MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2011 and 2010 (Tabular amounts in millions of Canadian dollars, except per share data) IFRS 10, Consolidated Financial Statements (“IFRS 10”) will replace SIC-12, Consolidation-Special Purpose Entities and IAS 27, Consolidated and Separate Financial Statements . IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more entities. IFRS 10 is effective for periods beginning on or after January 1, 2013. IFRS 11, Joint Arrangements (“IFRS 11”) will replace guidance in IAS 31, Interests in Joint Ventures . IFRS 11 provides focus on the rights and obligations of the joint arrangement, rather than its legal form in the current standard. IFRS 11 also addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interest in jointly controlled entities. IFRS 11 is effective for periods beginning on or after January 1, 2013. IFRS 12, Disclosure of Interests in Other Entities (“IFRS 12”) establishes new and comprehensive disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. This new standard is effective for periods beginning on or after January 1, 2013. IFRS 13, Fair Value Measurement (“IFRS 13”) replaces the fair value guidance that is currently contained within individual IFRS with a single source of fair value measurement guidance. IFRS 13 is effective for periods beginning on or after January 1, 2013. Amendments to IAS 1, Presentation of Financial Statements (“IAS 1”) retains the “one or two statement” approach to presenting the statements of income and comprehensive income at the option of the entity and only revises the way other comprehensive income is presented. This revised standard is effective for periods beginning on or after July 1, 2012. IAS 12, Deferred Tax: Recovery of Underlying Assets (“IAS 12”) has been amended to include the requirement that deferred tax on non-depreciable assets measured using the revaluation model in IAS 16 should be measured on the sale basis. This new standard is effective for periods beginning on or after January 1, 2012. IAS 19, Employee Benefits (“IAS 19”) eliminates the use of the “corridor” approach and requires that all remeasurement impacts be recognized in other comprehensive income. It also enhances the disclosure requirements by providing more information regarding the characteristics of defined benefit plans and the risk that entities are exposed to through participation in those plans. This revised standard is effective for periods beginning on or after January 1, 2013. The presentation of financial statements requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the year, and of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. In particular, the amounts recorded for inventories, redundant assets, bad debts, derivatives, income taxes, restructuring, pension and other post-retirement benefits, contingencies and litigation, environmental matters, outstanding self-insured claims, depreciation and amortization of property, plant and equipment, and the valuation of goodwill are based on estimates. Actual results could differ from those estimates. Inventories are valued at the lower of cost and net realizable value on the first-in, first-out basis. The cost of work in process and finished goods includes materials, direct labour applied to the product and the applicable share of overhead. In determining the net realizable value, the Company estimates and establishes reserves for excess, obsolete or unmarketable inventory. The reserve is based upon the aging of the inventory, the historical experience, the current business environment and the Company’s judgment regarding the future demand for the inventory. If actual demand and market conditions are less favourable than those projected, additional inventory reserves may be needed and the results from operations could be materially affected. A change in the provision would be recorded in the carrying value of inventory and cost of goods sold. The Company records an allowance for doubtful accounts related to accounts receivable that management believes may become impaired. The allowance is based upon the aging of the receivables, the Company’s knowledge of the financial condition of its customers, the historical experience, and the current business environment. If actual collection of receivables and market conditions are less favourable than those projected, additional allowance for doubtful accounts may be needed and the results from operations could be materially affected. A change in the allowance would be recorded in selling, general and administrative expenses. C) Critical Accounting Estimates Inventory Valuation Accounts Receivable 38 CCL Industries Inc. 2011 Annual Report