Notes to Consolidated Financial Statements  Year ended December 31, 2011  Reporting entity:  Alaris is a company domiciled in Calgary, Alberta, Canada. The consolidated financial statements of  the Company as at and for the year ended December 31, 2011 comprises the Company and its  subsidiaries (together referred to as the “Corporation”). The Corporation’s Canadian operations are  conducted through a partnership. The Corporation’s American operations are conducted through a  Delaware Corporation formed on October 21, 2011. The Corporation’s operations consist primarily  of investments in private operating entities, typically in the form of preferred limited partnership  interests, preferred interest in limited liability corporations in the United States, or long-term license  and royalty arrangements. The Corporation also has a wholly-owned subsidiary in The Netherlands. These consolidated financial statements have been prepared in accordance with International  Financial Reporting Standards (IFRS).  An explanation of how the transition to IFRS has affected the reported financial position, financial  performance and cash flows of the Corporation is provided in note 13. This note includes  reconciliations of equity and total comprehensive income for comparative periods and of equity at  the date of the transition reported under Canadian GAAP to those reported for those periods and at  the date of transition under IFRS.  These consolidated financial statements were approved by the Board of Directors on March 14,  2012.  The consolidated financial statements have been prepared on the historical cost basis except for the  following material items in the statement of financial position:  2. Statement of compliance: (a) Statement of compliance  (c) Functional and presentation currency  (b) Basis of measurement  (d) Use of estimates  GLYPH<g120> Available-for-sale financial assets (Preferred LP units and Preferred LLC units) are measured at  fair value with changes in fair value recorded in other comprehensive income  GLYPH<g120> Derivative financial instruments are measured at fair value  These consolidated financial statements are presented in Canadian dollars which is the  Corporation’s functional currency. The preparation of the consolidated financial statements in conformity with IFRS requires  management to make judgments, estimates and assumptions that affect the application of  accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual  results may differ from these estimates.  Provisions for taxes are made using the best estimate of the amount expected to be paid based on a  qualitative assessment of all relevant factors. Management reviews the adequacy of these  provisions at the end of the reporting period. However, it is possible that at some future date an 24  2011 Annual Report  Alaris Royalty Corp.