C ONSOLIDATED FINANCIAL STATEMENTS. Algeco Scotsman Global S.à r.l. Years Ended December 31, 2012, 2011 and 2010 With Report of Independent Auditors

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1 C ONSOLIDATED FINANCIAL STATEMENTS Algeco Scotsman Global S.à r.l. Years Ended December 31, 2012, 2011 and 2010 With Report of Independent Auditors

2 Table of Contents Consolidated Statements of Comprehensive Income... 3 Consolidated Statements of Financial Position... 4 Consolidated Statements of Changes in Equity... 5 Consolidated Statements of Cash Flows Reporting entity Basis of preparation and consolidation Significant accounting policies Significant accounting judgments, estimates and assumptions Debt refinancing and acquisition of Ausco Other acquisitions Revenue Other expense, net Personnel expenses Finance income and expense Income taxes Rental equipment Other property, plant and equipment Intangible assets Financial assets and liabilities Inventories Prepaid expenses and other current assets Cash and cash equivalents Loans and borrowings Employee benefits Provisions Trade and other payables Capital and reserves Share-based payments Financial instruments Commitments and contingencies Construction contracts Related parties Subsequent events Group entities Report of Independent Auditors... 68

3 Consolidated Statements of Comprehensive Income Year ended December 31, Notes Revenues Leasing and services revenue: Modular space 803, , ,866 Remote accommodations 16,911 Sales: New units 255, , ,988 Rental units 49,276 58,278 56,281 Total revenues 7 1,126, , ,135 Cost of revenues Cost of revenues, excluding depreciation on rental equipment (578,248) (490,260) (450,190) Depreciation on rental equipment 12 (184,901) (161,316) (156,324) Total cost of revenues (763,149) (651,576) (606,514) Gross profit 362, , ,621 Selling, general and administrative expense (296,775) (249,260) (243,309) Other depreciation and amortization 13, 14 (39,120) (29,680) (26,862) Impairment losses on goodwill 14 (195,600) (209,699) (11,000) Restructuring costs 21 (6,953) (8,078) (10,677) Other expense, net 8 (45,486) (10,254) (1,388) Operating profit (loss) (221,059) (186,344) 35,385 Net finance income (expense) Interest income 10 2,737 3,199 5,115 Interest expense 10 (198,872) (184,556) (183,305) Currency gains / (losses), net 10 27,118 14,226 (33,699) Other finance income 10 18,776 15,874 33,724 Gain on extinguishment of debt 10,19 13,890 Net finance expense 10 (136,351) (151,257) (178,165) Loss before income tax (357,410) (337,601) (142,780) Income tax benefit (expense) 11 (9,399) ,698 Loss for the year (366,809) (337,046) (111,082) Other comprehensive income (loss) Foreign currency translation (32,435) (34,132) (12,005) Defined benefit plan actuarial gain (loss) (1,710) 1, Other comprehensive loss, net of tax (34,145) (33,023) (11,965) Total comprehensive loss (400,954) (370,069) (123,047) See the accompanying notes which are an integral part of these consolidated financial statements. 3

