Notes to Consolidated Financial Statements  Year ended December 31, 2011  3. Significant accounting policies (continued):  A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary  differences, to the extent that it is probable that future taxable profits will be available against which  they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the  extent that it is no longer probable that the related tax benefit will be realized. (k) Earnings per Share  The Corporation presents basic and diluted earnings per share data for its common shares. Basic  earnings per share is calculated by dividing the profit or loss attributable to common shareholders of  the Company by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is determined by adjusting the profit or loss attributable to common  shareholders and the weighted average number of common shares outstanding, adjusted for the  effects of all dilutive potential common shares, which comprise warrants, restricted share units and  share options granted to employees. Transactions in foreign currencies are translated to the respective functional currencies of the  Corporation’s entities at exchange rates at the dates of the transactions. Monetary assets and  liabilities denominated in foreign currencies at the reporting date are retranslated to the functional  currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the  difference between amortized cost in the functional currency at the beginning of the year, adjusted  for effective interest and payments during the year and the amortized cost in foreign currency  translated at the exchange rate at the end of the year.  (l) Foreign currency transactions  Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value  are retranslated to the functional currency at the exchange rate at the date that the fair value was  determined. Non-monetary items in a foreign currency that are measured based on historical cost  are translated using the exchange rate at the date of the transaction.  Foreign currency differences arising on retranslation are recognized in profit or loss, except for  available for sale equity investments (except on impairment in which case foreign currency  differences that have been recognized in other comprehensive income are reclassified to profit or  loss) which are recognized in other comprehensive income.  The assets and liabilities of foreign operations are translated to Canadian dollars at exchange rates at  the reporting date. The income and expenses of foreign operations are translated to Canadian dollars  at exchange rates at the dates of the transactions.  (m) Foreign operations  Foreign currency differences are recognized in other comprehensive income, and presented in the  foreign currency translation reserve (translation reserve) in equity. When a foreign operation is Alaris Royalty Corp. 2011 Annual Report  29 