Algonquin Power & Utilities Corp. – Consolidated Financial Statements ALGONQUIN POWER & UTILITIES CORP.  Notes to the Consolidated Financial Statements  December 31, 2012 and 2011   (in thousands of Canadian dollars except as noted and amounts per share)  17.  Income taxes (continued)  The tax effect of temporary differences between the financial statement carrying amounts of assets  and liabilities and their respective tax bases that give rise to significant portions of the deferred tax  assets and deferred tax liabilities at December 31, 2012 and 2011 are presented below: The valuation allowance for deferred tax assets as of December 31, 2012 and 2011 was $15,062.  The net change in the total valuation allowance was nil in 2012 and a decrease of $16,834 in 2011.  The valuation allowance at December 31, 2012 was primarily related to operating losses that, in the  judgment of management, are not more likely than not to be realized. In assessing the realizability  of deferred tax assets, management considers whether it is more likely than not that some portion  or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is  dependent upon the generation of future taxable income during the periods in which those  temporary differences become deductible. Management considers the scheduled reversal of  deferred tax liabilities (including the impact of available carry back and carry forward periods),  projected future taxable income, and tax-planning strategies in making this assessment.  Deferred income taxes are classified in the financial statements as:  2012 Annual Report 120 2012 2011 Current deferred income tax asset  $ 10,567  $ 13,022  Non-current deferred income tax asset  Current deferred income tax liability  77,497  (1,133) 67,671  (723) Non-current deferred income tax liability  (100,798)  (53,231) $ (13,867)  $ 26,739  2012 2011 Deferred tax assets:  Non-capital loss, investment tax credits,  currently non-deductible interest expenses, and financing costs   $ 184,845  $ 119,340  Outside basis in partnership  2,533  - Financial derivatives  211  2,233  Pension and OPEB  5,011 - Acquisition related costs  5,134  2,009 Regulatory accounts  9,407  4,313  Production tax credit  673  - Reserves not currently deductible  1,276  - Other  136  - Total deferred income tax assets  209,226  127,895 Less: Valuation allowance  (15,062)  (15,062) Total deferred tax assets  194,164  112,833 Deferred tax liabilities:  Property, plant and equipment   (202,553)  (77,273) Intangible assets  (5,478)  (7,812) Other  - (1,009) Total deferred tax liabilities   (208,031)  (86,094) Net deferred tax assets/(liabilities)  $ (13,867) $ 26,739 