4 Consolidated Statements of Financial Position December 31, Notes Assets Current assets Cash and cash equivalents 18 78,882 92,025 Trade receivables , ,272 Receivables under finance leases 26 2,001 2,023 Inventories 16 52,120 43,864 Short-term financial assets 15 17,933 Prepaid expenses and other current assets 17 34,768 51,703 Current tax assets Total current assets 470, ,193 Non-current assets Rental equipment, net 12 1,421,507 1,298,486 Other property, plant and equipment, net , ,080 Investment property Goodwill , ,285 Other intangible assets , ,785 Receivables under finance leases 26 1,990 1,349 Long-term financial assets 15 23,589 18,160 Deferred tax assets 11 2, Total non-current assets 2,586,166 2,279,244 Total assets 3,056,940 2,767,437 Liabilities Current liabilities Trade and other payables , ,012 Provisions 21 15,300 13,409 Loans and borrowings 19 3,984 11,951 Short-term financial liabilities 15 6,620 8,627 Current tax liabilities 11 9,519 12,040 Accrued interest 19 38,290 7,753 Total current liabilities 338, ,792 Non-current liabilities Provisions 21 30,490 11,607 Loans and borrowings 19 2,203,307 2,549,236 Long-term financial liabilities 15 77,763 Employee benefits 20 31,278 21,404 Deferred tax liabilities , ,121 Total non-current liabilities 2,430,666 2,892,131 Total liabilities 2,768,888 3,191,923 Equity Share capital 583, ,759 Share premium 1,077, ,577 Non-controlling interests 1,229 Accumulated other comprehensive gain (loss) (9,314) 44,562 Accumulated deficit (1,364,811) (1,216,384) Total equity (deficit) ,052 (424,486) Total liabilities and equity (deficit) 3,056,940 2,767,437 See the accompanying notes which are an integral part of these consolidated financial statements. 4

5 Consolidated Statements of Changes in Equity Share capital Share premium Actuarial gains / (losses) Foreign currency translation Legal Noncontrolling interests Accumulated deficit Total equity (deficit) Balance at January 1, , ,730 (1,278) 90,827 1 (768,256) 17,783 Loss for the year (111,082) (111,082) Other comprehensive income (loss) 40 (12,005) (11,965) Total comprehensive loss (123,047) Capital contribution 49,574 49,574 Exchange of prior share-based payments (Note 24) (941) (941) Share-based payment (Note 24) 2,214 2,214 Balance at December 31, , ,577 (1,238) 78,822 1 (879,338) (54,417) Loss for the year (337,046) (337,046) Other comprehensive income (loss) 1,109 (34,132) (33,023) Total comprehensive loss (370,069) Balance at December 31, , ,577 (129) 44,690 1 (1,216,384) (424,486) Loss for the year (366,809) (366,809) Other comprehensive loss (1,710) (32,435) (34,145) Total comprehensive loss (400,954) Issue of ordinary shares (Note 23) 122, , ,966 Acquisition of entities under common control 478,330 (19,731) 1, , ,210 Other transactions with Parent (684) (684) Balance at December 31, ,289 1,077,659 (1,839) (7,476) 1 1,229 (1,364,811) 288,052 See the accompanying notes which are an integral part of these consolidated financial statements. 5

6 Consolidated Statements of Cash Flows Year ended December 31, Notes Cash flows from operating activities Loss for the year (366,809) (337,046) (111,082) Adjustments for: Depreciation 12, , , ,092 Amortization of intangible assets 14 21,641 13,659 10,094 Impairment losses (reversals) on rental equipment 8, 12 28, (327) Impairment losses on property, plant and equipment 8, 13 6,271 7,396 Impairment losses on assets held for sale 8 5,831 1,321 1,405 Impairment losses on goodwill , ,699 11,000 Purchase of rental equipment (166,060) (148,470) (84,538) Proceeds from sale of rental equipment 49,276 58,278 56,848 Gain on disposal of rental equipment (15,494) (8,172) (6,048) Loss on disposal of property, plant and equipment ,417 1,921 Net finance expense , , ,165 Income tax expense (benefit) 11 9,399 (555) (31,698) Other (896) (1,793) Working capital adjustments: Changes in inventory 3,778 (12,818) (502) Changes in financial assets (3,211) (965) (24) Changes in trade and other receivables 41,370 (41,817) 1,679 Changes in prepaid expenses and other current assets 19,355 4,171 (6,515) Changes in trade and other payables (39,661) 29,633 23,551 Changes in employee benefits and provisions 7,015 1,488 6,232 Cash provided by operating activities 136, , ,460 Interest paid (92,874) (114,831) (125,990) Interest received Income tax paid (23,698) (16,015) (6,467) Net cash provided by (used in) operating activities 20,607 (25,418) 89,077 Cash flows from investing activities Proceeds from the sale of property, plant and equipment 1,852 2, Acquisition of businesses, net of cash acquired (27,223) (88,315) (17,380) Acquisition of property, plant and equipment and other intangible assets (28,469) (15,828) (11,838) Net cash used in investing activities (53,840) (101,877) (28,344) Cash flows from financing activities Proceeds from capital contributions 49,574 Receipts from borrowings 2,531, ,995 Payment of transaction costs (68,928) (11,204) Repayment of borrowings (2,435,595) (14,621) (7,252) Payment of finance lease liabilities (3,709) (5,458) (8,593) Net cash provided by (used in) financing activities 22,780 (20,053) 24,520 Net increase (decrease) in cash and cash equivalents (10,453) (147,348) 85,253 Cash and cash equivalents at beginning of year 87, , ,422 Effect of exchange rate fluctuations on cash held (1,332) (21,481) (13,749) Cash and cash equivalents at end of year 75,312 87, ,926 Cash and cash equivalents, Statement of Financial Position 18 78,882 92, ,510 Bank overdrafts 15,18 (3,570) (4,928) (2,584) Cash and cash equivalents, Statement of Cash Flows 75,312 87, ,926 See the accompanying notes which are an integral part of these consolidated financial statements. 6

