HispanicBusiness

The following are the critical judgments that management has made in applying the Corporation's accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements.

Recoverability of asset carrying values

Newalta assesses its property, plant and equipment, intangibles and goodwill for impairment at the CGU level by comparing the carrying amount to the recoverable amount of the underlying assets. Judgment is required in the aggregation of assets into CGU's. The determination of the recoverable amount involves estimating the CGU's fair value less costs to sell or its value-in-use, which is based on its discounted future cash flows using an applicable discount rate. Future cash flows are calculated based on management's best estimate of future inflation and are discounted based on management's current assessment of market conditions.

Decommissioning liability

Newalta recognizes a provision for future remediation and post abandonment activities in the consolidated financial statements as the net present value of the estimated future expenditures required to settle the estimated future obligation at the balance sheet date. The recorded liability increases over time to its future amount through the unwinding of the discount. The measurement of the decommissioning liability involves the use of estimates and assumptions including the discount rate, the expected timing of future expenditures and the amount of future abandonment costs. Decommissioning estimates are reviewed annually and estimated by management, in consultation with Newalta's engineers and environmental, health and safety staff, on the basis of current regulations, costs, technology and industry standards.

Revisions to the estimated amount or timing of the obligations are reflected prospectively as increases or decreases to the recorded liability and the related asset. Actual decommissioning expenditures, up to the recorded liability at the time, are drawn against the liability as the costs are incurred. Amounts capitalized to the related assets are amortized to income in line with the depreciation of the underlying asset.

Fair value calculation on stock-based payments

The fair value of stock-based payments is calculated using a Black-Scholes option pricing model, depending on the characteristics of the stock-based payment. There are a number of estimates used in the calculation such as the future forfeiture rate, expected option life and the future price volatility of the underlying security which can vary from actual future events. The factors applied in the calculation are management's best estimates based on historical information and future forecasts.

Taxation

The calculation of deferred income taxes is based on a number of assumptions including estimating the future periods in which temporary differences, tax losses and other tax credits will reverse. Tax interpretations, regulations and legislation in the various jurisdictions in which the Corporation and its subsidiaries operate are subject to change.

Derivative instruments

The estimated fair value of derivative instruments resulting in financial assets and liabilities, by their very nature, are subject to measurement uncertainty.

Leases

Newalta makes judgments in determining whether certain leases, in particular those with long contractual terms where the lessee is the sole user and Newalta is the lessor, are operating or finance leases.