asedar 2012 dollarama finstateng

Dollarama Inc.

Consolidated Financial StatementsJanuary 29, 2012 and January 30, 2011(expressed in thousands of Canadian dollars)

PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., Chartered Accountants1250 René-Lévesque Boulevard West, Suite 2800, Montréal, Quebec, Canada H3B 2G4T: +1 514 205 5000, F: +1 514 876 1502

“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.

April 11, 2012

Independent Auditor’s Report

To the Shareholders ofDollarama Inc.

We have audited the accompanying consolidated financial statements of Dollarama Inc., which comprisethe consolidated statements of financial position as at January 29, 2012, January 30, 2011 and February 1,2010 and the consolidated statements of comprehensive income, changes in shareholders’ equity and cashflows for the years ended January 29, 2012 and January 30, 2011, and the related notes, which comprise asummary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statementsManagement is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with International Financial Reporting Standards, and for such internal controlas management determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur 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. Thosestandards require that we comply with ethical requirements and plan and perform the audits to obtainreasonable assurance about whether the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s 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, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evida basis for our audit opinion.

OpinionIn our opinion, the consolidatposition of Dollarama Inc. asfinancial performance and itsaccordance with Internationa

1 Chartered accountant auditor p

dence we have obtained in our audits is sufficient and

ted financial statements present fairly, in all materiaat January 29, 2012 and January 30, 2011 and Februcash flows for the years ended January 29, 2012 andal Financial Reporting Standards.

permit No. 19653

(2)

d appropriate to provide

l respects, the financialuary 1, 2010 and itsd January 30, 2011 in

Dollarama Inc.Consolidated Statements of Financial Position

(expressed in thousands of Canadian dollars)

Approved by the Board of Directors

__________________________________

The accompanying notes are an integral part of the consolidated financial statements.

(signed) Stephen Gunn (signed) John J. SwidlerStephen Gunn, Director John J. Swidler, Director

Note

As ofJanuary 29,

2012$

As ofJanuary 30,

2011$

As ofFebruary 1,

2010$

(note 20) (note 20)

Assets

Current assetsCash and cash equivalents 70,271 53,129 93,057Accounts receivable 1,844 1,821 1,453Deposits and prepaid expenses 4,436 4,658 4,924Merchandise inventories 315,873 258,905 234,684Derivative financial instruments 16 3,951 838 3,479

396,375 319,351 337,597

Non-current assetsDerivative financial instruments 16 - - 5,342Property and equipment 5 173,053 152,081 138,214Intangible assets 6 110,531 111,917 113,302Goodwill 6 727,782 727,782 727,782

Total assets 1,407,741 1,311,131 1,322,237

Liabilities and Shareholders’ Equity

Current liabilitiesAccounts payable and accrued liabilities 7 101,301 103,858 78,519Dividend payable 6,635 - -Income tax payable 20,635 12,830 23,445Derivative financial instruments 16, 17 248 5,630 55,194Current portion of long-term debt 8 13,967 14,292 1,925

142,786 136,610 159,083

Non-current liabilitiesLong-term debt 8 258,385 347,763 468,591Deferred income tax 12 73,765 61,906 56,879Other liabilities 37,859 33,644 29,988

Total liabilities 512,795 579,923 714,541

Shareholders’ equityShare capital 525,024 523,295 518,430Contributed surplus 15,659 16,066 17,472Retained earnings 352,287 198,712 81,885Accumulated other comprehensive income (loss) 9 1,976 (6,865) (10,091)

Total shareholders’ equity 894,946 731,208 607,696

Total liabilities and shareholders’ equity 1,407,741 1,311,131 1,322,237

Dollarama Inc.Consolidated Statements of Changes in Shareholders’ Equity



Note

Number ofcommon

sharesShare

capital$

Contributedsurplus

$

Retainedearnings

$

Accumulatedother

comprehensiveincome (loss)

$Total

$

Balance – February 1, 2010 20 72,691,935 518,430 17,472 81,885 (10,091) 607,696

Net earnings for the year - - 116,827 - 116,827

Other comprehensive incomeUnrealized gain on derivative

financial instruments,net of reclassificationadjustment and incometax of $1,140 9 - - - 3,226 3,226

Stock-based compensation 10 - 1,082 - - 1,082Issuance of common shares 908,624 2,377 - - - 2,377Reclassification related to exercise

of stock options 2,488 (2,488) - - -

4,865 (1,406) - - 3,459

Balance – January 30, 2011 20 73,600,559 523,295 16,066 198,712 (6,865) 731,208

Net earnings for the year - - 173,474 - 173,474

Other comprehensive incomeUnrealized gain on derivative

financial instruments,net of reclassificationadjustment and incometax of $3,120 9 - - - 8,841 8,841

Dividends declared - - (19,899) - (19,899)Stock-based compensation 10 - 784 - - 784Issuance of common shares 206,983 538 - - - 538Reclassification related to exercise

of stock options 1,191 (1,191) - - -

1,729 (407) (19,899) - (18,577)

Balance – January 29, 2012 73,807,542 525,024 15,659 352,287 1,976 894,946

Dollarama Inc.Consolidated Statements of Comprehensive Income

(expressed in thousands of Canadian dollars, except share and per share amounts)


Note

For theyear endedJanuary 29,

2012$


2011$

(note 20)

Sales 1,602,827 1,419,914Cost of sales 1,002,487 906,982

Gross profit 600,340 512,932

General, administrative and store operating expenses 305,121 278,952Amortization and depreciation 33,336 28,508

Operating income 261,883 205,472

Net financing costs 11 16,555 34,460

Earnings before income taxes 245,328 171,012

Provision for income taxes 12 71,854 54,185

Net earnings for the year 173,474 116,827

Other comprehensive incomeUnrealized gain on derivative financial instruments, net of

reclassification adjustment 16 11,961 4,366Income tax relating to component of other

comprehensive income (3,120) (1,140)

Total other comprehensive income 8,841 3,226

Total comprehensive income for the year 182,315 120,053

Earnings per common shareBasic net earnings per common share 13 2.35 1.60Diluted net earnings per common share 13 2.30 1.55

Weighted average number of common shares outstandingduring the year (in thousands) 13 73,684 73,153

Weighted average number of diluted common sharesoutstanding during the year (in thousands) 13 75,563 75,377

Dollarama Inc.Consolidated Statements of Cash Flows



Note


2012$


2011$

(note 20)

Cash flows

Operating activitiesNet earnings for the year 173,474 116,827Adjustments for

Depreciation of property and equipment 33,493 28,934Amortization of intangible assets 1,076 1,349Amortization of deferred tenant allowances (2,444) (2,014)Amortization of deferred leasing costs 310 336Amortization of unfavourable lease rights (1,233) (1,775)Amortization of debt issue cost and discounts 2,250 10,179Excess of receipts over amount recognized

on derivative financial instruments 16 3,466 17,047Foreign exchange gain on long-term debt - (15,850)Deferred lease inducements 3,323 3,058Deferred leasing costs - (300)Deferred tenant allowances 4,028 4,387Stock-based compensation 10 784 1,082Repayment of capitalized interest on long-term debt - (28,074)Repayment of finance lease (653) -Deemed interest on repayment of long-term debt (1,419) (20,207)Deferred income tax 8,739 3,886Other (9) 5

225,185 118,870Changes in non-cash working capital components 18 (52,123) (9,599)

Net cash generated from operating activities 173,062 109,271

Investing activitiesSettlement of derivative financial instruments 16 - (54,262)Purchase of property and equipment (52,957) (42,981)Proceeds on disposal of property and equipment 297 176

Net cash used by investing activities (52,660) (97,067)

Financing activitiesProceeds from long-term debt - 525,000Repayment of long-term debt 8 (90,459) (571,401)Dividends (13,264) -Issuance of common shares 538 2,377Debt issue costs (75) (8,108)

Net cash used by financing activities (103,260) (52,132)

Increase (decrease) in cash and cash equivalents 17,142 (39,928)

Cash and cash equivalents – Beginning of year 53,129 93,057

Cash and cash equivalents – End of year 70,271 53,129

Cash payment of interest 11,495 50,454Cash payment of income taxes 55,954 64,043

Dollarama Inc.Notes to Consolidated Financial StatementsJanuary 29, 2012 and January 30, 2011

(expressed in thousands of Canadian dollars, unless otherwise noted)

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1 General information and basis of measurement

General information

Dollarama Inc. (the “Corporation”) was formed on October 20, 2004 under the Canada Business CorporationsAct. The Corporation operates dollar stores in Canada that sell all items for $2 or less. As of January 29, 2012, itmaintains retail operations in every Canadian province. The Corporation’s corporate headquarters, distributioncentre and warehouses are located in the Montréal area, Canada. The Corporation is listed on the Toronto StockExchange and is incorporated and domiciled in Canada.

The Corporation’s registered head office is located at 5805 Royalmount Avenue, Montréal, Quebec H4P 0A1.

As of January 29, 2012, the significant entities within the legal structure of the Corporation are as follows:

Dollarama Group L.P. has a senior secured credit facility as further described in note 8.

Dollarama L.P. and Dollarama Corporation operate the chain of stores and perform related logistical andadministrative support activities.