7 1. Reporting entity Algeco Scotsman Global S.à r.l. (further referred to as the Company or together with its subsidiaries the Group ) is a limited liability company (société à responsabilité limitée) incorporated under the laws of Luxembourg on July 6, 2007 under the name Ristretto Group S.à r.l. The Company changed its name in July 2012 to conform with the worldwide branding used by the Group s operating subsidiaries. The main activity of the Company is to carry out all transactions pertaining directly or indirectly to the acquisition of participating interests as well as the financing of subsidiary companies. The Group, through its operating subsidiaries, engages in the leasing and sale of mobile offices, modular buildings and storage products and their delivery and installation throughout Europe, North America, Latin America and beginning in October 2012, Asia Pacific. The registered office of the Company is at 20, rue Eugène Ruppert, L-2453 Luxembourg. The Group carries out its business activities principally trading under the names Williams Scotsman in North America, Algeco in Europe, Elliott in the United Kingdom, Eurobras in Brazil, Ausco in Australia and Portacom in New Zealand. The Group s ultimate parent is Algeco/Scotsman Holding S.à r.l. ( Holdings ), a limited liability company incorporated under the laws of Luxembourg, principally owned by a group of investment funds managed by TDR Capital LLP ( TDR ), CMI Luxembourg S.à r.l. ( CMI ) and certain former and current lenders. 2. Basis of preparation and consolidation a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statements were approved by the Board of Managers on April 29, b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments and share-based payments accounted for as liabilities which are measured at fair value at each reporting date and long-lived assets where impairment charges have been recorded which are measured at fair value at the impairment date. c) Presentation currency These consolidated financial statements are presented in Euro (EUR). d) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at December 31, Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when 7

8 such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are eliminated in full. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportion of the share of the acquiree s net assets. Total comprehensive income within a subsidiary is attributable to non-controlling interest when the noncontrolling interest is entitled to share in the results of operations of the Group. e) Reclassifications The following accounts were reclassified in the Statement of Financial Position at December 31, 2011 to conform to the current presentation. Accrued interest on loans and borrowings of 38,290 and 7,753 at December 31, 2012 and December 31, 2011, respectively were classified from current loans and borrowings to be separately stated on the Statement of Financial Position. Customer deposit liabilities of 7,027 and 6,898 at December 31, 2012 and December 31, 2011, respectively were reclassified from Short-term financial liabilities to Trade and other payables. Bank overdraft liabilities were reclassified from a separate line on the Statement of Financial Position to Short-term financial liabilities. Other revenue was reclassified in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, December 31, 2011 and December 31, 2010 to conform to the current presentation in which other revenue is included in leasing and services revenue. 3. Significant accounting policies a) Business combinations and goodwill Business combinations, with unrelated entities, are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest (if any) in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be recognized in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured and subsequent settlement will be accounted for within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the 8

