In the first quarter of 2011, management performed a review of the useful life of the Company’s coal plants and determined that the useful life did not match common industry practices. As a result of an analysis compared with industry peers, historical averages, and the Company’s maintenance practices, the estimate of the useful life of the coal plants was revised. Effective January 1, 2011, the Company prospectively revised its estimate of the useful life of its coal plants from 35 years to 45 years. The change in estimate resulted in lower depreciation expense. For determining purchase price allocations for business combinations, the Company is required to estimate the fair value of acquired assets and obligations. Goodwill is measured as the excess of the fair value of the consideration transferred less the fair value of the identifiable assets acquired and liabilities assumed. Goodwill acquired in an acquisition is, from the date of acquisition, allocated to each of the cash generating units (CGU) that are expected to benefit from the acquisition. Estimates of fair value for the recoverable amount of CGUs undergoing impairment testing, and for purchase price allocations for business combinations are primarily based on discounted cash flow projection techniques employing estimated future cash flows based on assumptions regarding the expected market outlook and cash flows from each CGU or asset. The cash flow estimates will vary with the circumstances of the particular assets or CGU and will be based on, among other things, the lives of the assets, contract prices, estimated future prices, revenues and expenses, including growth rates and inflation, and required capital expenditures. For purposes of impairment testing of non-financial assets, assets that are managed as a portfolio are grouped together into a CGU, which is the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. For the purpose of goodwill impairment testing, goodwill acquired in a business combination is allocated to the CGU, or the group of CGUs, that is expected to benefit from the synergies of the combination. The Company has determined its CGUs and for non-financial assets subject to depreciation and amortization, it performs impairment testing when events or changes in circumstances may indicate or cause the asset’s carrying amount to exceed its recoverable amount. The Company reviews the recoverability of goodwill and indefinite life intangibles on an annual basis, or more frequently if events or circumstances indicate that the carrying amount may be impaired. Identifying events or changes in circumstances that may indicate or cause a non-financial asset’s carrying amount to exceed its recoverable amount requires judgment in assessing what events or circumstances would have such an impact. For 2011, the Company recognized an impairment loss of $43 million on management contracts associated with the operations of CPILP prior to the sale of CPILP units to Atlantic Power. Impairment charges or reversals of impairment charges are expected to occur more frequently than reported in the past due to changes in Canadian GAAP. Assets that are acquired or developed are initially recorded at their fair value which is subject to change as company, industry and general economic conditions fluctuate. The Company performs goodwill impairment testing on an annual basis and current assessments of fair value of its assets on a regular basis which may result in the recognition of impairment losses or reversals of losses such as the 2012 second quarter’s impairment loss with respect to its North East U.S. plants. See Significant Events. Measurement of the Company’s provisions and the related change in discount rate require the use of estimates with respect to the amount and timing of asset retirements, the extent of site remediation required, and related future cash flows for the decommissioning provisions and estimates of expected customer renewals for the Company’s other provisions. The Company estimates the undiscounted amount of cash flow required to settle its decommissioning obligations is approximately $331 million, calculated using inflation rates ranging from 2% to 3%. The expected timing for settlement of the obligations is between 2013 and 2066, which reflects the anticipated useful lives of the different power plants. The majority of the payments to settle the obligations are expected to occur between 2032 and 2066 for the power generation plants and between 2013 and 2019 for sections of the Genesee coal mine. Discount rates used to calculate the carrying amount of the obligation ranged from 1.14% to 2.95%. The actual costs to settle decommissioning obligations may vary from estimates as a result of changes to contractor rates required to perform the decommissioning. Decommissioning and other provisions Capital Power Corporation Management’s Discussion and Analysis 2012 55