HispanicBusiness

The accompanying notes to the financial statements are an integral component of the financial statements.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2012 and 2011.

(All tabular data in thousands of Canadian Dollars except per share and ratio data)

NOTE 1. CORPORATE STRUCTURE

Newalta Corporation (the "Corporation" or "Newalta") was incorporated on October 29, 2008, pursuant to the laws of the Province of Alberta. Newalta completed an internal reorganization resulting in a name change from Newalta Inc. to Newalta Corporation effective January 1, 2010. Newalta provides cost-effective solutions to industrial customers to improve their environmental performance with a focus on recycling and recovery of products from industrial residues. These services are provided both through our network of facilities across Canada and at our customers' facilities where we mobilize our equipment and people to process material directly onsite. Our customers operate in a broad range of industries including oil and gas, petrochemical, refining, lead, manufacturing and mining industries.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and include the accounts of Newalta and its wholly-owned subsidiaries. All intercompany balances and transactions including revenue and expenses have been eliminated. These consolidated financial statements are prepared using IFRS accounting policies which became Canadian Generally Accepted Accounting Principles for publicly accountable enterprises and were adopted by the Corporation for fiscal years beginning on January 1, 2011.

These consolidated financial statements were approved by the Board of Directors on February 12, 2013.

Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair value, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The principal accounting policies are set out below.

a) Cash and cash equivalents

Cash and cash equivalents are defined as cash and short-term deposits with maturities of three months or less, when purchased.

b) Inventories

Inventories are comprised of oil, lead and other recycled products, spare parts and supplies, and are recorded at the lower of cost and net realizable value. Inventories are valued using the weighted average costing method. Cost of finished goods includes the laid down cost of materials plus the cost of direct labour applied to the product and the applicable share of overhead expense. Cost of other items of inventories comprise the laid down cost.

c) Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated amortization and impairment. Amortization rates are calculated to amortize the costs, net of residual value, over the assets' estimated useful lives. Significant parts of property, plant and equipment that have different depreciable lives are amortized separately.

Plant and equipment is principally depreciated at rates of 5-10% of the declining balance (buildings, site improvements, tanks and mobile equipment) or from 5-14 years straight line (vehicles, computer hardware and software and leasehold improvements), depending on the expected life of the asset. Some equipment is depreciated based on utilization rates. The utilization rate is determined by dividing the cost of the asset by the estimated future hours of service. Residual values, up to 20% of original cost, may be established for buildings, site improvements, and tanks. These residual values are not depreciated. The estimated useful lives, residual values and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.