To the extent the fair value of consideration paid exceeds the fair value of the net identifiable tangible and intangible assets, the  excess is recorded as goodwill. To the extent the fair value of consideration paid is less than the fair value of net identifiable  tangible and intangible assets, the excess is recognized in net income. When a business combination is achieved in stages, previously held interests in the acquired entity are re-measured to fair  value at the acquisition date, which is the date control is obtained, and the resulting gain or loss, if any, is recognized in net  income, other than amounts transferred directly to retained earnings. Amounts arising from interests in the acquiree prior to the  acquisition date that have previously been recognized in other comprehensive income are reclassified to net income. Acquisition  costs are recorded as an expense in net income as incurred.  r)  Other Items i.  Capitalized Costs ii.  Capital Securities iii.  Share-based Payments s)  Critical Judgments and Estimates  i.  Critical Estimates a.  Investment Properties b.  Revaluation Method for Property, Plant and Equipment Capitalized costs related to assets under development and redevelopment include all eligible expenditures incurred in connection  with the acquisition, development and construction of the asset until it is available for its intended use. These expenditures  consist of costs that are directly attributable to these assets. Borrowing costs are capitalized when such costs are directly attributable to the acquisition, construction or production of a  qualifying asset. A qualifying asset is an asset that takes a substantial period of time to prepare for its intended use.  Capital securities are preferred shares that may be settled by a variable number of the company’s common shares upon their  conversion by the holders or the company. These instruments, as well as the related accrued distributions, are classified as liabilities  on the Consolidated Balance Sheets. Dividends and yield distributions on these instruments are recorded as interest expense. The company and its subsidiaries issue share-based awards to certain employees and non-employee directors. The cost of  equity-settled share-based transactions, comprised of share options, restricted shares and escrowed shares, is determined as  the fair value of the award on the grant date using a fair value model. The cost of equity-settled share-based transactions is  recognized as each tranche vests and is recorded in contributed surplus as a component of equity. The cost of cash-settled  share-based transactions, comprised of Deferred Share Units and Restricted Share Units, is measured as the fair value at the grant  date, and expensed on a proportionate basis consistent with the vesting features over the vesting period with the recognition of  a corresponding liability. The liability is measured at each reporting date at fair value with changes in fair value recognized in  net income. The preparation of financial statements requires management to make estimates and judgments that affect the carried amounts  of certain assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses  recorded during the period. Actual results could differ from those estimates. In making estimates and judgments management relies on external information and observable conditions where possible,  supplemented by internal analysis as required. These estimates have been applied in a manner consistent with prior periods and  there are no known trends, commitments, events or uncertainties that the company believes will materially affect the methodology  or assumptions utilized in making these estimates in these consolidated financial statements. The significant estimates used in determining the recorded amount for assets and liabilities in the consolidated financial  statements include the following: The critical assumptions and estimates used when determining the fair value of commercial properties are: the timing of rental  income from future leases reflecting current market conditions, less assumptions of future cash flows in respect of current and  future leases; maintenance and other capital expenditures; discount rates; terminal capitalization rates; and terminal valuation  dates. Properties under development are recorded at fair value using a discounted cash flow model which includes estimates in  respect of the timing and cost to complete the development.  Further information on investment property estimates is provided in Note 10. When determining the carrying value of property, plant and equipment using the revaluation method, the company uses the  following critical assumptions and estimates: the timing of forecasted revenues, future sales prices and margins; future sales  volumes; future regulatory rates; maintenance and other capital expenditures; discount rates; terminal capitalization rates;  terminal valuation dates; useful lives; and residual values. Determination of the fair value of property, plant and equipment under  development includes estimates in respect of the timing and cost to complete the development. 2013 ANNUAL REPORT 95