Audited Consolidated Financial Statements Years ended May 31, 2014 and 2013

Transcription

1 Audited Consolidated Financial Statements Years ended May 31, 2014 and 2013

2 MANAGEMENT S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The consolidated financial statements and the information contained within the Annual Report are the responsibility of the management of Amica Mature Lifestyles Inc. The Management s Discussion and Analysis and the consolidated financial statements have been approved by the Board of Directors. The financial statements have been prepared by management in accordance with International Financial Reporting Standards as set out in the notes to the consolidated financial statements. Financial information contained in the Annual Report is consistent with the information contained in the financial statements. Management maintains a system of internal controls that provide reasonable assurance that the assets of the Company, its subsidiaries, joint ventures and partnerships are safeguarded. These controls also facilitate the preparation of relevant, timely and reliable financial information that reflects, where necessary, management s best estimates and judgments based on informed knowledge of the facts. The Company s external auditors, KPMG LLP, have performed an independent audit of the consolidated financial statements. The Audit Committee of the Board of Directors of the Company has reviewed the consolidated financial statements and Management s Discussion and Analysis with management and the external auditors, KPMG LLP, and recommended their approval by the Board of Directors. The auditors have full access to the Audit Committee, with and without management being present. Samir A. Manji, CPA, CA Chairman & Chief Executive Officer Arthur J. Ayres, CPA, CA Chief Financial Officer & Corporate Secretary Vancouver, Canada August 15,

3 INDEPENDENT AUDITORS REPORT To the Shareholders of Amica Matures Lifestyles Inc. We have audited the accompanying consolidated financial statements of Amica Matures Lifestyles Inc., which comprise the consolidated statements of financial position as at May 31, 2014 and May 31, 2013, the consolidated statements of comprehensive loss, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Amica Matures Lifestyles Inc. as at May 31, 2014 and May 31, 2013, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards. Chartered Accountants August 15, 2014 Vancouver, Canada 2

4 AMICA MATURE LIFESTYLES INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in thousands of Canadian dollars) May 31, 2013 May 31, 2014 Restated (1) Note $ $ ASSETS Current Cash and cash equivalents 5,282 8,794 Trade and other receivables 2,134 2,547 Prepaid expenses and other assets 3,817 2,180 Loans receivable from associates ,876 13,709 Non-current Deposits and other assets 1,665 2,492 Loans receivable from associates 12 2,644 4,144 Investments in associates 5 5,433 8,636 Property and equipment 6 641, , , ,280 Total assets 663, ,989 LIABILITIES Current Trade and other payables 11,424 11,107 Resident deposits 8,082 7,739 Dividends payable 3,233 3,229 Mortgages payable 7 240, ,044 Demand operating loan 8 10, , ,119 Non-current Mortgages payable 7 254, ,760 Deferred income taxes 13 2,049 9, , ,380 Total liabilities 530, ,499 EQUITY Share capital 9 164, ,592 Contributed surplus 3,732 3,293 Deficit (45,821) (14,299) Equity attributable to owners of the Company 122, ,586 Non-controlling interests 4 9,601 6,904 Total equity 132, ,490 Total liabilities and equity 663, ,989 (1) See note 2(f) Commitments 15 Contingencies 16 Subsequent events 18 See accompanying notes to these consolidated financial statements Approved on behalf of the Board of Directors: Samir A. Manji, CPA, CA Director Terry M. Holland, FCPA, FCA Director 3

5 AMICA MATURE LIFESTYLES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Expressed in thousands of Canadian dollars, except share and per share amounts) For the year ended May (1) Note $ $ Revenues: Retirement communities 136, ,044 Other income 521 1, , ,156 Expenses and other items: Retirement communities 10 91,857 84,643 General and administrative 10 10,127 8,767 Finance costs 11 21,311 21,087 Depreciation 6 29,832 32,080 Impairment loss 6 16,200 - Share of losses from associates Gain on acquisitions 3 - (355) 169, ,625 Loss before income tax (31,852) (21,469) Income tax recovery: Deferred 13 5,741 2,344 5,741 2,344 Net loss and comprehensive loss (26,111) (19,125) Net loss and comprehensive loss attributable to: Owners of the Company (15,650) (8,467) Non-controlling interests 4 (10,461) (10,658) (26,111) (19,125) Weighted average shares (000 s) basic and diluted 30,771 30,623 Basic and diluted loss per share ($0.51) ($0.28) (1) Restated, see note 2(f) See accompanying notes to these consolidated financial statements 4

