Algonquin Power & Utilities Corp. – Consolidated Financial Statements ALGONQUIN POWER & UTILITIES CORP.   (in thousands of Canadian dollars except as noted and amounts per share)  Notes to the Consolidated Financial Statements  December 31, 2012 and 2011  1.  Significant accounting policies (continued) (o) Advances in aid of construction  The Company’s regulated utilities have various agreements with real estate development  companies (the “developers”) conducting business within the Company’s utility service territories, whereby funds are advanced to the Company by the developers to assist with  funding some or all of the costs of the development. These amounts are recorded as Advances  in Aid of Construction in other long-term liabilities. In many instances, developer advances can  be subject to refund but the refund is non-interest bearing. Refunds of developer advances  are made over periods generally ranging from 10 to 20 years. Advances not refunded within  the prescribed period are usually not required to be repaid. After the prescribed period has  lapsed, any remaining unpaid balance is transferred to contributions in aid of construction and  recorded as an offsetting amount to the cost of property, plant and equipment. In 2012, $3,207  (2011 - $1,107) was transferred from advances in aid of construction to contributions in aid of  construction.   (p) Deferred water rights and customer deposits  Deferred water rights are related to a hydroelectric generating facility which has a fifty year  water lease with the first ten years of the water lease requiring no payment, which is a form of  lease inducement. An annual average rate for water rights was estimated for the entire life of  the lease and that average rate is being expensed over the lease term. The result of this policy  is that the deferred water rights inducement amount recorded in the first ten years is being  drawn down in the last forty years.  Customer deposits result from the Liberty Utilities’ obligation by state regulators to collect a  deposit from customers of its facilities under certain circumstances when services are  connected. The deposits are refundable as allowed under the facilities’ regulatory agreement. The deposits bear monthly interest and are applied to the customer account after  12 months if the customer is found to be credit worthy. (q) Pension and other post employment plans  The Company has established defined contribution pension plans, defined benefit pension  plans, and other post-employment benefit (“OPEB”) plans for its various employee groups in  Canada and the United States. The Company recognizes the funded status of its defined  benefit pension plans and other post employment benefit plans on the Consolidated Balance  Sheets. The Company’s expense and liabilities are determined by actuarial valuations,  using assumptions that are evaluated annually at December 31, including discount rates,  mortality, assumed rates of return, compensation increases, turnover rates and healthcare  cost trend rates. The impact of modifications to those assumptions is recorded as actuarial  gains and losses in accumulated other comprehensive income and amortized to net periodic  cost over future periods using the corridor method. The costs of the Company’s pension for  employees are expensed over the periods during which employees render service and are  recognized as part of administrative expenses in the Consolidated Statement of Operations. The portion of pension and OPEB costs capitalized as cost of construction of plant and  equipment is insignificant. 2012 Annual Report 83