2 Basis of preparation and transition to International Financial Reporting Standards(“IFRS”)

Basis of preparation and adoption of IFRS

The Corporation prepares its consolidated financial statements in accordance with Canadian generally acceptedaccounting principles (“GAAP”) as set out in the Handbook of the Canadian Institute of Chartered Accountants(“CICA Handbook”). In 2010, the CICA Handbook was revised to incorporate IFRS as issued by theInternational Accounting Standards Board (“IASB”) and to require publicly accountable enterprises to applythese standards effective for years beginning on or after January 1, 2011. Accordingly, these are theCorporation’s first annual consolidated financial statements prepared in accordance with IFRS as issued by theIASB. In these consolidated financial statements, the term “Canadian GAAP” refers to Canadian GAAP beforethe adoption of IFRS.

Dollarama Inc.

Dollarama Group L.P.

Dollarama L.P. Dollarama Corporation



(2)

These consolidated financial statements have been prepared in compliance with IFRS. Subject to certaintransition elections and exceptions disclosed in note 20, the Corporation has consistently applied theaccounting policies used in the preparations of its opening IFRS consolidated statement of financial position asof February 1, 2010 throughout all periods presented, as if these policies had always been in effect. Note 20discloses the impact of the transition to IFRS on the Corporation’s reported shareholders’ equity as ofJanuary 30, 2011 and comprehensive income and cash flows for the year ended January 30, 2011.

These consolidated financial statements were approved by the Board of Directors for issue on April 10, 2012.

3 Summary of significant accounting policies

Subsidiaries

Subsidiaries are all entities (including special-purpose entities) over which the Corporation has the power togovern the financial and operating policies generally accompanying a shareholding of more than one half of thevoting rights. The existence and effect of potential voting rights that are currently exercisable or convertible areconsidered when assessing whether the Corporation controls another entity. Subsidiaries are fully consolidatedfrom the date on which control is transferred to the Corporation. They are deconsolidated from the date onwhich control ceases.

Intercompany transactions, balances and unrealized gains on transactions between group companies areeliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment ofthe asset transferred. Subsidiaries’ accounting policies have been changed where necessary to ensureconsistency with the policies adopted by the Corporation.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Corporation’s entities are measured using the currencyof the primary economic environment in which the entity operates (the “functional currency”). Theconsolidated financial statements are presented in Canadian dollars, which is also the Corporation’s functionalcurrency.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing atthe date of the transactions. Foreign exchange gains and losses resulting from the settlement of foreigncurrency transactions and from the translation at the year-end exchange rate of monetary assets and liabilitiesdenominated in foreign currencies are recognized in earnings, except where hedge accounting is applied asdescribed below under derivative financial instruments.



(3)

Segment information

The Corporation manages its business on the basis of one reportable segment. Operating segments are reportedin a manner consistent with the internal reporting provided to the chief operating decision-maker.

Financial assets

The Corporation classifies its financial assets in the following categories: financial assets at fair value throughprofit or loss, and loans and receivables. The classification depends on the purpose for which the financialassets were acquired. Management determines the classification of its financial assets at initial recognition.

a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset isclassified in this category if acquired principally for the purpose of selling in the short term. Derivatives arealso categorized as held for trading unless they are designated as hedges.

Financial assets carried at fair value through profit or loss are initially and subsequently recognized at fairvalue, and transaction costs are expensed in earnings.

b) Loans and receivables

Loans and receivables comprise cash and cash equivalents and accounts receivable. Loans and receivablesare non-derivative financial assets with fixed or determinable payments that are neither quoted in anactive market nor intended for trading. They are included in current assets, except for maturities greaterthan 12 months after the statement of financial position date. These are classified as non-current assets.Loans and receivables are subsequently carried at amortized cost using the effective interest method.

Financial liabilities

Financial liabilities comprise accounts payable and accrued liabilities, dividend payable, derivative financialinstruments, long-term debt and other liabilities.

Long-term debt is recognized initially at fair value, net of transaction costs incurred, and is subsequentlycarried at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemptionvalue is recognized in the consolidated statement of comprehensive income over the period of the debt usingthe effective interest method.

Fees paid on the establishment of revolving loan facilities are capitalized as a prepayment for liquidity servicesand amortized over the period of the facility to which it relates.

Financial liabilities are classified as current liabilities unless the Corporation has an unconditional right to defersettlement of the financial liabilities for at least 12 months after the statement of financial position date.



(4)

Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statementof financial position when there is a legally enforceable right to offset the recognized amounts and there is anintention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Derivative financial instruments

The Corporation uses derivative financial instruments in the management of its foreign currency risk. In priorperiods, the Corporation also used derivative financial instruments in the management of its interest rateexposure. The Corporation designates certain derivatives as hedges of a particular risk associated with a highlyprobable forecast transaction (cash flow hedge).

When hedge accounting is used, the Corporation documents at inception the relationships between the hedginginstruments and the hedged items, as well as its risk management objective and strategy for undertakingvarious hedge transactions. This process includes linking derivatives to specific assets and liabilities on theconsolidated statement of financial position or to specific firm commitments or forecasted transactions. TheCorporation also assesses whether the derivatives that are used in hedging transactions are effective inoffsetting changes in cash flows of hedged items.

Movements on the hedging reserve in shareholders’ equity are shown in the consolidated statement of changesin shareholders’ equity. The full fair value of a hedging derivative is classified as a non-current asset or liabilitywhen the remaining maturity of the hedged item is more than 12 months and as a current asset or liability whenthe remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a currentasset or liability.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flowhedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in earnings. Amounts accumulated in shareholders’ equity are reclassified to earningsin the periods when the hedged item affects earnings. The gain or loss relating to the effective portion of thederivatives is recognized in the consolidated statement of comprehensive income in cost of sales.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedgeaccounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized whenthe forecast transaction is ultimately recognized in earnings. When a forecast transaction is no longer expectedto occur, the cumulative gain or loss that was reported in shareholders’ equity is immediately transferred toearnings.

Most foreign exchange forward contracts are designated as cash flow hedges of specific anticipatedtransactions.



(5)

Derivatives that do not qualify for hedge accounting

Derivative financial instruments which are not designated as hedges or have ceased to be effective prior tomaturity are recorded at their estimated fair values under assets or liabilities, with changes in their estimatedfair values recorded in earnings.

Foreign currency swap agreements

Prior to June 14, 2010, the Corporation had significant long-term debt denominated in US dollars. It usedforeign currency swap agreements to mitigate risks from fluctuations in the exchange rate. When notdesignated as hedges or when foreign currency swap agreements have ceased to be effective prior to maturity,changes in fair value were reported in earnings under net financing costs. Foreign currency swap agreementswere classified as non-current assets or non-current liabilities on the consolidated statement of financialposition.

Property and equipment

Property and equipment are carried at cost and depreciated under the straight-line method over the estimateduseful lives of the assets as follows:

Store and warehouse equipment 8 to 10 yearsComputer equipment 5 yearsVehicles 5 yearsLeasehold improvements Term of leaseComputer software 5 years

The Corporation recognizes in the carrying amount of property and equipment the cost of replacing parts of anitem when that cost is incurred, if it is probable that the future economic benefits embodied within the item willflow to the Corporation and the cost of the item can be measured reliably. The carrying amount of the replacedpart is derecognized.

Estimates of useful lives, residual values and methods of depreciation are reviewed annually. Any changes areaccounted for prospectively as a change in accounting estimate. If the expected residual value of an asset isequal to or greater than its carrying value, depreciation on that asset is ceased. Depreciation is resumed whenthe expected residual value falls below the asset’s carrying value. Gains and losses on disposal of an item ofproperty and equipment are determined by comparing the proceeds from disposal with the carrying amount ofthe item and are recognized directly in the consolidated statement of comprehensive income.

Intangible assets

Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of theconsideration transferred over IFRS interest in net fair value of the net identifiable assets, liabilities andcontingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.



(6)

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested for impairment annually,as of the financial position date, or more frequently if events or circumstances indicate that it may be impaired.For the purposes of annual impairment testing, goodwill is allocated to one group of cash-generating units(“CGUs”) that is expected to benefit from the business combination, and which represent the lowest level withinthe Corporation at which goodwill is monitored for internal management purposes, according to operatingsegment. Negative goodwill arising on an acquisition is recognized directly in the consolidated statement ofcomprehensive income.

Trade name

The trade name is recorded at cost and is not subject to amortization, having an indefinite life. It is tested forimpairment annually, as of the financial position date, or more frequently if events or circumstances indicatethat it may be impaired. An impairment loss is recognized for the amount by which the asset’s carrying amountexceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to selland value in use. As the trade name does not generate cash flows that are independent from other assets orindividual CGUs, the Corporation estimates the recoverable amount of the CGU to which the asset belongs.

Impairment of other non-financial assets

Assets that are subject to amortization are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverableamount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. Forthe purposes of assessing impairment, assets are grouped at the lowest levels for which there are separatelyidentifiable cash flows (CGUs – these are individual stores). Non-financial assets other than goodwill thatsuffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities from the date of purchaseof three months or less.