6 AMICA MATURE LIFESTYLES INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Expressed in thousands of Canadian dollars) For the year ended May 31, 2014 Share capital Contributed surplus Deficit Noncontrolling interests Total Note $ $ $ $ $ Balance, June 1, 2013, as previously reported 164,592 3,293 (13,890) 10, ,902 Impact of changes in accounting policies (409) (4,003) (4,412) Restated balance, June 1, ,592 3,293 (14,299) 6, ,490 Net loss - - (15,650) (10,461) (26,111) Stock option proceeds Exercise of stock options 9 68 (68) Share-based compensation Non-controlling interests - issued ,072 11,072 Non-controlling interest - purchased (3,007) (2,264) Transfer of ownership from non-controlling interest ,991 (1,726) 265 Non-controlling interests - benefit on debt forgiveness & modification (5,680) 7,437 1,757 Dividends (12,926) - (12,926) Distributions (618) (618) Balance, May 31, ,859 3,732 (45,821) 9, ,371 For the year ended May 31, 2013 Share capital Contributed surplus Retained earnings (deficit) Noncontrolling interests Total Note $ $ $ $ $ Balance, June 1, 2012, as previously reported 162,372 3,195 7,602 11, ,251 Impact of changes in accounting policies ,070 4,070 Restated balance, June 1, ,372 3,195 7,602 15, ,321 Net loss for the period restated (8,467) (10,658) (19,125) Stock option proceeds 9 1, ,690 Exercise of stock options (530) Share-based compensation Non-controlling interests - issued ,297 3,297 Non-controlling interests - purchased restated - - (555) (20) (575) Dividends (12,879) - (12,879) Distributions restated (867) (867) Balance, May 31, ,592 3,293 (14,299) 6, ,490 See accompanying notes to these consolidated financial statements 5

7 AMICA MATURE LIFESTYLES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of Canadian dollars) For the year ended May (1) Note $ $ Cash provided by (used in): Operating activities: Net loss and comprehensive loss for the year (26,111) (19,125) Items not involving cash: Share-based compensation Depreciation 6 29,832 32,080 Impairment loss 6 16,200 - Amortization of deferred financing charges and other 1,304 1,059 Share of losses from associates Change in fair value of interest rate swaps 644 (357) Deferred income tax recovery (5,741) (2,344) Other (54) (308) 16,617 12,036 Net change in non-cash working capital 17 (4,091) (973) 12,526 11,063 Investing activities: Additions to property and equipment 6 (9,748) (5,341) Fees credited to (investment in) associates 200 (4,012) Receipts from (advances to) loans receivable (583) 4,192 Recovery from other assets - (367) Acquisition of non-controlling interest 3 (2,000) (949) Business combinations, net of cash acquired 3 - (8,805) (12,131) (15,282) Financing activities: Demand operating loan 8 10,634 - Repayment of notes payable on maturity (400) (400) Periodic mortgage principal payments (10,698) (6,863) Proceeds from issuance of mortgage payable 61,081 15,189 Repayment of mortgages payable on maturity (53,773) (13,760) Financing costs paid (431) (847) Proceeds from the exercise of stock options ,690 Proceeds from non-controlling interests 3,021 - Distributions to non-controlling interests (618) (868) Dividends paid (12,922) (12,846) (3,907) (18,705) Decrease in cash and cash equivalents (3,512) (22,924) Cash and cash equivalents, beginning of the year 8,794 31,718 Cash and cash equivalents, end of the year 5,282 8,794 (1) Restated, see note 2(f) See accompanying notes to these consolidated financial statements 6

