NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements For the years ended December 31, 2013 and December 31, 2012 AKITA Drilling Ltd. and its subsidiaries (the “Company”) provide contract drilling services, primarily to the oil  and gas industry. The Company owns and operates 38 drilling rigs (34.725 net) in Canada.  The Company conducts certain rig operations via joint ventures with aboriginal partners whereby rig assets  are jointly owned. While joint venture interests are at least 50% owned by the Company, in each case the joint  venture is governed on a joint basis.  The contract drilling business in which the Company operates is subject to seasonal fluctuations primarily due  to weather conditions affecting the ability to move rigs and other heavy equipment. Historically, rig utilization  in the first quarter of the calendar year is the highest. Lower activity levels that result from warmer weather  which necessitates travel bans on certain public roads characterize the second quarter while the summer  drilling season begins when road bans are lifted. Activity builds throughout the fall and peaks during the winter  months. The Company is a limited liability company incorporated and domiciled in Alberta, Canada. The address of its  registered office is 900, 311 – 6th Avenue SW, Calgary, Alberta. The Company is listed on the Toronto Stock  Exchange. The consolidated financial statements for the year ended December 31, 2013, have been prepared in  accordance with International Financial Reporting Standards (“IFRS”).  Items included in the financial statements of each of the Company’s consolidated entities are measured using  the currency of the primary economic environment in which the entity operates (the “functional currency”). These consolidated financial statements are presented in Canadian dollars. The policies applied in these consolidated financial statements are based on IFRS issued and effective as of  March 5, 2014, the date that the Company’s Board of Directors approved the statements. These consolidated financial statements have been prepared under the historical cost convention, as modified  by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair value  through the Consolidated Statement of Income and Comprehensive Income. 1. General Information 2. Basis of Preparation  3. Significant Accounting Policies  Basis of measurement 38 AKITA DRILLING LTD.  ANNUAL REPORT