CONSOLIDATED WATER CO. LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States dollars) 2. Accounting policies (continued) Advances in aid of construction: The Company recognizes a liability in respect of advances in aid of construction when such advances are received from certain condominium developers in the licensed area to help defray the capital expenditure costs of the Company. These advances do not represent a loan to the Company and are interest free. However, the Company allows a discount of 10% on future supplies of water to these developments until the aggregate discounts allowed are equivalent to advances received. Such discounts are charged against advances received. Treasury shares: Treasury shares are recorded at cost as a deduction from stockholders’ equity. Any profit or loss on the re-issue of these shares is recorded directly as a movement in stockholders’ equity. Stock and stock option incentive plans: The Company issues stock under incentive plans that form part of employees and non-executive Directors’ remuneration and grants options to purchase ordinary shares as part of remuneration for executive Directors.  The Company has elected to account for stock-based employee compensation plans in accordance with Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees,” as permitted by SFAS 123, “Accounting for Stock-Based Compensation.” In accordance with APB No. 25, compensation expense is not recognized for stock options that have no intrinsic value on the date of grant. Compensation expense is recognized immediately for restricted stock for which future service is not required as a condition to the delivery of the underlying shares of common stock. For restricted stock with future service requirements, compensation expense is recognized over the relevant vesting period. Stock compensation expenses are recorded within employee costs. The liability for unexercised stock option compensation expense is recorded as other liabilities. On exercise of options, proceeds up to the par value of the stock issued are credited to ordinary share capital, any proceeds in excess of the par value of the stock issued are credited to additional paid in capital in the period in which the options are exercised. Water sales and cost of water sales: The Group bills customers monthly for water delivered based on meter readings performed at or near each month end. An accrual, where necessary, is made for water delivered but unbilled at year end where readings are not performed at the year end date. This accrual is matched with the associated direct costs of producing and purchasing water.  Other income: Foreign exchange gains, water meter and fire hydrant rental and recurring income from a dispute settlement agreement with a customer within the Company’s license area are recorded as other income. Repairs and maintenance: All repair and maintenance costs are expensed as incurred. On July 21, 2000, the Company acquired all of the issued and outstanding capital stock of Seatec Belize Ltd., a company organized under the laws of Belize. Seatec Belize Ltd., now renamed Belize Water Ltd., owns and operates a reverse osmosis plant in Ambergris Caye, Belize, which was acquired upon closing of this transaction. This acquisition has been accounted for by the purchase method. The total purchase price of $3,971,730 was paid in cash including direct external costs incurred in the acquisition amounting to $29,734. The purchase price was allocated among the identifiable tangible and intangible assets and liabilities based on their respective fair values as detailed below. Of this purchase price $2,073,462 has been attributed to intangible assets and represents the value of the water purveyor contract (the “contract”) that the acquired company has with the Water and Sewerage Authority of Belize. This intangible asset is being amortised on a straight line basis over the remaining period of the contract. 3. Business combination