8 AMICA MATURE LIFESTYLES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended May 31, 2014 and May 31, 2013 (expressed in Canadian dollars, tabular amounts in thousands of Canadian dollars, except share and per share amounts) 1) ORGANIZATION AND NATURE OF OPERATIONS Amica Mature Lifestyles Inc. ( Amica or the Company ) was incorporated on November 5, 1996 under the Business Corporations Act (Alberta) and on December 7, 1998, was continued under the Canada Business Corporations Act. Amica s common shares are listed and trade on the Toronto Stock Exchange under the symbol ACC. Amica is involved in the design, development, marketing, management and ownership of luxury seniors residences. The Company owns varying percentage interests (30.51% to 100%) in and manages 26 seniors rental residences (24 operational), predominantly located in Ontario and British Columbia, Canada. Properties in which Amica owns less than a 100% interest are set-up as co-tenancies (note 12(a)). The Company earns revenues from the ownership, development, marketing and operation of seniors residences. These revenues include income from rents and services, and may include revenues from non-consolidated seniors residences including management fees based on gross revenue, design and marketing fees during the development, construction and lease-up of the seniors residences, profit distributions and interest income on loans advanced by Amica to the non-consolidated co-tenancies. 2) SIGNIFICANT ACCOUNTING POLICIES a) Statement of compliance These consolidated financial statements are prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ) effective as at May 31, These consolidated financial statements were authorized for issue by the Board of Directors on August 15, These consolidated financial statements follow the same accounting policies and methods of application as the consolidated financial statements as at and for the year ended May 31, 2013 with the exception of the changes outlined in note 2(f). b) Basis of measurement These consolidated financial statements have been prepared on the historical cost basis with the exception of interest rate swaps, which are recorded at fair value. c) Basis of presentation The consolidated financial statements are presented in thousands of Canadian dollars, the Company s functional currency, unless otherwise indicated. d) Basis of consolidation i) Business combinations The Company uses the acquisition method of accounting whereby the Company recognizes and classifies the fair value of identifiable assets acquired, fair value of liabilities assumed, and non-controlling interests in the acquiree measured at the proportionate share of identifiable net assets. In a business combination achieved in stages, the previously held equity interest in the acquiree is re-measured to fair value and the resulting gain or loss is recognized in profit or loss. Goodwill is recognized when the cost of the acquired net assets is in excess of their fair values. Goodwill is reviewed for impairment annually, or earlier if events indicate that an impairment condition exists. 7

9 2) SIGNIFICANT ACCOUNTING POLICIES (continued) d) Basis of consolidation (continued) i) Business combinations (continued) Bargain purchase gains are recognized in income when the fair value of the acquired identifiable assets and liabilities assumed are in excess of the aggregate of: consideration transferred, value attributed to any non-controlling interest, and the acquisition date fair value of the Company s previously held equity interest. Acquisition costs are expensed as incurred. ii) Acquisition of non-controlling interest Acquisitions of non-controlling interests are accounted for within equity as transactions with owners. Any difference between the carrying value of non-controlling interest acquired and the fair value of consideration paid is charged or credited to equity along with the related tax effect. iii) Subsidiaries Subsidiaries are entities controlled by the Company. These consolidated financial statements include the accounts of the Company and the entities over which it has control. As a result of the adoption of IFRS 10 (see note 2(f)), the Company has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investees. IFRS 10 introduces a new control model that focuses on whether the Company has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. The non-controlling interests in and results of the entities that the Company does not have a 100% interest in are shown separately as non-controlling interests in these consolidated financial statements. All intra-group transactions and balances are eliminated on consolidation. See note 4 for a listing of the Company s subsidiaries. The adoption of IFRS 10 has resulted in additional entities being consolidated. See note 2(f) for further details. iv) Investment in jointly-controlled entities The adoption of IFRS 10 has resulted in the Company s jointly-controlled entities which were previously proportionately consolidated, to be 100% consolidated. See note 2(f) for further details. v) Investments in associates An associate is an entity over which the Company has significant influence but not control nor joint control. Significant influence is defined as the power to participate in the financial and operating policy decisions of the investee. The results and assets and liabilities of associates are incorporated in the Company s consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are initially recognized at cost and then adjusted for the Company s proportionate share of post-acquisition changes in the net assets of the associates less any impairment loss. The adoption of IFRS 10 has resulted in the consolidation of entities with rental operations which were previously associates (those that are under development continue to be equity accounted). See note 2(f) for further details. 8

