Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax assets and liabilities are measured using enacted or substantively enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the income statement in the period that includes the date of substantive enactment. The Company assesses recoverability of deferred tax assets based on the Company's estimates and assumptions. Deferred tax assets are recorded at an amount that the Company considers probable to be realized.
Current and deferred income taxes relating to items recognized directly in shareholders' equity are also recognized directly in shareholders' equity.
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date. Leases which transfer substantially all of the benefits and risks of ownership of the property to the lessee are classified as finance leases; all other leases are classified as operating leases. Classification is re-assessed if the terms of the lease are changed.
Toromont as Lessee
Operating lease payments are recognized as an operating expense in the income statement on a straight-line basis over the lease term. Benefits received and receivable as an incentive to enter into an operating lease are deferred and amortized on a straight-line basis over the term of the lease.
Toromont as Lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
Standards Issued But Not Yet Effective
A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ended December 31, 2012, and accordingly, have not been applied in preparing these consolidated financial statements.
Consolidated Financial Statements - On May 12, 2011, the IASB issued IFRS 10 - Consolidated Financial Statements. This IFRS replaces portions of IAS 27 - Consolidated and Separate Financial Statements that addresses consolidation, and supersedes SIC-12 in its entirety. The objective of IFRS 10 is to define the principles of control and establish the basis of determining when and how an entity should be included within a set of consolidated financial statements. IAS 27 has been amended for the issuance of IFRS 10 and retains guidance only for separate financial statements.
Joint Arrangements - On May 12, 2011, the IASB issued IFRS 11 - Joint Ventures. IFRS 11 supersedes IAS 31 - Interest in Joint Ventures and SIC-13 - Jointly Controlled Entities - Non Monetary Contributions by Venturers. Through an assessment of the rights and obligations in an arrangement, IFRS 11 establishes principles to determine the type of joint arrangement and guidance for financial reporting activities required by the entities that have an interest in arrangements that are controlled jointly.
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