Merchandise inventories

Merchandise inventories at the distribution centre, warehouses and stores are stated at the lower of cost andnet realizable value. Cost is determined on a weighted average cost basis and is assigned to store inventoriesusing the retail inventory method. Costs of inventories include amounts paid to suppliers, duties and freightinto the warehouses as well as costs directly associated with warehousing and distribution.

Net realizable value is the estimated selling price in the ordinary course of business, less applicable variableselling expenses. Costs of inventories include the transfer from accumulated other comprehensive income (loss)of any gains (losses) on qualifying cash flow hedges related to the purchases of inventories.



(7)

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are obligations to pay for goods or services that have been acquired inthe ordinary course of business from suppliers. Accounts payable and accrued liabilities are classified as currentliabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Accounts payable and accrued liabilities are recognized initially at fair value and subsequently measured atamortized cost using the effective interest method.

Provisions

A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructiveobligation that can be estimated reliably, and if it is probable that an outflow of economic benefits will berequired to settle the obligation. Provisions are not recognized for future operating losses.

If the effect of time value of money is material, provisions are measured at the present value of the expendituresexpected to be required to settle the obligation using a pre-tax rate that reflects current market assessments ofthe time value of money and the risks specific to the obligation. The increase in the provision due to the passageof time is recognized as interest expense.

Share capital

Common shares are classified as shareholders’ equity. Incremental costs directly attributable to the issue ofshares or options are shown in shareholders’ equity as a deduction, net of tax, from the proceeds.

Dividends declared

Dividend distributions to the Corporation’s shareholders are recognized as a liability in the Corporation’sconsolidated financial statements in the period in which the dividends are declared by the Board of Directors.

Employee future benefits

A defined contribution plan is a post-employment benefit plan under which the Corporation pays fixedcontributions into a separate legal entity and will have no legal or constructive obligation to pay furtheramounts. Obligations for contributions to defined contribution retirement plans are recognized as an expensein earnings when they are due.

The Corporation offers a group defined contribution pension plan to eligible employees whereby it matches anemployee’s contributions of up to 3% of the employee’s salary to a maximum of three thousand dollars per year.

Short-term employee benefits

Liabilities for bonus plans are recognized based on a formula that takes into consideration individualperformance and contributions to the profitability of the Corporation.



(8)

Termination benefits

Termination benefits are generally payable when employment is terminated before the normal retirement dateor whenever an employee accepts voluntary redundancy in exchange for these benefits. The Corporationrecognizes termination benefits when it is demonstrably committed to providing termination benefits as aresult of an offer made.

Income tax

The income tax expense for the year comprises current and deferred tax. Tax is recognized in earnings, exceptto the extent that it relates to items recognized in other comprehensive income or directly in shareholders’equity. In this case, the tax is also recognized in other comprehensive income or directly in shareholders’ equity,respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at thestatement of financial position date and any adjustment to tax payable in respect of previous years.

Deferred income tax is recognized using the liability method on temporary differences arising between the taxbases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,deferred income tax liability is not accounted for if it arises from initial recognition of goodwill or if it arisesfrom initial recognition of an asset or liability in a transaction other than a business combination that at thetime of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determinedusing tax rates (and laws) that have been enacted or substantively enacted by the statement of financial positiondate and are expected to apply when the related deferred income tax asset is realized or the deferred income taxliability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profits will beavailable against which the temporary differences can be utilized.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current taxassets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxlevied by the same taxation authority on either the taxable entity or different taxable entities where there is anintention to settle the balances on a net basis.

Revenue recognition

The Corporation recognizes revenue at the time the customer tenders payment for and takes possession of themerchandise. All sales are final. Revenue is shown net of sales tax, rebates and discounts. Gift cards sold arerecorded as a liability and revenue is recognized when gift cards are redeemed.

Cost of sales

Cost of sales includes the cost of merchandise inventories, outbound transportation costs, warehousing anddistribution costs, as well as store, warehouse and distribution centre occupancy costs.



(9)

General, administrative and store operating expenses

The Corporation includes store and head office salaries and benefits, repairs and maintenance, professionalfees, store supplies and other related expenses in general, administrative and store operating expenses.

Pre-opening costs

Costs associated with the opening of new stores are expensed as incurred, and included in general,administrative and store operating expenses in the consolidated statement of comprehensive income.

Vendor rebates

The Corporation records vendor rebates, consisting of volume purchase rebates, when it is probable that theywill be received and the amounts are reasonably estimable. The rebates are recorded as a reduction of inventorypurchases and are reflected as a reduction of cost of sales in the consolidated statement of comprehensiveincome.

Earnings per common share

Earnings per common share is determined using the weighted average number of common shares outstandingduring the year. Diluted earnings per common share is determined using the treasury stock method to evaluatethe dilutive effect of stock options. Under this method, instruments with a dilutive effect are considered to havebeen exercised at the beginning of the year, or at the time of issuance, if later, and the proceeds received areconsidered to have been used to redeem common shares at the average market price during the year.

Operating leases

The Corporation leases stores, warehouses, distribution centres and corporate headquarters. Leases in which asignificant portion of the risks and rewards of ownership are retained by the lessor are classified as operatingleases. The Corporation recognizes rental expense incurred and inducements received from landlords on astraight-line basis over the term of the lease. Any difference between the calculated expense and the amountsactually paid is reflected as deferred lease inducements in the Corporation’s consolidated statement of financialposition. Contingent rental expense is recognized when the achievement of specified sales targets is consideredprobable.

Favourable and unfavourable lease rights represent the fair value of lease rights as established on the date oftheir acquisition or assumption and are amortized on a straight-line basis over the terms of the related leases.

Deferred leasing costs and deferred tenant allowances are recorded on the consolidated statement of financialposition and amortized using the straight-line method over the term of the respective lease.



(10)

Stock-based compensation

The Corporation recognizes a compensation expense for options granted based on the fair value of the optionsat the grant date, using the Black-Scholes option pricing model. The options granted by the Corporation vest intranches (graded vesting) and, accordingly, the expense is recognized in award tranches.

The total amount to be expensed is determined by reference to the fair value of the options granted, includingany market performance conditions.

The impact of any service and non-market performance vesting conditions (for example, profitability, salesgrowth targets and retaining an employee of the entity over a specified time period) are excluded from the fairvalue calculation. Non-market vesting conditions are included in assumptions about the number of options thatare expected to vest. The total expense is recognized over the vesting period, which is the period over which allof the specified vesting conditions are to be satisfied. At the end of each reporting period, the Corporationrevises its estimates of the number of options that are expected to vest based on the non-marketing vestingconditions. It recognizes the impact of the revision to original estimates, if any, in the consolidated statement ofcomprehensive income, with a corresponding adjustment to shareholders’ equity.

The cash subscribed for the shares issued when the options are exercised is credited, together with the relatedcompensation costs, to share capital (nominal value), net of any directly attributable transaction costs.

Accounting standards and amendments issued but not yet adopted

The following standards and amendments to existing standards have been published and are mandatory for theCorporation’s accounting periods beginning on or after February 1, 2013 unless otherwise noted. TheCorporation has not early adopted them.

IFRS 9, Financial Instruments, addresses classification and measurement of financial assets and replacesthe multiple category and measurement models in IAS 39, Financial Instruments: Recognition andMeasurement, with a new mixed measurement model having only two categories: amortized cost and fairvalue through profit or loss. IFRS 9 also replaces the models for measuring equity instruments. Suchinstruments are recognized either at fair value through profit or loss or at fair value through othercomprehensive income. Where such equity instruments are measured at fair value through othercomprehensive income, dividends, to the extent that they do not clearly represent a return on investment,are recognized in profit or loss; however, other gains and losses (including impairments) associated withsuch instruments remain in accumulated comprehensive income indefinitely. IFRS 9 is effective for annualperiods beginning on or after January 1, 2015.



(11)

In May 2011, the IASB issued the following standards which have not yet been adopted by the Corporation:IFRS 10, Consolidated Financial Statements; IFRS 11, Joint Arrangements; IFRS 12, Disclosure ofInterests in Other Entities; IFRS 13, Fair Value Measurement; IAS 27, Consolidated and SeparateFinancial Statements; and IAS 28, Investments in Associates and Joint Ventures (as amended in 2011).Each of the new standards is effective for annual periods beginning on or after January 1, 2013, with earlyadoption permitted. The Corporation has not yet begun the process of assessing the impact that the newand amended standards will have on its consolidated financial statements nor whether to early adopt anyof the new requirements. The following is a brief summary of the new standards:

o IFRS 10 – Consolidated Financial Statements

IFRS 10 requires an entity to consolidate an investee when the entity is exposed, or has rights, tovariable returns from its involvement with the investee and has the ability to affect those returnsthrough its power over the investee. Under existing IFRS, consolidation is required when anentity has the power to govern the financial and operating policies of another entity so as toobtain benefits from its activities. IFRS 10 replaces SIC 12, Consolidation – Special PurposeEntities, and parts of IAS 27.

o IFRS 11 – Joint Arrangements

IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture or jointoperation. Joint ventures will be accounted for using the equity method of accounting, whereasfor a joint operation, the venturer will recognize its share of the assets, liabilities, revenue andexpenses of the joint operation. Under existing IFRS, entities have the choice to proportionatelyconsolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31, Interestsin Joint Ventures, and SIC 13, Jointly Controlled Entities – Non-Monetary Contributions byVenturers.

o IFRS 12 – Disclosure of Interests in Other Entities

IFRS 12 establishes disclosure requirements for interests in other entities, such as jointarrangements, associates, special-purpose vehicles and off-balance sheet vehicles. The standardcarries forward existing disclosures and also introduces significant additional disclosurerequirements that address the nature of, and risks associated with, an entity’s interests in otherentities.

o IFRS 13 – Fair Value Measurement

IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements foruse across all IFRS standards. The new standard clarifies that fair value is the price that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date. It also establishes disclosures about fair valuemeasurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersedamong the specific standards requiring fair value measurements and in many cases does notreflect a clear measurement basis or consistent disclosures.