10 2) SIGNIFICANT ACCOUNTING POLICIES (continued) e) Use of estimates and judgments The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment are included in the following notes: i) Note 2(g) Property and equipment; ii) Note 3 Acquisitions; iii) Note 14 Financial instruments and financial risk management; and iv) Note 16 Contingencies. In the process of applying the accounting policies, the Company makes various judgments, apart from those involving estimations, that can significantly affect the amounts it recognizes in the financial statements. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are included in the following notes: i) Notes 2(h) and 2(j) Impairments; and ii) Notes 2(q) and 13 Income taxes. f) Changes in accounting policies The Company has adopted the following new standards effective June 1, 2013 with retroactive application to June 1, i) IFRS 10 Consolidated Financial Statements ( IFRS 10 ) As a result of IFRS 10, the Company has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investees. IFRS 10 introduces a new control model that focuses on whether the Company has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. In accordance with the transitional provisions of IFRS 10, the Company reassessed the control conclusion for its investees at June 1, The impact was as follows: i) All investees that were previously consolidated by the Company, continue to be consolidated under IFRS 10; ii) Those investees with operating seniors residences that were previously either proportionately consolidated or equity accounted are now considered to be controlled by the Company and are now consolidated; and iii) Those investees (Amica at Aspen Woods and Amica at Oakville) that were under development, continued to be equity accounted. The main factors in making the above assessments were the Company s ownership position, its management and licence agreements with the investees and the Co-tenancy agreement between the owners. For all of the operating seniors residences the Company has power over the investee, exposure to variable returns from its involvement with the investee and the ability to use its power to affect those returns. 9

11 2) SIGNIFICANT ACCOUNTING POLICIES (continued) f) Changes in accounting policies (continued) i) IFRS 10 Consolidated Financial Statements ( IFRS 10 ) (continued) For Amica at Aspen Woods and Amica at Oakville the Company determined it did not have power over these investees as its power under the management agreements is less significant during the development phase when the property is not operational. The changes, and the effective dates of the change, are as follows: Property Prior Accounting IFRS 10 Accounting Effective date of change Amica at Dundas Proportionate consolidation Consolidation June 1, 2012 Amica at Erin Mills Proportionate consolidation Consolidation June 1, 2012 Amica at Swan Lake Proportionate consolidation Consolidation June 1, 2012 Amica at Aspen Woods Equity accounting Consolidation August 9, 2013 (1) Amica at Bayview Gardens Equity accounting Consolidation June 1, 2012 Amica at London Equity accounting Consolidation June 1, 2012 Amica at Thornhill Equity accounting Consolidation June 1, 2012 Amica at Whitby Equity accounting Consolidation December 1, 2012 (2) Amica at Windsor Equity accounting Consolidation June 1, 2012 (1) Prior to August 9, 2013, Amica at Aspen Woods was under development; and (2) Prior to December 1, 2012, Amica at Whitby was accounted for using the cost method. ii) IFRS 11 Joint Arrangements ( IFRS 11 ) In May 2011, the IASB issued IFRS 11 which redefined joint operations and joint ventures and requires joint operations to be proportionately consolidated and joint ventures to be equity accounted. This new standard was effective for the Company s interim and annual consolidated financial statements commencing June 1, The Company has assessed this amendment and determined there is no impact on its consolidated financial statements. iii) IFRS 12 Disclosure of Interests in Other Entities ( IFRS 12 ) IFRS 12 was issued in June 2011 and outlines the required disclosures for interests in subsidiaries and joint arrangements. The new disclosures require information that will assist financial statement users to evaluate the nature, risks and financial effects associated with an entity s interests in subsidiaries and joint arrangements. As a result of IFRS 12, the Company has expanded its disclosure about its interests in subsidiaries. See accompanying note 4 to the consolidated financial statements. iv) IFRS 13 Fair Value Measurement ( IFRS 13 ) IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 Financial Instruments: Disclosures. In accordance with the transitional provisions of IFRS 13, the Company has applied the new fair value measurement guidance prospectively. The change had no significant impact on the measurement of the Company s assets and liabilities. 10

12 2) SIGNIFICANT ACCOUNTING POLICIES (continued) f) Changes in accounting policies (continued) v) Summary of quantitative impact The following tables summarize the material impacts resulting from the above changes in accounting policies on the Company s financial position, comprehensive loss and cash flows. Consolidated statement of financial position June 1, 2012 Effect of changes in accounting policies As previously reported IFRS 10 (see note 2) As restated $ $ $ Cash and cash equivalents 31, ,718 Trade and other receivables 2,526 1,549 4,075 Prepaid expenses and other assets 2,980 1,100 4,080 Loans receivable from associates 35,989 (22,512) 13,477 Investment in associates 8,011 (4,484) 3,527 Other investments 2,921-2,921 Property and equipment 384, , ,120 Total assets 468, , ,918 Trade and other payables 7,079 4,229 11,308 Resident deposits 3,917 2,039 5,956 Mortgages payable 253, , ,563 Other liabilities 3,931-3,931 Obligation to investment in associates 3,836 (3,836) - Deferred income tax 11,839-11,839 Total liabilities 284, , ,597 Equity attributable to owners of the company 173, ,169 Non-controlling interests 11,082 4,070 15,152 Total equity 184,251 4, ,321 11

