Revenue from loans and notes receivable, less a provision for uncollectible amounts, is recorded on the accrual basis using the  effective interest method. Other gains represent the excess of proceeds over carrying values on the disposition of assets in the normal course of operations.  The company and its subsidiaries selectively utilize derivative financial instruments primarily to manage financial risks,  including interest rate, commodity and foreign exchange risks. Derivative financial instruments are recorded at fair value within  the company’s consolidated financial statements. Hedge accounting is applied when the derivative is designated as a hedge of a  specific exposure and there is assurance that it will continue to be effective as a hedge based on an expectation of offsetting cash  flows or fair values. Hedge accounting is discontinued prospectively when the derivative no longer qualifies as a hedge or the  hedging relationship is terminated. Once discontinued, the cumulative change in fair value of a derivative that was previously  recorded in other comprehensive income by the application of hedge accounting is recognized in net income over the remaining  term of the original hedging relationship. The assets or liabilities relating to unrealized mark-to-market gains and losses on  derivative financial instruments is recorded in accounts receivable and other or accounts payable and other, respectively. Realized and unrealized gains and losses on foreign exchange contracts, designated as hedges of currency risks relating to a  net investment in a subsidiary or an associate, are included in equity and are included in net income in the period in which  the subsidiary or associate is disposed of or to the extent partially disposed and control is not retained. Derivative financial  instruments that are designated as hedges to offset corresponding changes in the fair value of assets and liabilities and cash  flows are measured at their estimated fair value with changes in fair value recorded in net income or as a component of equity,  as applicable. Unrealized gains and losses on interest rate contracts designated as hedges of future variable interest payments are included in  equity as a cash flow hedge when the interest rate risk relates to an anticipated variable interest payment. The periodic exchanges  of payments on interest rate swap contracts designated as hedges of debt are recorded on an accrual basis as an adjustment to  interest expense. The periodic exchanges of payments on interest rate contracts designated as hedges of future interest payments  are amortized into net income over the term of the corresponding interest payments. Unrealized gains and losses on electricity contracts designated as cash flow hedges of future power generation revenue are  included in equity as a cash flow hedge. The periodic exchanges of payments on power generation commodity swap contracts  designated as hedges are recorded on a settlement basis as an adjustment to power generation revenue. Derivative financial instruments that are not designated as hedges are carried at their estimated fair value, and gains and losses  arising from changes in fair value are recognized in net income in the period in which the change occurs. Realized and unrealized  gains and losses on equity derivatives used to offset the change in share prices in respect of vested Deferred Share Units and  Restricted Share Units are recorded together with the corresponding compensation expense. Realized and unrealized gains on  other derivatives not designated as hedges are recorded in total revenues and other gains, direct costs or corporate costs, as  applicable. Realized and unrealized gains and losses on derivatives which are considered economic hedges, and where hedge  accounting is not able to be elected, are recorded in fair value changes in the Consolidated Statements of Operations. Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries,  based on the tax rates and laws enacted or substantively enacted at the balance sheet date. Current and deferred income tax relating  to items recognized directly in equity are also recognized in equity. Deferred income tax liabilities are provided for using the  liability method on temporary differences between the tax bases and carrying amounts of assets and liabilities. Deferred income tax  assets are recognized for all deductible temporary differences and, carry forward of unused tax credits and unused tax losses, to  the extent that it is probable that deductions, tax credits and tax losses can be utilized. The carrying amount of deferred income  tax assets is reviewed at each balance sheet date and reduced to the extent it is no longer probable that the income tax assets will  be recovered. Deferred income tax assets and liabilities are measured using the tax rates that are expected to apply to the year  when the asset is realized or the liability settled, based on the tax rates and laws that have been enacted or substantively enacted  at the balance sheet date. Business combinations are accounted for using the acquisition method. The cost of a business acquisition is measured at the  aggregate of the fair values at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments issued  in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at  their fair values at the acquisition date, except for non-current assets that are classified as held-for-sale which are recognized  and measured at fair value less costs to sell. The interest of non-controlling shareholders in the acquiree is initially measured at  the non-controlling shareholders’ proportion of the net fair value of the identifiable assets, liabilities and contingent liabilities  recognized. q)  Business Combinations p)  Income Taxes o)  Derivative Financial Instruments and Hedge Accounting  xii.  Other Gains i.  Items Classified as Hedges ii.  Items Not Classified as Hedges 94 BROOKFIELD ASSET MANAGEMENT 