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o Amendments to other standards

In addition, there have been amendments to existing standards, including IAS 27, Consolidatedand Separate Financial Statements; IAS 28, Investments in Associates and Joint Ventures;IAS 1, Presentation of Financial Statements; IFRS 7, Financial Instruments: Disclosures; andIAS 32, Financial Instruments: Presentation. IAS 27 addresses accounting for subsidiaries,jointly controlled entities and associates in non-consolidated financial statements. IAS 28 hasbeen amended to include joint ventures in its scope and to address the changes in IFRSs 10 to 13.IAS 1 has been amended to change the disclosure of items presented in other comprehensiveincome, including a requirement to separate items presented in other comprehensive income intotwo groups based on whether they may be recycled to profit or loss in the future. IFRS 7 has beenamended to incorporate additional disclosure requirements related to offsetting financial assetsand financial liabilities. IAS 32 has been amended to clarify certain requirements for offsettingfinancial assets and financial liabilities.

4 Critical accounting estimates and judgments

The preparation of financial statements requires management to use judgment in applying its accountingpolicies and estimates and assumptions about the future. Estimates and other judgments are continuallyevaluated and are based on management’s experience and other factors, including expectations about futureevents that are believed to be reasonable under the circumstances. The following discusses the most significantaccounting judgments and estimates that the Corporation has made in the preparation of the consolidatedfinancial statements.

Valuation of merchandise inventories

The valuation of store merchandise inventories is determined by the retail inventory method valued at the lowerof cost and net realizable value. Under the retail inventory method, merchandise inventories are converted to acost basis by applying an average cost to sell ratio. Merchandise inventories that are at the distribution centre orwarehouses and inventories that are in transit from suppliers are stated at the lower of cost and net realizablevalue, determined on a weighted average cost basis. Merchandise inventories include items that have beenmarked down to management’s best estimate of their net realizable value and are included in cost of sales in theperiod in which the markdown is determined. The Corporation estimates its markdown reserve based on theconsideration of a variety of factors, including quantities of slow-moving or carryover seasonal merchandise onhand, historical markdown statistics, future merchandising plans and inventory shortages (shrinkage). Theaccuracy of the Corporation’s estimates can be affected by many factors, some of which are beyond its control,including changes in economic conditions and consumer buying trends. Historically, the Corporation has notexperienced significant differences in its estimates of markdowns compared with actual results.



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Impairment of goodwill and trade name

Goodwill and trade name are not subject to amortization and are tested for impairment annually or morefrequently if events or circumstances indicate that the assets might be impaired. Impairment is identified bycomparing the recoverable amount of the CGU to its carrying value. To the extent the CGU carrying amountexceeds its recoverable amount, an impairment loss is recognized in the consolidated statement ofcomprehensive income.

The recoverable amount of the CGU is based on the fair value less cost to sell. The fair value less cost to sell isthe amount for which the CGU could be exchanged between knowledgeable willing parties in an arm’s lengthtransaction, less cost to sell. Management undertakes an assessment of relevant market data, which is themarket capitalization of the Corporation.

As of January 29, 2012, January 30, 2011 and February 1, 2010, impairment reviews were performed bycomparing the carrying value of goodwill and the trade name with the recoverable amount of the CGU to whichgoodwill and the trade name have been allocated. Management determined that there has been no impairment.

Fair value of financial instruments and hedging

The fair value of financial instruments is based on current interest rates, foreign exchange rates, credit risk,market value and current pricing of financial instruments with similar terms. Unless otherwise disclosed, thecarrying value of the financial instruments, especially those with current maturities such as cash and cashequivalents, accounts receivable, deposits and prepaid expenses, accounts payable and accrued liabilities, anddividend payable approximates their fair value.

When hedge accounting is used, formal documentation is set up about relationships between hedginginstruments and hedged items, as well as a risk management objective and strategy for undertaking varioushedge transactions. This process includes linking derivatives to specific firm commitments or forecasttransactions. As part of the Corporation’s hedge accounting, an assessment is made to determine whether thederivatives that arose as hedging instruments are effective in offsetting changes in cash flows of hedged items.

Income tax

Significant judgment is required in determining the provision for income tax. There are transactions andcalculations for which the ultimate tax determination is uncertain. The Corporation recognizes liabilities foranticipated tax audit issues based on estimates of whether additional tax will be due. Where the final taxoutcome of these matters differs from the amounts that were initially recorded, such differences will impact thecurrent and deferred income tax assets and liabilities in the period in which such determination is made.



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5 Property and equipment

Store andwarehouseequipment

$

Computerequipment

$Vehicles

$

Leaseholdimprovements

$

Computersoftware

$Total

$

As of February 1, 2010Cost 123,475 3,142 2,681 79,993 14,712 224,003Accumulated depreciation (46,567) (1,365) (1,341) (28,061) (8,455) (85,789)

Net book value 76,908 1,777 1,340 51,932 6,257 138,214

For the year endedJanuary 30, 2011

Opening net book value 76,908 1,777 1,340 51,932 6,257 138,214Additions 20,790 453 992 18,770 1,976 42,981Disposals, at cost (5) - (625) (37) - (667)Accumulated depreciation

on disposals - - 449 38 - 487Depreciation charge (16,073) (493) (494) (8,627) (3,247) (28,934)

Closing net book value 81,620 1,737 1,662 62,076 4,986 152,081

As of January 30, 2011Cost 144,260 3,595 3,048 98,726 16,688 266,317Accumulated depreciation (62,640) (1,858) (1,386) (36,650) (11,702) (114,236)

Net book value 81,620 1,737 1,662 62,076 4,986 152,081


Opening net book value 81,620 1,737 1,662 62,076 4,986 152,081Additions 27,429 1,890 1,426 19,525 4,483 54,753Disposals, at cost (49) - (1,095) (15) - (1,159)Accumulated depreciation

on disposals 15 - 852 4 - 871Depreciation charge (18,699) (1,143) (606) (10,452) (2,593) (33,493)

Closing net book value 90,316 2,484 2,239 71,138 6,876 173,053

As of January 29, 2012Cost 171,640 5,485 3,379 118,236 21,171 319,911Accumulated depreciation (81,324) (3,001) (1,140) (47,098) (14,295) (146,858)

Net book value 90,316 2,484 2,239 71,138 6,876 173,053



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6 Goodwill and intangible assets

Intangible assets

Tradename

$

Covenantsnot to

compete$

Deferredleasing

costs$

Favourableleaserights

$Total

$Goodwill

$

As of February 1, 2010Cost 108,200 400 2,550 20,862 132,012 727,782Accumulated amortization - (298) (891) (17,521) (18,710) -

Net book value 108,200 102 1,659 3,341 113,302 727,782


Opening net book value 108,200 102 1,659 3,341 113,302 727,782Additions - - 300 - 300 -Amortization charge - (57) (336) (1,292) (1,685) -

Closing net book value 108,200 45 1,623 2,049 111,917 727,782

As of January 30, 2011Cost 108,200 400 2,850 20,862 132,312 727,782Accumulated amortization - (355) (1,227) (18,813) (20,395) -

Net book value 108,200 45 1,623 2,049 111,917 727,782


Opening net book value 108,200 45 1,623 2,049 111,917 727,782Amortization charge - (45) (310) (1,031) (1,386) -

Closing net book value 108,200 - 1,313 1,018 110,531 727,782

As of January 29, 2012Cost 108,200 400 2,850 20,862 132,312 727,782Accumulated amortization - (400) (1,537) (19,844) (21,781) -

Net book value 108,200 - 1,313 1,018 110,531 727,782



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7 Accounts payable and accrued liabilities

As ofJanuary 29,

2012

As ofJanuary 30,

2011

As ofFebruary 1,

2010

Accounts payable 30,751 39,577 31,694Accrued liabilities and other

Compensation and benefits 27,913 21,612 19,597Merchandise inventories in transit 5,730 6,026 5,321Rent 5,736 4,850 4,607Sales tax 17,859 19,381 5,366Other 13,312 12,412 11,934

101,301 103,858 78,519

8 Long-term debt

Long-term debt outstanding consists of the following:

Carrying value

Note

As ofJanuary 29,

2012$

As ofJanuary 30,

2011$

As ofFebruary 1,

2010$

Senior secured credit facility 8(a) 274,997 366,875 -Senior subordinated deferred interest notes 8(b) - - 226,872Term bank loan 8(c) - - 250,564

274,997 366,875 477,436Less: Current portion (net of financing cost of

$135; 2011 – $190; 2010 – $678) 13,967 14,292 1,925

261,030 352,583 475,511Less: Unamortized financing costs 2,645 4,820 6,920

258,385 347,763 468,591



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a) Senior secured credit facility

On June 10, 2010, Dollarama Group L.P., a wholly owned subsidiary of the Corporation, entered into anagreement to refinance its senior secured credit facility with a new $600,000 syndicated senior securedcredit facility. This senior secured credit facility was amended on October 5, 2011 to reflect (i) a change inthe interest rates, from a range of 2.25% to 3.25% above bankers’ acceptance rates to a range of 1.25% to2.25% above bankers’ acceptance rates, and (ii) an extended maturity date on the revolving credit facilityuntil June 10, 2015.

