2. Significant Accounting Policies (continued)  3. Significant Accounting Judgments, Estimates and Assumptions Investment Properties Leases Financial Instruments Deferred income tax assets are recognized only to the extent that it is probable that taxable profit will be available against which deductible  temporary differences, carried forward tax credits, or tax losses can be utilized. The carrying value of deferred income tax assets are  reviewed at each reporting date and reduced to the extent it is no longer probable that the income tax asset will be recovered. The Company determines the deferred tax consequences associated with temporary differences relating to investment properties as if the  carrying amount of the investment property is recovered entirely through sale. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or  the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in profit or loss. In the application of Killam’s accounting policies, which are described in Note 2, Management is required to make judgments, estimates  and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and  associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ  from these estimates. The judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized  in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the  revision affects both current and future periods.  Judgments Other Than Estimates In the process of applying the Company’s accounting policies, management has made the following judgments, which have the most  significant effect on the amounts recognized in the consolidated financial statements: Property Acquisitions When investment properties are acquired, management considers whether the acquisition represents the acquisition of an asset or a  business. The Company accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to  the property. More specifically, consideration is made of the extent to which significant processes are acquired and, in particular, the extent  of ancillary services provided by the subsidiary (e.g., maintenance, cleaning, security, bookkeeping, leasing operations, etc.). Management believes that the majority of the Company’s acquisitions will be classified as asset acquisitions. During the acquisition of  most properties, Killam buys the asset itself and any short‑term leases that are in place. Generally, Killam does not purchase any business  systems or processes with a property. Management considers an acquisition to be a business combination if all the following criteria are  met: • The acquisition includes a property portfolio (multiple buildings), • A significant staff complement is included, including a maintenance team, leasing representatives and property management personnel,  and • Systems are acquired and continue to be incorporated into operations. The Company’s accounting policies relating to investment properties are described in Note 2(F). In applying this policy, judgment is  applied in determining whether certain costs are additions to the carrying amount of the property and, for properties under construction,  identifying the point at which substantial completion of the property occurs and identifying the directly attributable borrowing costs  to be included in the carrying value of the development property. Judgment is also applied in determining the extent and frequency of  independent appraisals. The Company has entered into residential property leases on its investment property portfolio. The Company has determined, based on an  evaluation of the terms and conditions of the arrangements, that it has not transferred all the significant risks and rewards of ownership of  these properties and accounts for the contracts with tenants as operating leases. The Company’s accounting policies relating to financial instruments are described in Note 2(K). The critical judgments inherent in these  policies relate to applying the criteria set out in IAS 39 to designate financial instruments as FVTPL and determining whether the Company  has significant influence over investees with which it has contractual relationships in addition to the financial instrument it holds. Killam ProPerties inc | 2013  75 Notes to the Consolidated Financial Statements Dollar amounts are in thousands of Canadian dollars (except share and per share amounts)