13 2) SIGNIFICANT ACCOUNTING POLICIES (continued) f) Changes in accounting policies (continued) v) Summary of quantitative impact (continued) Consolidated statement of financial position May 31, 2013 Effect of changes in accounting policies As previously reported IFRS 10 (see note 2) As restated $ $ $ Cash and cash equivalents 8, ,794 Trade and other receivables 1, ,547 Prepaid expenses and other assets 2,909 1,763 4,672 Loans receivable from associates 34,272 (29,940) 4,332 Investments in associates 9,940 (1,304) 8,636 Property and equipment 421, , ,008 Total assets 479, , ,989 Trade and other payables 8,798 2,309 11,107 Resident deposits 4,832 2,907 7,739 Mortgages payable 282, , ,804 Other liabilities 3,229 3,229 Obligation to investment in associates 5,467 (5,467) - Deferred income tax 9,620-9,620 Total liabilities 314, , ,499 Equity attributable to owners of the company 153,995 (409) 153,586 Non-controlling interests 10,907 (4,003) 6,904 Total equity 164,902 (4,412) 160,490 Condensed consolidated statement of comprehensive loss For the year ended May 31, 2013 Effect of changes in accounting policies As previously reported IFRS 10 (see note 2) As restated $ $ $ Revenues: Retirement communities 91,853 32, ,044 Other income 6,406 (5,294) 1,112 98,259 26, ,156 Expenses and other items: Retirement communities 59,957 24,686 84,643 General and administrative 8,767-8,767 Depreciation 22,782 9,298 32,080 Finance costs 12,260 8,827 21,087 Share of losses from associates 5,969 (5,566) 403 Gain on acquisition (355) - (355) 109,380 37, ,625 Loss before income tax (11,121) (10,348) (21,469) Deferred income tax recovery 2,344-2,344 Net loss and comprehensive loss (8,777) (10,348) (19,125) Net loss and comprehensive loss attributable to: Owners of the Company (8,467) - (8,467) Non-controlling interests (310) (10,348) (10,658) (8,777) (10,348) (19,125) 12

14 2) SIGNIFICANT ACCOUNTING POLICIES (continued) g) Property and equipment Property and equipment are recorded at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs. Depreciation commences when an asset is available for use and is recognized in a manner that reflects the future economic benefits of the asset expected to be realized over its useful economic life. The method of depreciation and estimates of the useful economic life are reviewed at each fiscal year end with any changes accounted for on a prospective basis. An item of property and equipment with a cost component that is significant in relation to the items total cost and that has a different useful life is accounted for separately. Estimated useful lives were determined based on management s analysis of the anticipated physical life of the asset. The cost of replacing a major component is capitalized if it is probable that future economic benefits will flow to the Company and its cost can be measured reliably; the carrying amount of the replaced component is recognized in profit or loss. The costs of day to day servicing of property and equipment are recognized in profit or loss as incurred. Depreciation is recorded in profit or loss on a straight-line basis over the estimated useful lives of the building component or, for furniture, fixtures and equipment, on a declining balance basis, as follows: Buildings: Structure Electrical and plumbing HVAC and mechanical equipment Elevators, roof, windows & doors Interior finishes In-place leases 50 years 40 years 30 years 25 years 5 years 1 to 3 years h) Impairment of non-financial assets Furniture, fixtures and equipment 20% 50% At the end of each reporting period, the carrying value of property & equipment are reviewed on a property by property basis for indications of impairment. Should an impairment condition exist, the recoverable amount of the asset is estimated in order to determine the extent of a potential impairment loss. The recoverable amount is defined as the higher of (i) an asset s fair value less costs to sell and (ii) its value in use. The Company estimates the fair value less costs to sell by using independent appraisals and updating assumptions for current market conditions. For estimating value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the time value of money and the risks specific to the asset. For purposes of impairment testing, assets that cannot be tested individually are grouped into the smallest group of assets capable of generating independent cash flows or cash generating units ( CGU ). Where the carrying amount of an asset or the CGU exceeds the recoverable amount determined, an impairment loss is recognized in profit or loss. The depreciation charge related to the impaired asset or the CGU is revised for the adjusted carrying amount over the remaining useful life of the asset or CGU. Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss may be reversed to the profit or loss if there has been a change in the estimate of the recoverable amount. 13