The proceeds from the syndicated senior secured credit facility, net of debt issue costs of $8,108, wereused to repay the senior subordinated deferred interest notes (note 8(b)), the US dollar term bank loan(note 8(c)) and debt-related hedging obligations (note 16), with the remainder being used for generalcorporate purposes.

The syndicated senior secured credit facility includes a revolving credit facility amounting to $75,000 andconsists of revolving credit loans, bankers’ acceptances, swing line loans and a letter of credit facility.Borrowings under the swing line loans are limited to $10,000 and the letter of credit facility is limited to$25,000. As of January 29, 2012, there were no borrowings under the revolving credit facility, and lettersof credit issued for the purchase of inventories amounted to $917 (January 30, 2011 – $761 outstandingunder the previous senior secured credit facility). The maturity date of the revolving credit facility wasextended from June 2014 to June 2015.

The syndicated senior secured credit facility also includes a $525,000 term bank loan. Borrowings underthe term bank loan amounted to $274,997 as of January 29, 2012. The term loan of the syndicated seniorsecured credit facility will continue to mature in June 2014 and is repayable in quarterly capitalinstalments of $3,526 until January 2014 and a final capital instalment of $246,792 at maturity. Subject tocertain exceptions and reductions in the total lease-adjusted leverage ratio, the term bank loan requirespayment of 100% of net cash proceeds on certain sales of assets.

Repayment of principal under the senior secured credit facility

On July 29, 2011, the Corporation made an $84,827 payment on the term bank loan of its senior securedcredit facility, consisting of a quarterly capital instalment of $4,827 and a prepayment of $80,000.

b) Senior subordinated deferred interest notes (the “Deferred Interest Notes”)

On June 14, 2010, the Corporation repaid all of the issued and outstanding Deferred Interest Notes in theaggregate principal amount of US$212,169, ($219,340) in accordance with sections 3.01(a) and 3.03(b) ofthe Indenture at a redemption price equal to 101% of the principal amounts of such Deferred InterestNotes, plus accrued and unpaid interest up to July 15, 2010 (US$215,567 ($222,853)).

Prior to their redemption, the Deferred Interest Notes were converted into Canadian dollars at the foreignexchange rates prevailing at the statement of financial position date. As a result, a foreign exchange gain of$7,464 for the year ended January 30, 2011 was recorded in comprehensive income under net financingcosts.



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c) Term bank loan

Prior to repayment on June 14, 2010, the term bank loan of US$233,716 was converted into Canadiandollars at foreign exchange rates prevailing at the statement of financial position date. As a result, a foreignexchange gain of $8,198 for the year ended January 30, 2011 was recorded in the consolidated statementof comprehensive income under net financing costs.

d) Principal repayments on long-term debt due 12 months from the statement of financial position date ineach of the next three fiscal years are approximately as follows:

$

2013 14,1022014 14,1022015 246,793



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9 Accumulated other comprehensive income (loss)

Components of accumulated other comprehensive income (loss) include:

Unrealizedgain (loss) on

derivative financialinstruments,

designated ashedging instruments,net of reclassification

adjustments andincome tax

$

As of February 1, 2010 (10,091)

Net change in unrealized gain on foreign exchange forwardcontracts 1,618

Realized losses on foreign exchange forward contracts (16,432)Transfer to earnings 19,180Tax thereon (1,140)

3,226

As of January 30, 2011 (6,865)

Net change in unrealized gain on foreign exchange forwardcontracts 8,577

Realized losses on foreign exchange forward contracts (8,767)Transfer to earnings 12,151Tax thereon (3,120)

8,841

As of January 29, 2012 1,976



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10 Stock-based compensation

The Corporation has a management option plan whereby its directors, managers and employees may be grantedstock options to acquire its shares. Under the plan, the number and characteristics of stock options granted aredetermined by the Board of Directors of the Corporation, and the options will have a life not exceeding 10 years.

Under the plan, the following types of options are available:

a) Options with service requirements (“Service Conditions”)

These options are granted to purchase an equivalent number of common shares. The options vest at arate of 20% annually on the anniversary of the grant date.

b) Options with service and performance requirements (“Performance Conditions”)

These options are granted to purchase an equivalent number of common shares. The options becomeeligible to vest annually from the date of grant at a rate of 20% when the Performance Conditions aremet. As of January 29, 2012, there are no options with performance requirements outstanding.

Number ofcommon

shareoptions

Weightedaverage

purchaseprice

$

Outstanding – February 1, 2010 3,278,640 5.02

Granted 108,000 24.67Exercised (961,009) 4.02Forfeited (2,000) 24.51

Outstanding – January 30, 2011 2,423,631 6.23

Granted 250,000 41.47Exercised (260,632) 9.36

Outstanding – January 29, 2012 2,412,999 9.58

Exercisable – January 29, 2012 1,919,491 4.68

During the year ended January 29, 2012, the Corporation recognized stock-based compensation expense of$784 (January 30, 2011 – $1,082).



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Information relating to share options outstanding as of January 29, 2012:

Options outstanding Options exercisable

Price$

Numberof options

Weightedaverage

remaininglife (months)

Numberof options

Weightedaverage

remaininglife (months)

2.30 1,333,344 34 1,333,344 349.20 84,202 37 84,202 379.38 553,356 67 442,685 67

11.99 72,936 75 35,659 7417.50 11,161 93 1,601 9222.42 2,000 95 800 9524.51 100,000 98 20,000 9826.55 4,000 105 800 10528.84 2,000 107 400 10729.10 2,000 110 - -29.65 33,000 111 - -37.77 4,000 116 - -43.50 209,000 120 - -44.43 2,000 120 - -

2,412,999 55 1,919,491 43

The weighted average fair value of the share options granted was estimated at the grant date based on theBlack-Scholes option pricing model using the following assumptions:

As ofJanuary 29,

2012

As ofJanuary 30,

2011

Dividend yield 0.83% NilRisk-free interest rate 1.65% 1.65%Expected life 6 years 6 yearsExpected volatility 20% 48%Weighted average fair value of share options

granted at the grant date $10.31 $12.22

As part of the Corporation’s management option plan, the expected life of the options has to be determined. Theexpected life is estimated using the average of the vesting period and the contractual life of the options. Thevolatility is estimated based on the Corporation’s public trading history.



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11 Additional disclosure relating to the consolidated statement of comprehensive income

Compensation of key management is reported on the accrual basis of accounting consistent with the amountsrecognized on the consolidated statement of comprehensive income. Key management includes theCorporation’s chief executive officer, chief financial officer/secretary, chief operating officer, chiefmerchandising officer and senior vice-president Import Division


2012$


2011$

Compensation awarded to key management is summarized as follows:

Compensation of key management:

Salaries 3,556 3,355Pension – Defined contribution plan 15 15Annual bonus 4,354 3,836Option-based awards 632 903

Total compensation of key management 8,557 8,109

Other disclosures relating to the consolidated statement ofcomprehensive income:

Amortization and depreciation:

Cost of sales 28,883 24,391General, administrative and store operating expenses 4,453 4,117

Total amortization and depreciation 33,336 28,508

Employee benefit expense:

Wages and salaries (including bonuses) 222,746 201,032Share options granted to directors and employees 784 1,082Pension costs – Defined contribution plan 1,234 1,312

Total employee benefit expense 224,764 203,426

Financing costs:

Interest expense on financial liabilitiesat amortized cost 14,305 24,281

Amortization of debt issue costs 2,250 10,179

Net financing costs 16,555 34,460



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12 Income tax

a) Deferred income tax

The analysis of deferred tax assets and deferred tax liabilities is as follows:

As ofJanuary 29,

2012$

As ofJanuary 30,

2011$

As ofFebruary 1,

2010$

Deferred tax assetsTo be recovered after more than 12 months 13,270 14,750 14,510To be recovered within 12 months 540 1,450 1,922

Deferred tax liabilitiesTo be settled after more than 12 months (86,581) (78,106) (73,311)To be settled within 12 months (994) - -

(73,765) (61,906) (56,879)

Deferred tax liabilities, net

Gross movement on the deferred income tax liability is as follows:

$

As of February 1, 2010 56,879

Charged to consolidated statement of comprehensive income 3,887Tax charge relating to component of other

comprehensive loss 1,140

As of January 30, 2011 61,906

Charged to consolidated statement of comprehensive income 8,739Tax charge relating to component of other

comprehensive loss 3,120

As of January 29, 2012 73,765



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The movement in deferred income tax assets and liabilities during the year, without taking intoconsideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred tax liabilities