9 appropriate IFRS. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained. Business combinations among entities under the common control of the Group s controlling shareholders are accounted for under the pooling of interest method prospectively from the date on which control is taken. b) Foreign currency transactions and translation The Group s presentation currency is the EUR which is the Company s functional currency. The assets and liabilities of foreign operations where the functional currency is different from the presentation currency are translated from the functional currency to the presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations, where the functional currencies are different from the presentation currency, are translated from the functional currency to the presentation currency at average exchange rates for the period. Foreign currency differences from translating foreign operations into the presentation currency are recognized as a component of other comprehensive income. Transactions in foreign currencies (currencies other than the Group entities functional currencies) are translated to the respective functional currencies at exchange rates at the dates of the transactions. Foreign currency differences arising from transactions in foreign currencies are recognized in profit or loss. Monetary assets and liabilities denominated in foreign currencies at the reporting date other than the functional currency are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on these monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period. Foreign currency differences arising on retranslation are recognized in profit or loss. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a consolidated Group entity, the settlement of which is neither planned nor likely in the foreseeable future, 9

10 are considered to form part of a net investment in the Group entity and are included in the foreign currency translation component of other comprehensive income. c) Rental equipment Rental equipment (rental fleet) is comprised of assets held for rental to customers which are expected to be in use for more than one reporting period. Items of rental fleet are measured at cost less accumulated depreciation and impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labor and any other costs directly attributable to bringing the asset to a working condition for its intended use. Costs of improvements and betterments to rental equipment are capitalized when such costs extend the useful life of the equipment. Costs incurred for equipment to meet a particular lease specification are capitalized and depreciated over the lease term. Rental fleet assets are depreciated on a straight-line basis over their estimated useful lives which generally range from 9 to 20 years with a residual value of up to 50%. These useful lives and residual values vary within the Group based on the type of unit, local operating conditions and local business practices. Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted prospectively, if appropriate. d) Other property, plant and equipment Other property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Maintenance and repair costs are expensed as incurred. The cost of self-constructed assets includes the cost of materials, direct labor and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Assets leased under finance leases are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. Land is not depreciated. Depreciation is computed using the straight-line method over estimated useful lives, as follows: Buildings Machinery and equipment Furniture and fixtures years 3-10 years 3-10 years Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted prospectively, if appropriate. 10

11 e) Intangible assets Goodwill Goodwill arises upon acquisition of businesses. Goodwill represents the excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognized immediately in profit or loss. Goodwill is considered to have an indefinite life and is not amortized. Goodwill is tested for impairment at least annually, and is measured at cost less impairment losses, if any. Other intangible assets Other intangible assets that are acquired by the Group and determined to have an indefinite useful life are not amortized, but are tested for impairment at least annually. Other intangible assets that have finite useful lives are measured at cost less accumulated amortization and impairment losses, if any. Subsequent expenditures for intangible assets are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. Intangible assets in the process of being developed are not amortized until such time as they are placed in use. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives for these assets are as follows: Customer relationships Software 1-12 years 3-7 years f) Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise cash and cash equivalents, trade and other receivables, loans and borrowings and trade and other payables. These non-derivative financial instruments are recognized initially at fair value plus any directly attributable transaction costs. Costs directly attributable to the issuance of a finance liability are offset against that liability and are amortized over the life of that liability using the effective interest rate method. Subsequent to initial recognition, non-derivative financial instruments are measured as described below. Because of their short-term nature, the amounts reported in the Consolidated Statements of Financial Position for cash, trade and other receivables and trade and other payables approximate fair value. The fair value of total loans and borrowings is approximately 2,258,433 at December 31, Derivative financial instruments The Group held derivative financial instruments to manage its foreign currency and interest rate risk exposures. Derivatives were initially recognized and at subsequent reporting dates at fair value. Attributable transaction costs were recognized in profit or loss when incurred. Hedge accounting was not applied to these derivative instruments. Changes in the fair value of all derivatives were recognized in 11