15 2) SIGNIFICANT ACCOUNTING POLICIES (continued) i) Financial instruments i) Non-derivative financial assets and liabilities Financial assets are classified into one of following classifications: held-to-maturity financial assets, loans and receivables, available for sale and financial assets at fair value through profit or loss ( FVTPL ). Financial liabilities are classified as financial liabilities at FVTPL or other financial liabilities. Held-to-maturity financial assets Held-to-maturity financial assets are debt securities that the Company has the positive intent and ability to hold to maturity. Held-to-maturity financial assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method, less any impairment losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale investments, and prevent the Company from classifying investment securities as held to maturity for the current and the following two financial years. The Company does not have any held-to-maturity financial assets. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Available For Sale Available for sale financial assets are assets that are not classified in any of the previous categories or are designated as such by management. These assets are initially recognized at fair value plus directly attributable transaction costs, and subsequently carried at fair value with changes, except for impairment losses, recorded in other comprehensive income until the assets are de-recognized through sale or impairment, at which time the cumulative gain or loss previously recognized in accumulated other comprehensive income is recognized in net earnings. Available for sale financial assets that are investments in equity instruments, like the Company s other investments, that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Financial assets and liabilities at FVTPL FVTPL are financial assets and liabilities that are either held for trading or designated as at FVTPL. FVTPL are stated at fair value, with gains or losses arising on measurement recognized in profit or loss. A financial instrument is classified as held for trading if: it has been acquired principally for the purpose of selling in the near term; or on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit taking; or it is a derivative that is not designated and effective as a hedging instrument. A financial instrument designated as FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or it forms part of a group which is managed and its performance is evaluated on a fair value basis; or it forms part of a contract containing one or more embedded derivatives. Directly attributable transaction costs are recognized in profit or loss as incurred. 14

16 2) SIGNIFICANT ACCOUNTING POLICIES (continued) i) Non-derivative financial assets and liabilities (continued) Other financial liabilities Other financial liabilities are initially measured at fair value less directly attributable transaction costs and subsequently measured at amortized cost using the effective interest method. Summary of Financial Instruments and Classification Below is a summary of the classification of the Company s financial instruments: Asset / Liability Classification Measurement Cash and cash equivalents, restricted cash Loans and receivables Amortized cost Trade and other receivables Loans and receivables Amortized cost Loans receivable Loans and receivables Amortized cost Trade and other payables Other financial liability Amortized cost Resident deposits Other financial liability Amortized cost Dividends payable Other financial liability Amortized cost Mortgages payable Other financial liability Amortized cost Demand operating loan Other financial liability Amortized cost Interest rate swaps FVTPL Fair value Financial assets and liabilities are offset and the net amount reported in the statement of financial position when the Company has a legal right of offset and intends to net settle the amounts. ii) Derivative financial instruments From time to time, the Company uses derivative financial instruments to manage risks from fluctuations in interest rates. All derivative instruments, including embedded derivatives that must be separately accounted for, are valued at their respective fair values with changes in fair values recognized in profit or loss. The Company does not enter into financial instruments for trading or speculative purposes; nor does the Company apply hedge accounting. j) Impairment of financial assets Financial assets not carried at fair value through profit or loss are reviewed at each reporting date for evidence indicating that an impairment condition exists. Evidence may include default or arrears by a debtor, a restructuring on terms that the Company would not consider otherwise or indications of deterioration in a debtor s financial condition. Receivables are reviewed for indicators of impairment at both a specific asset and collective level. Individually significant receivables are assessed specifically and receivables that are not individually significant are reviewed on a collective basis by grouping receivables with similar risk profiles. An impairment loss in respect of a financial asset measured using amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset s original effective interest rate. Losses are recognized in profit or loss and offset against the receivable in an allowance account. If a future event causes the amount of an impairment loss to decrease, the decrease is reversed through profit or loss; however, impairment of equity instruments without quoted market values are not reversed. k) Cash and cash equivalents The Company considers all liquid investments with original terms to maturity of three months or less when acquired to be cash equivalents. 15