Propertyand

equipment$

Goodwilland otherintangible

assets$

Foreignexchange

gain (loss) onlong-term

debt$

Other$

Derivativefinancial

instruments$

Total$

As of February 1, 2010 (7,084) (63,851) (2,353) (23) - (73,311)

Charged (credited) toconsolidatedstatement ofcomprehensiveincome 49 (7,220) 2,353 23 - (4,795)

As of January 30, 2011 (7,035) (71,071) - - - (78,106)

Charged (credited) toconsolidatedstatement ofcomprehensiveincome (174) (8,301) - - 2,126 (6,349)

Credited to component ofother comprehensiveincome - - - - (3,120) (3,120)

As of January 29, 2012 (7,209) (79,372) - - (994) (87,575)

Deferred tax assets

Derivativefinancial

instruments$

Tax benefitarising from

financingexpenses

$

Otherliabilities

$Total

$

As of February 1, 2010 1,373 4,917 10,142 16,432

Charged (credited) to consolidated statement ofcomprehensive income 920 1,229 (1,241) 908

Credited to component of othercomprehensive income (1,140) - - (1,140)

As of January 30, 2011 1,153 6,146 8,901 16,200

Charged (credited) to consolidated statement ofcomprehensive income (1,153) (2,623) 1,386 (2,390)

As of January 29, 2012 - 3,523 10,287 13,810



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b) Provision for income taxes


2012$


2011$

Current income taxCurrent income tax on earnings for the year 62,976 48,448Adjustments in respect of prior years 139 1,851

Total current income tax 63,115 50,299

Deferred income taxNet effect of original and reversal temporary differences 7,708 4,807Adjustment to deferred tax in respect of prior year adjustment 1,501 -Impact of change in income tax rate (470) (921)

Total deferred income tax 8,739 3,886

Income tax expense 71,854 54,185

Tax on the Corporation’s earnings before income tax differs from the theoretical amount that would ariseusing the weighted average tax rate applicable to earnings of the consolidated entities as follows:


2012$


2011$

Earnings before income tax 245,328 171,012

Provision for income tax based on combined statutoryCanadian federal and provincial income tax rate 69,158 51,617

Adjustments for income tax arising from the followingNon-deductible taxable portion of capital losses - 573Decrease in deferred income tax resulting from a substantively

enacted change in tax rates (470) (921)Non-deductible expense related to the initial public offering

or secondary offerings - 316Non-deductible stock-based compensation expense 221 327Other permanent differences 364 358Other 1,080 1,915Adjustment to deferred tax in respect of prior year adjustment 1,501 -

71,854 54,185



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The applicable statutory tax rate is 28.19% in 2012 and 30.18% in 2011. The Corporation’s applicable taxrate is the Canadian combined rate applicable in the provinces in which the Corporation operates. Thedecrease is mainly due to the reduction of the federal income tax rate in 2011 from 18.0% to 16.5%.

13 Earnings per share

a) Basic

Basic earnings per common share is calculated by dividing the profit attributable to shareholders of theCorporation by the weighted average number of common shares issued during the year.


2012


2011

Net earnings attributable to shareholders of the Corporation $173,474 $116,827

Weighted average number of common shares issued (thousands) 73,684 73,153

Basic net earnings per common share $2.35 $1.60

b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of common sharesoutstanding to assume conversion of all dilutive potential common shares. The Corporation has onecategory of dilutive potential common shares that are share options. For the share options, a calculation isperformed to determine the number of shares that could have been acquired at fair value (determined asthe average annual market share price of the Corporation’s shares) based on the monetary value of thesubscription rights attached to outstanding share options. The number of shares calculated as above iscompared with the number of shares that would have been issued assuming the exercise of the shareoptions, plus any unrecognized compensation costs.


2012


2011

Net earnings attributable to shareholders of the Corporation $173,474 $116,827Net earnings used to determine diluted earnings per share $173,474 $116,827

Weighted average number of common shares fordiluted earnings per share (thousands) 75,563 75,377

Diluted net earnings per common share $2.30 $1.55



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14 Contingencies and commitments

As of January 29, 2012, contractual obligations for operating leases amounted to approximately $641,579(January 30, 2011 – $610,342; February 1, 2010 – $567,599).

Non-cancellable operating lease rentals are payable as follows:

As atJanuary 29,

2012$

As atJanuary 30,

2011$

As atFebruary 1,

2010$

Less than 1 year 94,115 84,217 75,514Between 1 and 5 years 308,162 284,984 253,501More than 5 years 239,302 241,141 238,584

Total 641,579 610,342 567,599

The basic rent and contingent rent expense of operating leases for stores, warehouses, distribution centre andcorporate headquarters included in the consolidated statement of comprehensive income is as follows:


2012$


2011$

Basic rent 91,694 81,795Contingent rent 3,687 3,169

95,381 84,964

The Corporation entered into a finance lease totalling $1,797 as of January 1, 2011. The amount due under thefinance lease has an implied interest rate of 8.4% and a maturity extending until December 1, 2013. During theyear, the Corporation recorded interest expense of $117 (January 30, 2011 – nil).

15 Related party transactions

Expenses charged by entities controlled by a director, which comprise mainly rent, totalled $15,073 for the yearended January 29, 2012 (January 30, 2011 – $14,652).

As of January 29, 2012, nil (January 30, 2011 – $264; February 1, 2010 – nil) was payable to entities controlledby a director, which comprises mainly rent.

These transactions were measured at the exchange amount, which is the amount of consideration established atmarket terms.



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16 Derivative financial instruments

A summary of the derivative financial instruments as of January 29, 2012, January 30, 2011 and February 1,2010 is as follows:

As of January 29, 2012

Contractualnominal

valueUS$

Contractualnominal

value

Statementof financial

positionlocation

Fair value –Asset

(liability)$

Nature ofhedging

relationship

Hedging instrumentsForeign exchange

forward contracts 235,000 - Current assets 3,951 Cash flow hedgeForeign exchange

forward contracts 10,000 3,600 Current liabilities (166) Cash flow hedge

Non-hedging instrumentsCumulative foreign

exchange forwardcontract 30,000 - Current liabilities (82) Not applicable

275,000 3,600 3,703

As of January 30, 2011

Contractualnominal

valueUS$

Contractualnominal

value


positionlocation

Fair value –Asset

(liability)$

Nature ofhedging

relationship

Hedging instrumentsForeign exchange

forward contracts 90,324 992 Current assets 838 Cash flow hedgeForeign currency swap

agreements 261,517 450 Current liabilities (5,630) Cash flow hedge

351,841 1,442 (4,792)



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As of February 1, 2010

Contractualnominal

valueUS$


positionlocation

Fair value –Asset

(liability)$

Nature ofhedging

relationship

Hedging instrumentsForeign exchange forward contracts 125,000 Current assets 3,479 Cash flow hedgeForeign exchange forward contracts 130,000 Current liabilities (9,889) Cash flow hedge

Non-hedging instrumentsForeign currency and interest rate swaps 234,300 Current liabilities (32,759) Not applicable

Foreign currency swap agreements 70,000Non-current

assets 5,342 Not applicableForeign currency swap agreements 143,000 Current liabilities (12,546) Not applicable

702,300 (46,373)

As ofJanuary 29,

2012$

As ofJanuary 30,

2011$

As ofFebruary 1,

2010$

Derivative financial instrumentsCurrent assets 3,951 838 3,479Non-current assets - - 5,342Current liabilities (248) (5,630) (55,194)

3,703 (4,792) (46,373)

The Corporation is exposed to certain risks relating to its ongoing business operations. The primary riskmanaged by using derivative financial instruments is currency risk. Foreign exchange forward contracts andcumulative foreign exchange forward contracts are entered into to manage the currency fluctuation riskassociated with forecasted US dollar and euro merchandise purchases sold in stores.

For foreign exchange forward contracts, the Corporation formally documents the relationship between hedginginstruments and hedged items, as well as its risk management objectives and strategies for undertaking hedgetransactions.

Foreign exchange forward contracts are designated as hedging instruments and are recorded at fair value,determined using market prices. The Corporation designates its foreign exchange forward contracts as hedgesof the variability in highly probable future cash flows attributable to a recognized asset or liability or aforecasted transaction (cash flow hedges). All gains and losses from changes in fair value of foreign exchangeforward contracts designated as cash flow hedges are recorded in accumulated other comprehensive income(loss) and reclassified to comprehensive income when the associated gains (losses) on related hedged items arerecognized in comprehensive income.

The cumulative foreign exchange forward contract does not qualify for hedge accounting treatment; as such,changes in its fair value are recognized in comprehensive income.



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Up to June 14, 2010, the Corporation used foreign currency interest rate swap agreements to manage currencyfluctuation risk and interest rate risk associated with US dollar borrowings. Those derivative financialinstruments were classified as held for trading. All gains and losses from changes in fair value of derivativefinancial instruments not designated as hedges were recognized in earnings.

