NOTES  TO CONSOLIDATED FINANCIAL STATEMENTS obligation can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognized as a finance cost. Trade and other payables, including accruals, are recorded when the Company is required to make future payments as a result of purchases of assets or services. Trade and other payables are recognized initially at fair value and are subsequently measured at amortized cost using the effective interest rate method. All financial instruments are measured at initial recognition at fair value plus any transaction costs that are directly attributable to the acquisition of the financial instruments except for transaction costs related to financial instruments classified as at fair value through profit or loss (‘‘FVTPL’’) which are expensed as incurred. The Company has designated its financial instruments as follows: The IASB intends to replace IAS 39 – Financial Instruments: Recognition and Measurement (‘‘IAS 39’’) in its entirety with IFRS 9 – Financial Instruments (‘‘IFRS 9’’) in three main phases. IFRS 9 will be the new standard for the financial reporting of financial instruments that is principle-based and less complex than IAS 39. In November 2009 and October 2010, phase 1 of IFRS 9 was issued and amended, respectively, which addressed the classification and measurement of financial assets and financial liabilities. IFRS 9 requires that all financial assets be classified as subsequently measured at amortized cost or at fair value based on the Company’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. Financial liabilities are classified as subsequently measured at amortized cost except for financial liabilities classified as at fair value through profit or loss, financial guarantees, and certain other exceptions. The effective date of IFRS 9 is for annual periods beginning on or after January 1, 2015 (with earlier application permitted). The Company has not yet assessed the impact that this new standard is likely to have on its consolidated financial statements. In May 2011, the IASB issued IFRS 10 – Consolidated Financial Statements (‘‘IFRS 10’’), which supersedes SIC 12 and the requirements relating to consolidated financial statements in IAS 27 – Consolidated and Separate Financial Statements (‘‘IAS 27’’). IFRS 10 is effective for annual periods beginning on of after January 1, 2013, with earlier application permitted under certain circumstances. IFRS 10 establishes control as the basis for an investor to consolidate its investees and defines control as an investor’s power over an investee with exposure, or rights, to variable returns from the investee and the ability to affect the investor’s returns through its power over the investee. In addition, the IASB issued IFRS 12 – Disclosure of Interest in Other Entities (‘‘IFRS 12’’) which combines and enhances the disclosure requirements for the Company’s subsidiaries, joint arrangements, associates, and unconsolidated structured entities. The requirements of IFRS 12 include reporting of the nature of risks associated with the Company’s interests in other entities and the effect of those interests on the Company’s consolidated financial statements. CONSOLIDATION U) TRADE AND OTHER PAYABLES V) FINANCIAL INSTRUMENTS W) CONSOLIDATED STATEMENT OF CASH FLOWS The Company prepares its consolidated statement of cash flows using the indirect method. i) Cash and cash equivalents, restricted cash and cash equivalents, and accounts receivable have been classified as loans and receivables and are measured at amortized cost using the effective interest method, less any allowance for uncollectability. The Company recognizes purchase or sale of financial assets using trade date accounting. ii) Accounts payable and accrued liabilities, long-term debt, royalties payable, repayable research funding, the royalty financial liability, and the CAAP loan are classified as other financial liabilities and are measured at amortized cost using the effective interest rate method. X) FUTURE CHANGES IN ACCOUNTING POLICIES FINANCIAL INSTRUMENTS CEAPRO Annual Report 2012 37