H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010  ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS  Status of Convergence Plan  Page 34 of 45  Where significant impacts of the transition were identified, work commenced on solutions which required a significant amount of time  to resolve. These issues include but may not be limited to, the identification of proposed information technology initiatives and  components of debt covenants which need to be addressed to ensure they are completed on time. As the review of accounting  policies is completed, appropriate changes to ensure the integrity of internal controls over financial reporting and disclosure controls  and procedures has been made. For example, changes in accounting policies could result in changes to controls or procedures to  address reporting of first time adoption as well as ongoing IFRS reporting requirements. The Trusts have held IFRS information  sessions with members of the Boards of Trustees of both Trusts and separately with Audit Committee members of both Trusts. During these sessions, management and external consultants provided both Boards of Trustees with a review of the timeline for  implementation, the implications of IFRS standards to the business and an overview of the impact to the financial statements (as  experienced in Europe by comparable companies). Both Audit Committees continue to receive quarterly updates from management.  An analysis of the impact of the majority of IFRS standards has been assessed and recommendations on policy choices, where  applicable, have been approved by the Boards of Trustees of both Trusts. As such, action plans have been created to implement  these policy choices. These plans detail what is required to implement each standard and the information and related systems  requirements to gather and track data for the extensive accounting and disclosure requirements under the transition to IFRS and on  a continual basis once the adoption of these new standards has been completed. The following provides a summary of the Trusts’ IFRS Implementation Plan and status of the Trusts’ activities:  Implementing IFRS will have an impact on accounting, financial reporting and supporting IT systems and processes. It may also  have an impact on contractual commitments involving GAAP based clauses (including debt covenants), and performance metrics.  Accordingly, the Trusts’ implementation plan has included measures to provide extensive training to key finance personnel, to review  relevant contracts and agreements and to increase the level of awareness and knowledge amongst management, the Boards of  Trustees and the audit committees of both Trusts.  The Canadian Accounting Standards Board (“AcSB”) has mandated the adoption of IFRS effective for interim and annual periods  beginning on or after January 1, 2011 for Canadian publicly accountable profit-oriented enterprises. IFRS will replace Canada’s  current GAAP for these enterprises. Comparative IFRS information for the 2010 fiscal year will also have to be reported. These new  standards will be effective for the Trusts during the first quarter of 2011. The Trusts’ combined financial performance and financial  position as disclosed in the current GAAP financial statements may be significantly different when presented in accordance with  IFRS. The discussion in this section should be read in conjunction with the Trusts’ annual MD&A for the years ended December 31, 2009  and 2008, and contains an update as at the reporting date.  Future income taxes are recognized for the temporary differences between the financial statement carrying amounts of assets and  liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or substantively  enacted tax rates and laws that are expected to apply to taxable income in the years in which those temporary differences are  expected to be reversed or settled. The effect on future income tax assets and liabilities of a change in tax rate is recognized in  income in the period that includes the date of enactment or substantive enactment.  Prior to the SIFT Rules, income earned by the REIT and distributed annually to unitholders was not, and would not be, subject to  taxation in the REIT, but was taxed at the unitholder level. For financial statement reporting purposes, the tax deductibility of the  REIT's distributions was treated as an exemption from taxation as the REIT distributed and intended to continue distributing all of its  income to its unitholders. Accordingly, prior to the SIFT Rules, the REIT did not record a provision for income taxes, or future  income tax assets or liabilities, in respect of the REIT or its investments in its subsidiary trusts . 