2012

Impact onstatement

of financialposition

Pre-taximpact on othercomprehensive

incomeImpact onearnings

Impact oncash flows

Note

Change in fairvalue during

the year ofderivative

financialinstruments

$


derivativefinancial

instruments,net of

reclassificationadjustment

$

Costof sales

$

Excess ofreceipts

(disbursements)over amount

recognized onderivative


$

Derivative financial instrumentsNon-hedging:

Net change in unrealized loss on cumulativeforeign exchange forward contract 16(d) (82) - (82) 82

Hedging:Net change in unrealized gain on foreign

exchange forward contracts 8,577 8,577 - -Realized losses on foreign exchange

forward contracts - (8,767) - (8,767)Transfer to earnings - 12,151 (12,151) 12,151

Total 11,961 (12,233) 3,466



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2011

Impact onstatement

of financialposition

Pre-taximpact on othercomprehensive

income Impact on earnings Impact on cash flows

Note

Change in fairvalue during

the year oflong-termdebt and

derivativefinancial

instruments$


derivativefinancial

instruments,net of

reclassificationadjustment

$

Netfinancing

costs$

Costof sales

$

Excess ofreceipts

over amountrecognized on

derivativefinancial

instruments$

Foreignexchange

gain onlong-term

debt$

Settlement ofderivative


$

Long-term debtSenior subordinated deferred

interest notes 8(b) 7,464 - 7,464 - - (7,464) -Term bank loan 8(c) 8,198 - 8,198 - - (8,198) -Other foreign exchange loss - - (235) - - (188) -

- 15,427 - - (15,850) -

Derivative financialinstruments

Hedging:Net change in

unrealized gain onforeign exchangeforward contracts 16(b) 1,618 1,618 - - - - -

Realized losses onforeign exchangeforward contracts 16(b) - (16,432) - - 2,748 - -

Transfer to earnings - 19,180 - (19,180) - - -

4,366 - (19,180) 2,748 - -

Non-hedging:Foreign currency and

interest rate swapagreements 16(a) (7,540) - (7,540) - 7,540 - -

Settlement of foreigncurrency andinterest rate swapagreements 16(a) 40,299 - - - - - (40,299)

Foreign currency swapagreements 16(c) (6,759) - (6,759) - 6,759 - -

Settlement of foreigncurrency swapagreements 16(c) 10,963 - - - - - (10,963)

Materialized loss onearly settlementof derivatives 16(c) 3,000 - - - - - (3,000)

Realized gain onforeign currencyand interest rateswap interestpayments - - 59 - - - -

Realized loss onforeign currencyswap agreementinterest payments - - (853) - - - -

- (15,093) - 14,299 - (54,262)

Total 4,366 334 (19,180) 17,047 (15,850) (54,262)



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a) Foreign currency and interest rate swap agreements

Prior to June 14, 2010, the Corporation entered into swap agreements consisting of a combination of aforeign currency swap and an interest rate swap that were undertaken to address two risks associated withits US dollar LIBOR-based term bank loan.

On June 14, 2010, as a result of the repayment of the US dollar term bank loan, the Corporationsimultaneously settled all of its related swap agreements. The settlement of US$233,465 for CA$281,655resulted in a net cash outflow of $40,299.

For the period from February 2 to June 14, 2010, a loss of $7,540 was recorded in the consolidatedstatement of comprehensive income under cost of sales.

Changes in fair value of the foreign currency and interest rate swap agreements were reported in theconsolidated statement of comprehensive income under net financing costs.

b) Foreign exchange forward contracts

As of January 29, 2012, the Corporation was party to foreign exchange forward contracts to purchaseUS$245,000 for CA$242,082 (January 30, 2011 – US$351,841 for CA$358,665) and 3,600 for CA$4,947(January 30, 2011 – 1,442 for CA$1,594), maturing prior to January 2013.

In addition to the fair value of the foreign exchange forward contracts representing a gain of $2,718 (net oftaxes of $985) as of January 29, 2012 (January 30, 2011 – loss of $3,517, net of taxes of $1,275),accumulated other comprehensive income (loss) includes a loss of $814 (net of taxes of $295) (January 30,2011 – loss of $3,299, net of taxes of $1,195,) on foreign exchange forward contracts settled before January29, 2012, but which will be reported to earnings based on the recognition of the related inventories inearnings.

c) Foreign currency swap agreements

On March 17, 2010, the Corporation modified its swap agreements, which resulted in a net cash outflowof $3,000.

On June 14, 2010, as a result of the repayment of the senior subordinated deferred interest notes, theCorporation simultaneously settled all of its related swap agreements. The settlement of US$213,000 forCA$231,163 resulted in a net cash outflow of $10,963.

For the period from February 2 to June 14, 2010, a loss of $6,759 was recorded in earnings.



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d) Cumulative foreign exchange forward contract

As of January 29, 2012, the Corporation was party to a cumulative foreign exchange forward contract topurchase US$9,333 for CA$9,375 with a remaining possibility to purchase US$20,667 for CA$20,760,maturing in September 2012. The change in fair value of the cumulative foreign exchange forward contractrepresenting a loss of $60 (net of taxes of $22) was included in the consolidated statement ofcomprehensive income for the year ended January 29, 2012.

17 Financial instruments and fair values

Classification of financial instruments

The classification of financial instruments as of January 29, 2012, January 30, 2011 and February 1, 2010 isdetailed below, and their respective carrying amounts equal their fair values in all material respects.

Cash and cash equivalents and accounts receivable are classified as loans and receivables, which refer to non-derivative financial assets resulting from the delivery of cash or other assets by a lender to a borrower in returnfor a promise to repay on a specified date, or on demand. Accounts receivable are recorded at amortized costusing the effective interest method.

Accounts payable and accrued liabilities and long-term debt are classified as other financial liabilities. Financialliabilities are recorded at amortized cost using the effective interest method.

Financial risk factors

The Corporation’s activities expose it to a variety of financial risks: market risk (including currency risk, fairvalue interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Corporation’s overallrisk management program focuses on the unpredictability of the financial market and seeks to minimizepotential adverse effects on the Corporation’s financial performance. The Corporation uses derivative financialinstruments to hedge certain risk exposures.

Risk management is carried out by the finance department under practices approved by the Board of Directors.This department identifies, evaluates and hedges financial risks based on the requirements of the organization.The Board of Directors provides guidance for overall risk management, covering specific areas such as foreignexchange risk, interest rate risk, credit risk and the use of derivative financial instruments.



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a) Market risk

i) Currency risk

The Corporation is exposed to foreign exchange risks arising from the purchase of importedmerchandise using US dollars and euros, which are partially covered by foreign exchange forwardcontracts. The Corporation is also exposed to the fluctuation of the Chinese renminbi against the USdollar.

The Corporation’s risk management policy is to hedge up to 100% of anticipated cash flows requiredfor purchases of merchandise in US dollars and euros over the next rolling six months. TheCorporation does not hedge its exposure to fluctuations in the value of the Chinese renminbi againstthe US dollar.

The Corporation uses foreign exchange forward contracts to manage risks from fluctuations in theUS dollar and euro relative to the Canadian dollar. The forward contracts are used only for riskmanagement purposes and are designated as hedges of specific anticipated purchases of merchandise.Upon redesignation or amendment of a foreign exchange forward contract, the ineffective portion ofsuch contracts is recognized immediately in earnings. The Corporation periodically examines thederivative financial instruments it uses to hedge exposure to foreign currency fluctuations to ensurethat these instruments are highly effective at reducing foreign exchange risk associated with thehedged item.

As of January 29, 2012, the Corporation held net financial liabilities of approximately US$6,563 andnet financial assets of approximately 311. A 1% variance in the US dollar and euro foreign exchangerates would result in an approximate variance of $62 in the net liabilities of the Corporation and inearnings. This analysis assumes that all other variables remain constant. The analysis was performedon the same basis for the year ended January 30, 2011.

ii) Interest rate risk

The Corporation’s interest rate risk arises from long-term borrowings. Borrowings issued at variablerates expose the Corporation to cash flow interest rate risk. Borrowings issued at fixed rates exposethe Corporation to fair value interest rate risk.

When appropriate, the Corporation analyzes its interest rate risk exposure. Various scenarios aresimulated, taking into consideration refinancing, renewal of existing positions, alternative financingand hedging. Based on these scenarios, the Corporation calculates the impact on earnings of a definedinterest rate shift. It uses variable-rate debt to finance a portion of its operations and capitalexpenditures. These obligations expose it to variability in interest payments due to changes in interestrates. On January 29, 2012, the Corporation has approximately $274,997 in a term bank loanoutstanding under its senior secured credit facility, bearing interest at variable rates. Each quarterpoint change in interest rates would result in a $0.7 million change in interest expense on the termbank loan.



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b) Credit risk

The Corporation is exposed to credit risk to the extent of non-payment by counterparties of its financialinstruments. The Corporation has credit policies covering financial exposures. The maximum exposureto credit risk at the statement of financial position date is represented by the carrying value of eachfinancial asset, including derivative financial instruments. The Corporation mitigates this credit risk bydealing with counterparties which are major financial institutions that the Corporation anticipates willsatisfy their contractual obligations.

The Corporation is exposed to credit risk on accounts receivable from its landlords for tenant allowances.In order to reduce this risk, the Corporation retains rent payments until accounts receivable are fullysatisfied.

c) Liquidity risk

Liquidity risk is the risk that the Corporation will not be able to meet its obligations as they fall due. Asof January 29, 2012, the Corporation had available credit facilities of $74,083 (January 30, 2011 –$74,239), taking into consideration outstanding letters of credit of $917 (January 30, 2011 – $761).

