Decommissioning obligations are estimated based on existing laws, contracts, or other policies. Decommissioning obligations are measured at the present value of management's best estimate of the expenditure required to settle the present obligation as at the reporting date. Subsequent to the initial measurement, the obligation is adjusted at the end of each reporting period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The increase in the provision due to the passage of time is recognized as accretion whereas increases or decreases due to changes in the estimated future cash flows or changes in the discount rate are capitalized. Actual costs incurred upon settlement of the decommissioning obligations are charged against the provision to the extent the provision was established. By their nature, these estimates are subject to measurement uncertainty and the impact on the financial statements could be material.
Share based compensation
Measurement of compensation cost attributable to the Company's share based compensation plan is subject to the estimation of fair value using the Black-Scholes-Merton option pricing model. The valuation is based on significant assumptions including the estimated forfeiture rate, the expected volatility (based on the weighted average historic volatility adjusted for changes expected due to publicly available information), the weighted average expected life of the instrument (based on historical experience and general information), the expected dividends, and the risk free interest rate (based on government bonds).
Deferred income taxes
The determination of the Company's income taxes requires interpretation of complex laws and regulations. Tax interpretations, regulations, and legislation in the various jurisdictions in which the Company operates are subject to change. Deferred income tax assets are assessed by management at the end of the reporting period to determine the likelihood that they will be realized from future taxable earnings.
FUTURE CHANGES IN ACCOUNTING POLICIES
In May 2011, the IASB issued four new standards and two amendments. Five of these items related to consolidation, while the remaining one addresses fair value measurement. All of the new standards are effective for annual periods beginning on or after January 1, 2013. The adoption of these standards is not expected to have a significant impact on the amounts recorded in the Company's consolidated financial statements.
IFRS 10, Consolidated Financial Statements replaces IAS 27, Consolidated Separate Financial Statements. It introduces a new principle-based definition of control, applicable to all investees to determine the scope of consolidation. The standard provides the framework for consolidated financial statements and their preparation based on the principle of control.
IFRS 11, Joint Arrangements replaces IAS 31, Interests in Joint Ventures. IFRS 11 divides joint arrangements into two types, each having its own accounting model. A "joint operation" continues to be accounted for using proportionate consolidation, whereas a "joint venture" must be accounted for using equity accounting. This differs from IAS 31, where there was the choice to use proportionate consolidation or equity accounting for joint ventures. A "joint operation" is defined as the joint operators having rights to the assets, and obligations for the liabilities, relating to the arrangement. In a "joint venture", the joint venture partners have rights to the net assets of the arrangement, typically through their investment in a separate joint venture entity.
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