17 2) SIGNIFICANT ACCOUNTING POLICIES (continued) l) Revenue recognition Consolidated revenues include revenues generated by the operations of the Company s consolidated seniors residences, and may include fees earned from non-consolidated seniors residences that the Company has under long term management contracts, interest revenue from loans made in conjunction with the development and ownership of non-consolidated seniors residences, and profit distributions from other investments. Revenues generated by the operations of consolidated seniors residences are recognized when the lease of space commences and the related services are rendered to residents and at the date of sale or rendering of service for ancillary goods and services. Profit distributions are recognized when received or receivable. Management fee revenues from non-consolidated seniors residences, if any, are pursuant to long term management contracts that include base fees equal to a percentage of the gross operating revenues of the managed properties and incentive fees based on exceeding certain operating results. Design fees, marketing fees and marketing bonuses from non-consolidated seniors residences, if any, are earned during the development and lease-up of newly built and renovated seniors rental residences. Management fees, design fees and marketing fees from non-consolidated seniors residences are recognized as revenue when the services have been rendered in accordance with the terms of each individual contract, the fees are non-refundable, when the amount of the fees is fixed or determinable, and when there is reasonable assurance that the fees are collectible. Incentive fees and marketing bonuses from non-consolidated seniors residences are accrued once threshold results for the fee or bonus are achieved, subject to the terms of each individual contract. Management fee revenues are eliminated when the Company consolidates the seniors residence. Management fees charged to associates, if any are included in revenues when received or receivable with the proportionately offsetting amount expensed in determining the income or loss from associates. Interest income is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued in accordance with the terms of each individual contract and by reference to the principal outstanding and at the effective interest rate applicable. When a loan and receivable is impaired, the Company reduces the carrying amount to its recoverable amount, which is the estimated future cash flow discounted at the original effective interest rate of the instrument, and recognizes the discount as interest income. Interest income on impaired loans and receivables are recognized using the original effective interest rate. Other income consists primarily of development fees, marketing fees, interest on loans receivable from non-consolidated seniors residences and deposit interest on cash balances. Fees and interest charged to associates with properties under development, if any, are recognized as revenue by the Company. The proportionate amount of fees and interest relating to the Company s owned interest in the associate is eliminated from revenue and recorded as a reduction in the carrying value of the investment in the associate m) Employee benefits Short term employee benefit obligations including vacation and bonus payments are measured on an undiscounted basis and are estimated and expensed as the related service is provided. Short-term employee benefit obligations are recorded in trade and other payables. The Company s employee share purchase plan permits employees other than executive officers to purchase common shares through payroll deductions. Amounts contributed by the Company are expensed as incurred. 16

18 2) SIGNIFICANT ACCOUNTING POLICIES (continued) n) Share-based compensation The Company grants share-based awards to executives, certain employees and directors. The cost of share-based transactions is the fair value of the options on the date of grant using the Black-Scholes option pricing model. The cost of the options are recognized on a proportionate basis consistent with the vesting features of each tranche of the grant. For options granted that vest over time, the Company estimates a forfeiture rate and expected life for these options. o) Provisions Provisions are liabilities of uncertain timing and amount and are recognized when the entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be estimated reliably. Provisions are not recognized for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a discount rate that reflects the time value of money and the risks and uncertainties specific to the obligation. Provisions are re-measured at each reporting date using the current discount rate. The increase in the provision due to the passage of time is recognized as a finance cost. p) Decommissioning costs The Company has evaluated each of the seniors residences in which it has an interest and identified three properties where asbestos is present in certain contained areas. Remedial action will be required only at the date of renovation or retirement of these assets. Generally, on sale of a property, no remedial action is required. As the Company has no present legal or constructive obligation to remediate the areas containing asbestos, no provision has been recognized in these consolidated financial statements for asbestos remediation. q) Income taxes Current tax is based on the Company s taxable position for the year. Taxable position differs from income or loss as reported in the consolidated statement of comprehensive income (loss) as certain items of income or expense are taxable or deductible in other years or never taxable or deductible. Current tax is determined using tax rates that have been enacted or substantially enacted by the end of the reporting period. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the calculation of taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred income tax assets are recognized for deductible temporary differences or carry forward of unused tax losses, to the extent that it is probable that the deductions or tax losses can be utilized. The carrying amount of deferred income tax assets are reviewed at each reporting date and reduced to the extent it is no longer probable that the income tax asset will be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability settled, based on tax rates and legislation that have been enacted or substantively enacted at the reporting date. Where applicable, current and deferred income taxes relating to items recognized directly in equity are also recognized in equity. r) Dividends Dividends on common shares are recognized in the consolidated financial statements in the period in which the approved dividends are declared by the Board of Directors of the Company. 17