12 profit or loss as part of finance income and expense. Derivatives were carried as financial assets when the fair value was positive and as financial liabilities when the fair value was negative. The fair value of derivative financial instruments was classified as current or non-current based on the maturity of the underlying instrument. g) Lease transactions The determination of whether an arrangement is, or contains, a lease is based upon the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in the arrangement. Group as lessee Operating lease agreements, for which the Group has a financial commitment but does not bear all of the risks and rewards of ownership, are not reflected in the Consolidated Statements of Financial Position. Operating lease payments are recognized as an operating expense in the Statement of Comprehensive Income on a straight-line basis over the lease term. Leases under which the Group, as a lessee, assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset and associated liability are measured at an amount equal to the lower of the leased assets fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Initial direct costs are included in the initial measurement of the lease payable. Minimum lease payments made under finance leases are apportioned between finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Current lease payments due at the reporting date are classified as part of loans and borrowings in the accompanying Consolidated Statements of Financial Position. Group as lessor Leases in which the Group transfers substantially all of the risks and rewards of ownership of an asset are classified as finance leases. All other leases are classified as operating leases. Payments from customers under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Upon commencement of a finance lease with a customer, the Group records the net investment in the lease, which consists of the sum of the minimum lease term payments and the un-guaranteed residual value (gross investment in lease), less the unearned finance lease income. The difference between the gross investment and its present value is recorded as unearned finance lease income. Finance lease 12

13 income consists of the amortization of unearned finance lease income. Initial direct costs are included in the initial measurement of the lease receivables. Current lease payments due at the reporting date are classified as receivables under finance lease in the accompanying Consolidated Statements of Financial Position. Minimum lease payments received under finance leases are apportioned between finance income and a reduction of the outstanding receivable. The finance lease income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable. The transfer of the asset to a customer under a finance lease is considered a sale. h) Cash and cash equivalents The Group considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. For the purpose of the Consolidated Statements of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Outstanding bank overdrafts are included in Short-term financial liabilities. i) Inventories Inventories which consist of raw materials, rental equipment in assembly, parts and supplies and rental equipment held for sale, are measured at the lower of cost or net realizable value. The cost of inventories is based on the weighted average principle, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. j) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects. k) Impairment of non-financial assets Goodwill For the purpose of impairment testing, goodwill is allocated to cash generating units ( CGU ) or groups of cash generating units ( CGU Group ) that are expected to benefit from the synergies of the combination. CGU or CGU Groups to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the carrying value may be impaired. If the recoverable amount of each CGU or CGU Group to which goodwill has been allocated is less than the carrying amount of the unit or group, an impairment loss is recognized in profit or loss. Impairment losses are allocated first to reduce the carrying amount of any goodwill allocated to the unit or group, then to 13

