Algonquin Power & Utilities Corp. – Consolidated Financial Statements ALGONQUIN POWER & UTILITIES CORP.  Notes to the Consolidated Financial Statements  December 31, 2012 and 2011   (in thousands of Canadian dollars except as noted and amounts per share)  1.  Significant accounting policies (continued) (u) Recognition of revenue  Revenue derived from non-regulated energy generation sales, which are mostly under long- term power purchase contracts, is recorded at the time electrical energy is delivered.  Revenues related to utility electricity and natural gas sales and distribution are recorded based  on metered consumptions by customers, which occur on a systematic basis throughout a  month, rather than when the electricity or natural gas is delivered. At the end of each month,  the electricity and natural gas delivered to the customers from the date of their last meter read to  the end of the month is estimated and the corresponding unbilled revenues are calculated. These estimates of unbilled sales and revenues are based on the ratio of billable days versus  unbilled days, amount of electricity or natural gas procured during that month, historical  customer class usage patterns, weather, line loss, unaccounted-for gas and current tariffs. Water reclamation and distribution revenues are recorded when water is processed or delivered  to customers. At the end of each month, the water delivered and waste water collected from the  customers from the date of their last meter read to the end of the month is estimated and the  corresponding unbilled revenues are calculated. These estimates of unbilled revenues are  based on the ratio of billable days versus unbilled days, amount of water procured and collected  during that month, historical customer class usage patterns and current tariffs.  Revenue from waste disposal is recognized on actual tonnage of waste delivered to the plant at  prices specified in the contract. Certain contracts include price reductions if specified thresholds  are exceeded. Revenue for these contracts is recognized based on actual tonnage at the  expected price for the contract year.  Interest from long-term investments is recorded as earned. The Company’s reporting currency is the Canadian dollar. The Company’s US operations are determined to have the U.S. dollar as their functional  currency since the preponderance of operating, financing and investing transactions are  denominated in U.S. dollars. The financial statements of these operations are translated into  Canadian dollars using the current rate method, whereby assets and liabilities are translated at  the rate prevailing at the balance sheet date while revenues and expenses are converted using  average rates for the period. Unrealized gains or losses arising as a result of the translation of  the financial statements of these entities are reported as a component of other comprehensive  income (“OCI”) and are accumulated in a component of equity on the Consolidated Balance  Sheet and are not recorded in income unless there is a complete or substantially complete sale  or liquidation of the investment. (v) Foreign currency translation  2012 Annual Report 85