from foreign currency transl ation are recorded in other comprehensive earnings. Foreign currency transactions are transactions in a currency other than the Company’s functional currency. Foreign currency transactions are translated to the functional currency by applying the exchange rate prevailing at the date of the transactions. Translati on gains and losses on assets and liabilities denominated in a foreign currency are included in the statement of comprehensive earnings.