14 intangible assets of the unit or group, and lastly to the carrying amount of the other assets in the unit or group on a pro rata basis. Impairment losses relating to goodwill may not be reversed in future periods. The Group performs its annual impairment test for goodwill on October 1 st of each year. Intangible assets with indefinite useful lives Intangible assets with indefinite useful lives are also tested for impairment annually, or more frequently when there is an indication that the carrying value may be impaired. If the recoverable amount of the intangible assets with indefinite useful lives is less than its carrying amount, an impairment loss is recognized in profit or loss. The Group performs its annual impairment test for intangible assets with indefinite useful lives on October 1 st of each year. Other non-financial assets The carrying amounts of the Group s non-financial assets or groups of assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset s or group of assets recoverable amount is estimated. If the asset s estimated recoverable amount is less than its carrying value, an impairment loss is recognized. l) Retirement benefit obligation The Group provides post-employment benefits to certain of its employees under defined benefit plans. The fair value of defined benefit obligations is determined annually on December 31st. The Group s net obligation for defined benefit pension plans is calculated separately for each plan by first estimating the net present value of future benefits that employees have earned in return for their service in the current and prior periods. Any unrecognized past service costs and the fair value of any plan assets are deducted to arrive at the net obligation. The discount rate used in the present value calculation is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Group s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the net total of any unrecognized past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. The Group recognizes all actuarial gains and losses related to defined benefit plans in the year they arise in equity as a component of total comprehensive income. 14

15 m) Share-based payments Cash-settled equity plan The cost of awards under a cash-settled plan is measured initially at fair value at the grant date, which is the date at which the Group and the participants have a shared understanding of the terms and conditions of the arrangement. The fair value is expensed over the vesting period with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date with changes in fair value attributed to vested awards recognized as expense in the period. Equity-settled plan The cost of share grants under an equity-settled plan is measured based on the fair value at the grant date, which is the date at which the Group and plan participants have a shared understanding of the terms and conditions of the arrangement. The fair value is determined using a pricing model. The cost is recognized as an employee expense with a corresponding increase in equity over the period during which the relevant plan participant becomes fully entitled to the award. The ultimate expense recognized at each reporting date reflects the extent to which the vesting period has lapsed and the Group s best estimate of the number of shares that will ultimately vest. The expense on the Consolidated Statements of Comprehensive Income for a period represents the movement in cumulative expense recognized as of the beginning and end of that period. When the terms of an award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the award, or is otherwise beneficial to the employee as measured at the date of modification. When an award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. However, if a new award is issued and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. n) Provisions A provision is recognized when there is a present obligation (legal or constructive) as a result of a past event, in which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision is recognized. Provisions are measured at the value of the expenditures expected to be required to settle the obligation. Where the time value of money is material, provisions are discounted using an appropriate rate that takes into account the risks specific to the liability. Uninsured losses are recognized when the underlying event occurs and the value of the expenditures expected to be required to settle the obligation can be determined. Recoveries of amounts claimed from insurers to settle expenses incurred are recognized when it is virtually certain that reimbursement will be received. 15

16 o) Revenue The Group generates revenue from leasing rental equipment, sales of new and used rental equipment, and delivery, installation, maintenance and removal services and other incidental items related to accommodation services. The Group enters into arrangements with a single deliverable (such as goods or services) as well as multiple deliverables. Revenue under arrangements with multiple deliverables is recognized separately for each identifiable component with the arrangement consideration allocated on a relative fair value basis. Rental revenue Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Delivery, installation, maintenance and removal services associated with rental activities are recognized upon completion of the related services. Goods sold and services rendered Revenue from the sale of goods and the provision of service other than rental under accommodation arrangements is measured at the fair value of the consideration received or receivable, net of returns and trade discounts. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. Transfer of risks and rewards occurs when units are delivered and installed. Revenue from delivery and installation services incidental to the sales of rental equipment is recognized upon completion of delivery and installation of sold rental equipment. Revenue from the provision of services other than rental under accommodation agreements is recognized as services are provided. For finance leases where the Group is a lessor, the revenue recognized at the inception of the lease is the fair value of the asset, or, if lower, the present value of the minimum lease payments accruing to the Group, computed at a market rate of interest. The finance income earned by the Group on such arrangements is recognized in revenue over the lease term. Certain equipment is sold under construction-type contracts. Construction-type contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that those variations will result in revenue and can be measured reliably. When the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognized in profit or loss in proportion to the stage of completion of the contract determined by reference to the proportion of the costs incurred to date compared to estimated total costs under the contract. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognized immediately in profit or loss. For construction contracts in progress, a single asset (prepaid expense) or liability (deferred revenue) is presented for the total of costs 16