19 2) SIGNIFICANT ACCOUNTING POLICIES (continued) s) Earnings per share Basic earnings (loss) per share ( EPS ) is calculated by dividing the net income (loss) for the year by the weighted average number of common shares outstanding during the year. Diluted EPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to options and similar instruments is computed using the treasury stock method. The Company s potentially dilutive common shares comprise in-the-money options issued pursuant to the Company s stock option plan. t) Future accounting policy changes The following IFRSs have been issued or revised by the IASB, however they are not yet effective and as such have not been applied to these consolidated financial statements: IFRS 9, Financial Instruments was issued by the IASB in October of 2010 and will replace IAS 39 Financial instrument: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple classification options in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial impairment methods in IAS 39 and is effective for annual periods beginning on or after January 1, The Company is currently assessing the impact of the standard on its consolidated financial statements. IFRIC 21, Levies, was issued by the IASB in May IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers payment occurs, as identified by the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 does not apply to accounting for income taxes, fines and penalties or for the acquisition of assets from governments. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014 and should be applied retrospectively. The Company is currently assessing the impact on the consolidated financial statements. 18

20 3) ACQUISITIONS a) Amica at Erin Mills On September 1, 2013, the Company acquired an additional 50% ownership interest in Amica at Erin Mills for total cash consideration of $2,000,000 bringing the Company s ownership position to 100%. As the Company controlled this property prior to the acquisition of the additional 50% interest, the transaction has been recorded in equity. At September 1, 2013, the carrying value of the 50% non-controlling interest was $3,007,000 and as this amount exceeds the consideration paid by $1,007,000, the excess of $743,000 (net of deferred income tax of $264,000) has been applied to reduce the Company s deficit. b) Amica at Whitby On December 16, 2013, the Company increased its ownership in Amica at Whitby from 24.94% to 51.25%. The aggregate cash consideration for the additional ownership interests totaled $789,000 and was funded by way of participation in a new equity financing to fund the repayment of a portion of the construction loans on the property (note 7). The Company also funded an additional $748,000 of the Amica at Whitby equity financing to maintain its previously held 24.94% ownership position before the acquisition of the additional ownership interests. As the Company consolidated this property prior to the acquisition of the additional 26.31% interest, the non-controlling interest in Amica at Whitby was reduced by $1,200,000 which represents the carrying value of the 26.31% non-controlling interest that the Company acquired. The transaction also resulted in a deferred income tax asset of $320,000 which is accounted for within equity. The equity financing was undertaken in conjunction with a debt restructuring whereby the Company forgave $2,867,000 in loans receivable from this co-tenancy (note 12(e)). c) Amica at Thornhill On March 17, 2014, the Company increased its ownership in Amica at Thornhill from 29.50% to 55.50%. The aggregate cash consideration for the additional ownership interests totaled $910,000 and was funded by way of participation in a new equity financing to fund the repayment of a portion of the construction loans on the property (note 7). The Company also funded an additional $1,032,500 of the Amica at Thornhill equity financing to maintain its previously held 29.50% ownership position before the acquisition of the additional ownership interests. As the Company consolidated this property prior to the acquisition of the additional 26.00% interest, the non-controlling interest in Amica at Thornhill was reduced by $479,000 which represents the carrying value of the 26.00% non-controlling interest that the Company acquired. The transaction also resulted in a deferred income tax asset of $17,000 which is accounted for within equity. The equity financing was undertaken in conjunction with a debt restructuring whereby the Company forgave $3,000,000 in loans receivable from this co-tenancy (note 12(e)). d) Amica at Fish Creek The Company completed a land purchase in Calgary, Alberta on August 30, 2013 and anticipates developing the land in two phases with the first phase being an Amica branded luxury Wellness & Vitality rental retirement residence. The project will be called Amica at Fish Creek and the Company currently estimates approximately 150 suites for the first phase. The purchase price for the land was $4,250,000 and was funded using all cash. Amica plans to form a co-tenancy for this project and to bring on an investor(s) to provide funding for the project. e) Amica at Mayfair On October 8, 2013, the Company acquired an additional rental unit from the adjacent condominium development at its Amica at Mayfair property for cash consideration of $245,000. f) Amica at Oakville and Amica at Kingston On May 1, 2014, the Company increased its ownership interests in Amica at Kingston by 1.39% and Amica at Oakville by 0.62% for total cash consideration of $126,