Financial Report - Veresen Inc.

Financial Instruments
Financial assets and financial liabilities are classified as held-for-trading, available-for-sale or at amortized cost. Financial instruments
are initially recorded at fair value on the balance sheet. Subsequent measurement of each financial instrument is based on its
classification. At December 31, 2012 and 2011, the Company did not have held-to-maturity instruments or instruments in qualifying
hedging relationships.
Financial assets and liabilities classified as held-for-trading are measured at fair value with changes in fair value recognized in earnings.
Available-for-sale financial assets are measured at fair value with changes in fair value recognized in other comprehensive income.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the
estimated income taxes payable in respect of the current year, which includes an accrual for interest and penalties, if any. Deferred tax
assets and liabilities are recognized for temporary differences between the tax and accounting asset and liability bases using enacted
tax rates and laws expected to apply when the liabilities are settled and the assets realized. Deferred tax assets are recognized
in circumstances where it is considered more likely than not the related income tax benefits will be realized.
When appropriate, the Company records a valuation allowance against deferred tax assets to reflect that these tax assets may not
be realized. In determining whether a valuation allowance is appropriate, the Company considers whether it is more likely than not
that all or some portion of its deferred tax assets will not be realized, based on management’s judgments using available evidence
about future events.
At times, the Company may claim tax benefits that may be challenged by a tax authority. The Company recognizes tax benefits only
for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured
as the largest amount of benefit that has a greater than 50% likelihood to be realized upon settlement. A liability for “unrecognized
tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and
measurement standards.
Share Issuance Costs
Costs directly attributable to the raising of equity are charged against the related share capital. Costs related to shares not yet issued
are recorded as deferred share issuance costs and presented as other current assets in the Consolidated Statement of Financial Position.
These costs are deferred until the issuance of the shares to which the costs relate, at which time the costs are charged against the
related share capital or charged to operations if the shares are not issued.
Note 4. Acquisitions
Acquisition of Hythe/Steeprock Gas Gathering and Processing Complex
On February 9, 2012, the Company, through a wholly-owned subsidiary, acquired the Hythe/Steeprock gas gathering and processing
complex for $907.5 million. On June 21, 2012, the Company acquired the remaining portion of the associated midstream assets, which
are regulated by the NEB, for $8.0 million. The acquired business is located in the Cutbank Ridge region of Alberta and British Columbia.
The acquisition of Hythe/Steeprock has been accounted for using the acquisition method, as set out below, and its results of operations
since the date of acquisition have been reported on a consolidated basis. Transaction costs of $0.5 million were recorded in general and
administrative expenses. The purchase price was allocated to assets and liabilities as described below:
Capital assets $ 646.6
Intangible assets 280.3
Asset retirement obligation (11.4)
$ 915.5
The acquired intangible assets, representing customer relationship and service agreement intangibles, are being amortized over
a weighted average of approximately 20 years.
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