DIVERSIFIED ROYALTY CORP .  (Unaudited)  (Expressed in Canadian dollars)  Notes toConsolidatedFinancial Statements  Year ended December 31, 2014  3. Significant accounting policies(continued):  (h) Employee benefits:  ( i ) Termination benefits:  Termination benefits are recognized as an expense when the Company is committed  demonstrably, without realistic possibility of withdrawal, to a formal detai led plan to either  terminate employment before the normal retirement date, or to provide termination benefits  as a result of an offer made to encourage voluntary redundancy. Termination benefits for  voluntary redundancies are recognized as an expense if t he Company has made an offer  of voluntary redundancy, it is probable that the offer will be accepted, and the number of  acceptances can be estimated reliably. If benefits are payable more than 12 months after  the reporting period, then they are discounted  to their present value. The Company records a liability at the present value of the benefits expected to be paid  under the agreement for the tenure agreement with the founder of the Company. A risk - free rate that reflects the risk s pecific to the liability has been used at the date of  measurement.  The Company accounts for all stock -based payments to employees and non -employees  using the fair value based method of accounting. The Company measur es the  compensation cost of stock -based option awards to employees at the grant date using the  Black-Scholes option pricing model to determine the fair value of the options. The  compensation cost of the options is recognized as stock -based compensation expense  over the relevant vesting period of the stock options. Forfeitures are estimated and are  adjusted if actual forfeitures differ from the original estimate unless forfeitures are due to  market-based vesting conditions. When the equity -settled stock options are exercised,  share capitalis increased by the sum of the consideration paid and the carrying value of  the stock options recorded to contributed surplus. ( ii ) Tenure benefits:  ( iii ) Share-based payment transactions: ( iv ) Restricted stock units: Restricted stock units granted under the Company’s long-term incentive plans are  accounted for based on the market value of the underlying shares on the date of grant and  vest in equal installments annually over three years  or as set out in a restricted stock unit  participant’s grant agreement. Restricted stock un it awards are accounted for as liability - based awards. Restricted stock units are measured atfair value each reporting date.  Restricted stock units are settled  either in common shares or cashat the option of the  holderbased on the number of vested res tricted stock units multiplied by the current market  price of the common shares when vested.  9 