43 AKITA DRILLING LTD.  ANNUAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Dividend distribution Provisions Income taxes Employee future benefits Contributions to the Company defined contribution plan and the group RRSP are recognized as employee  benefit expense when they are due. The Company has a defined contribution pension plan that covers substantially all of its employees. Under  the provisions of the plan, the Company contributes 5% of regular earnings for eligible employees on a current  basis. In addition, employees having eligible terms of service are subject to admission into the group RRSP. The Company makes contributions on behalf of these plans to a separate entity and has no legal or constructive  obligations to pay further contributions if the plans do not hold sufficient assets to pay all employees benefits  relating to employee service in current or prior periods. Deferred income tax assets and liabilities are presented as non-current assets or liabilities. The Company records deferred taxes using the liability method of accounting for income taxes. Under this  method, deferred tax assets and liabilities are determined based on differences between financial reporting  and tax bases of assets and liabilities, and are measured using tax rates that are enacted or substantively  enacted at the Statement of Financial Position date and are expected to apply when the deferred tax asset is  realized or liability is settled. Deferred tax assets are recognized to the extent that it is probable that the assets  can be recovered. Income taxes comprise current and deferred tax. Income tax is recognized in the Statement of Net Income and  Comprehensive Income except to the extent that it relates to items recognized directly in equity in which case  the income tax is also recognized directly in equity. Current taxes are calculated by reference to the amount of  income taxes payable or recoverable in respect of the taxable profit or loss for the period using tax rates and  tax laws that have been enacted or substantively enacted at the end of the reporting period. Current taxes are  recognized as liabilities (or assets) to the extent that they are unpaid (or refundable). The Company performs evaluations to identify onerous contracts and, where applicable, records provisions for  such contracts. Provisions are measured at the present value of management’s best estimate of the expenditure required  to settle the obligation at the Statement of Financial Position date. The discount rate used to determine the  present value reflects current market assessments of the time value of money and the risks specific to the  liability. The provision’s increase in each period reflecting the passage of time is recognized as a finance cost. Provisions are recognized when the Company has a legal or constructive obligation as a result of past events,  and it is more likely than not that an outflow of resources will be required to settle the obligation and the  amount can be reliably estimated. Dividend distribution to the Company’s shareholders is recognized as a liability in the Company’s financial  statements in the period in which the Company’s Board of Directors approves the dividends. 