17 incurred and recognized profits, net of progress payments and recognized losses, in the Consolidated Statements of Financial Position. p) Finance income and expenses Finance income comprises interest income on funds invested, dividend income, currency gains and markto-market gains on financial instruments measured at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Finance expenses comprise interest expense on borrowings, amortization of deferred financing costs, currency losses and mark-to-market losses on financial instruments measured at fair value through profit or loss. All borrowing costs are recognized in profit or loss using the effective interest method. q) Income tax Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income. Current income tax relating to items recognized directly in equity is recognized in equity and not in profit (loss) for the year. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences, except: When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable 17

18 that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except: When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognized subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the acquisition measurement period or in profit or loss. r) New standards and interpretations not yet adopted New and amended standards and interpretations The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations effective as of January 1, 2012: IAS 12 Income Taxes: Recovery of Underlying Assets effective January 1, 2012 Improvements to IFRSs (May 2012) 18

19 The adoption of the standards or interpretations is described below: IAS 12 Income Taxes: Recovery of Underlying Assets The amendment clarifies the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in IAS 16 always be measured on a sale basis of the asset. The adoption of the amendment did not have any impact on the financial position or results of operations of the Group. Improvements to IFRSs In May 2012, the IASB issued its fourth omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies, but had no impact on the financial position or results of operations of the Group. IAS 1 Presentation of Financial Statements: The amendment requires notes to the financial statements when additional comparative periods are voluntarily presented by clarifying the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative information is the previous period. IAS 16 Property, Plant and Equipment: This amendment clarifies that major spare part and servicing equipment that meets the definition of property, plant and equipment are not inventory to ensure these types of assets are consistently recorded and presented. IAS 32 Financial Instruments: Presentation This amendment clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes. Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or results of operations of the Group: IFRS 1 First-time Adoption of International Financial Reporting Standards IAS 34 Interim Financial Reporting 19

20 Standards issued but not yet effective Standards issued but not yet effective up to the date of issuance of the Group s consolidated financial statements are listed below. This listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or results of operations when applied at a future date. The Group intends to adopt these standards when they become effective. IAS 1 Financial Statement Presentation: Presentation of Items of Other Comprehensive Income The amendments to IAS 1 change the grouping of items presented in other comprehensive income. Items that could be reclassified / (or recycled ) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment affects presentation only and has there no impact on the Group s financial position or results of operations. The amendment becomes effective for annual periods beginning on or after July 1, IAS 19 Employee Benefits (Amendment) The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The Group is currently assessing the full impact of the remaining amendments. The amendment becomes effective for annual periods beginning on or after January 1, IFRS 9 Financial Instruments: Classification and Measurement IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after January 1, In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group s financial assets, but will potentially have no impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture. IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27. This standard becomes effective for annual periods beginning on or after January 1,

21 IFRS 12 Disclosure of Interest in Other Entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. This standard becomes effective for annual periods beginning on or after January 1, IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance. This standard becomes effective for annual periods beginning on or after January 1, The following standards have been issued but are not yet effective for the Group. The Group has concluded that the adoption of these standards when required will not reasonably have an impact on disclosures, financial position or results of operations when applied: IAS 28 Investments in Associates and Joint Ventures (Amendment) IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendment) IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRS 1 Government Loans (Amendment) IFRS 7 Financial Instruments: Disclosures Enhanced Derecognition Disclosure Requirements IFRS 11 Joint Arrangements 4. Significant accounting judgments, estimates and assumptions The preparation of the Group s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these estimates and assumptions could result in outcomes that require a material adjustment to the carrying amount of the asset or liability or the disclosures of contingent liabilities in future periods. Judgments Business combinations Goodwill only arises in business combinations. The amount of goodwill initially recognized is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based to a considerable extent on management s judgment. 21