The contractual maturities, including interest, of the Corporation’s financial liabilities as of January 29, 2012are summarized in the following table:

Carryingamount

$

Contractualcash flows

$

Under1 year

$

From 1 to2 years

$

From 2 to5 years

$

Non-derivative financial liabilitiesAccounts payable 30,751 30,751 30,751 - -Accrued liabilities and other 70,550 70,550 70,550 - -Term bank loan 274,997 274,997 14,102 14,102 246,793

376,298 376,298 115,403 14,102 246,793

Derivative financial liabilitiesForeign exchange forward contracts 166 166 166 - -Cumulative foreign exchange

forward contract 82 82 82 - -

248 248 248 - -



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Foreign currencies

Monetary assets and liabilities denominated in foreign currencies are translated at the financial position dateusing year-end exchange rates, while non-monetary assets and liabilities are translated at historical rates.Expenses are translated at prevailing market rates in the recognition period. The resulting exchange gains orlosses are recorded in the consolidated statement of comprehensive income.


2012$


2011$

Net financing costs - (334)Foreign exchange loss included in cost of sales 12,084 18,957

Aggregate foreign exchange loss included in net earnings 12,084 18,623

Fair value of financial instruments

The fair value hierarchy has the following levels:

Level 1 – Quoted market prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted market prices included in Level 1 that are observable for the asset orliability, either directly (as prices) or indirectly (derived from prices); and

Level 3 – Inputs for the asset or liability that are not based on observable market date (that is,unobservable inputs).

The fair values of financial assets and financial liabilities measured in the consolidated statement of financialposition are as follows:

January 29, 2012

Statement of financial position classificationand nature

Quotedprices

in activemarkets for

identicalassets

(Level 1)$

Significantobservable

inputs(Level 2)

$

Unobservableinputs

(Level 3)$

AssetsDerivative financial instruments – Current - 3,951 -

LiabilitiesDerivative financial instruments – Current - 248 -



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January 30, 2011

Statement of financial position classificationand nature

Quotedprices


identicalassets

(Level 1)$


inputs(Level 2)

$

Unobservableinputs

(Level 3)$

AssetsDerivative financial instruments – Current - 838 -

LiabilitiesDerivative financial instruments – Current - 5,630 -

February 1, 2010

Balance sheet classification and nature

Quotedprices


identicalassets

(Level 1)$


inputs(Level 2)

$

Unobservableinputs

(Level 3)$

AssetsDerivative financial instruments – Current - 3,479 -Derivative financial instruments – Non-current - 5,342 -

LiabilitiesDerivative financial instruments – Current - 55,194 -

Derivative financial instruments include foreign currency and interest rate swap agreements, foreign currencyswap agreements, foreign exchange forward contracts and cumulative foreign exchange forward contract. Fairvalue measurements of the Corporation’s derivative financial instruments are classified under Level 2 becausesuch measurements are determined using published market prices or estimates based on observable inputssuch as interest rates, yield curves, and spot and future exchange rates.



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18 Consolidated statement of cash flows information

The changes in non-cash working capital components are as follows:


2012$


2011$

Accounts receivable (23) (368)Deposits and prepaid expenses 222 266Merchandise inventories (56,968) (24,221)Accounts payable and accrued liabilities and other (3,159) 25,339Income taxes payable 7,805 (10,615)

(52,123) (9,599)

19 Capital disclosures

Capital is defined as long-term debt and shareholders’ equity excluding accumulated other comprehensiveincome (loss).

As ofJanuary 29,

2012$

As ofJanuary 30,

2011$

Long-term debt, including current portion 274,997 366,875Shareholders’ equity* 892,970 738,073

Total capital 1,167,967 1,104,948

* Excluding accumulated other comprehensive income (loss)

The Corporation’s objectives when managing capital are to:

provide a strong capital base so as to maintain investor, creditor and market confidence and to sustainfuture development of the business;

maintain a flexible capital structure that optimizes the cost of capital at acceptable risk and preservesthe ability to meet financial obligations; and

ensure sufficient liquidity to pursue its organic growth strategy.



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In managing its capital structure, the Corporation monitors performance throughout the year to ensure workingcapital requirements and maintenance capital expenditures are funded from operations, available cash ondeposit and, where applicable, bank borrowings. The Corporation manages its capital structure and may makeadjustments to it in order to support the broader corporate strategy or in response to changes in economicconditions and risk. In order to maintain or adjust its capital structure, the Corporation may issue shares ornew debt, issue new debt to replace existing debt (with different characteristics), or reduce the amount ofexisting debt.

The Corporation monitors debt using a number of financial metrics, including but not limited to:

the leverage ratio, defined as debt adjusted for value of lease obligations to consolidated EBITDARwhich is defined as the sum of (i) adjusted earnings before interest, taxes, depreciation andamortization, adjusted for annualized earnings for new stores (defined as “consolidated adjustedEBITDA”), and (ii) lease expense; and

the interest coverage ratio, defined as adjusted EBITDA to net interest expense (interest expenseincurred net of interest income earned).

The Corporation uses EBITDA and EBITDAR as measurements to monitor performance. Both measures, aspresented, are not recognized for financial statement presentation purposes under IFRS and do not have astandardized meaning. Therefore, they are not likely to be comparable to similar measures presented by otherentities.

The Corporation is subject to financial covenants pursuant to the credit facility agreements and indentures,which are measured on a quarterly basis. These covenants include the leverage and debt service ratiospresented above. The Corporation is in compliance with all such covenants.



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20 Transition to IFRS

Reconciliation between IFRS and previous Canadian GAAP

The following reconciliations provide a quantification of the effect of the transition from Canadian GAAP toIFRS for equity, comprehensive income and cash flows as described in note 2.

1) Reconciliation of shareholders’ equity between previous reporting under Canadian GAAP and IFRS

As ofJanuary 30,

2011$

As ofFebruary 1,

2010$

Total shareholders’ equity under Canadian GAAP 738,208 614,696

Deferred tax adjustment on measurement 7,000 7,000

Total shareholders’ equity under IFRS 731,208 607,696

Under Canadian GAAP, future income taxes were calculated from temporary differences between the taxbasis of an asset or liability and its carrying amount in the consolidated statement of financial position.Under the current Income Tax Act (Canada) and equivalent provincial legislation, eligible capitalexpenditures are deductible for tax purposes to a maximum of 75% of the cost incurred. CICA HandbookSection 3465, Income Taxes, addresses this specific situation and specifies that for these assets, at anypoint in time, the tax basis represents the balance in the cumulative eligible capital pool plus 25% of thecarrying amount.

The definition of temporary differences under IFRS is generally consistent with that under CanadianGAAP. However, IFRS does not provide specific guidance in relation to the determination of the tax basisof eligible capital expenditures such the one described above. As such, the tax bases of these assets, withouttaking into consideration the 25% adjustment of the carrying amount as allowed under Canadian GAAP,should be compared with the carrying amounts in the consolidated statement of financial position todetermine the temporary difference relating to these assets.

The adjustment increased the deferred income tax liabilities in the consolidated statement of financialposition by $7,000 as of February 1, 2010 and January 30, 2011, and decreased retained earnings by thesame amount. The change had no impact on comprehensive income for the presented periods.

2) Reconciliation of comprehensive income between previous reporting under Canadian GAAP and IFRS

The transition from Canadian GAAP to IFRS had no significant impact on comprehensive income.



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3) Reconciliation of consolidated statement of cash flows between previous reporting under CanadianGAAP and IFRS

The transition from Canadian GAAP to IFRS had no significant impact on cash flows generated by theCorporation.

Exemptions and exceptions from full retrospective application elected by the Corporation

The Corporation has elected to apply the following exemptions and exceptions from full retrospectiveapplication.

Business combinations exemption

The Corporation has applied the business combinations exemption as per IFRS 1, First-time Adoption of IFRS.It has not restated business combinations that took place prior to the February 1, 2010 transition date.

Hedge accounting

Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy thehedge accounting criteria in IAS 39, Financial Instruments: Recognition and Measurement, at that date.Hedging relationships cannot be designated retrospectively, and supporting documentation cannot be createdretrospectively. All hedging relationships satisfied the hedge accounting criteria as of the transition date, and,consequently, they are still reflected as hedges in the Corporation’s results under IFRS.

Estimates

In accordance with IFRS 1, an entity’s estimates under IFRS as of the transition date to IFRS must be consistentwith estimates made for the same date under Canadian GAAP, unless there is objective evidence that thoseestimates were in error. The estimates previously made by the Corporation under Canadian GAAP were notrevised accordingly, except where necessary to reflect any difference in accounting policies.

21 Subsequent event

On April 11, 2012, the Corporation announced that its Board of Directors had approved a 22% increase of thequarterly dividend for holders of its common shares, from $0.09 per common share to $0.11 per commonshare. The increased dividend will be paid on May 4, 2012 to shareholders of record at the close of business onApril 25, 2012. The dividend is designated as an “eligible dividend” for Canadian tax purposes.

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