Notes to the Consolidated Financial Statements Dollar amounts are in thousands of Canadian dollars (except share and per share amounts) 2.  Significant Accounting Policies (continued)  The cost of equity‑settled transactions is recognized, together with a corresponding increase in contributed surplus in equity, over the  period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity‑settled transactions  at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of  the number of equity instruments that will ultimately vest. The movement in cumulative expense recognized at the beginning and end of a  period is recognized in administration expense. Where the terms of an equity‑settled transaction award are modified, the minimum expense recognized is the expense as if the terms had  not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the  total fair value of the share‑based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity‑settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognized for  the award is recognized immediately. This includes any award where non‑vesting conditions within the control of either the entity or the  employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the  date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the  previous paragraph.  The dilutive effect of share‑based awards is reflected as additional share dilution in the computation of diluted earnings per share (further  details are given in note 22). Financial instruments are accounted for, presented, and disclosed in accordance with IFRS 7 – Financial Instruments: Disclosures (“IFRS  7”), IAS 32 ‑ Financial Instruments: Presentation (“IAS 32”) and IAS 39 ‑ Financial Instruments: Recognition and Measurement (“IAS 39”).  The Company recognizes financial assets and financial liabilities when the Company becomes a party to a contract. Financial assets and  financial liabilities, with the exception of financial assets classified at fair value through profit or loss, are measured at fair value plus  transaction costs on initial recognition. Financial assets at fair value through profit or loss are measured at fair value on initial recognition  and transaction costs are expensed when incurred. Financial assets are classified as FVTPL when acquired principally for the purpose of trading, if so designated by management (fair value  option), or if they are derivative assets. Financial assets classified as FVTPL are measured at fair value, with changes recognized in the  consolidated statements of income and comprehensive income. Loans and receivables are non‑derivative financial assets that have fixed or determinable payments and are not quoted in an active market.  Subsequent to initial recognition, loans and receivables are carried at amortized cost, using the effective interest method, less a provision  for impairment. A provision for impairment is established when there is objective evidence that collection will not be possible under the  original terms of the contract. Indicators of impairment include delinquency of payment and significant financial difficulty of the holder.  The carrying amount of the financial asset is reduced through an allowance account, and the amount of the loss is recognized in the  Consolidated Statements of Income and Comprehensive Income. Any subsequent reversal of an impairment loss is recognized in profit or  loss. Financial liabilities are classified as FVTPL if they meet certain conditions and are designated as such by management, or they are derivative  liabilities. Financial liabilities classified as FVTPL are measured at fair value, with changes recognized in the Consolidated Statements of  income and comprehensive income. Other financial liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial liabilities  are measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized  cost of an instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts  estimated future cash receipts (including all transaction costs and other premiums or discounts) through the expected life of the debt  instrument to the net carrying amount of the initial recognition. Fair value measurements recognized in the Consolidated Statements of Financial Position are categorized using a fair value hierarchy that  reflects the significance of inputs used in determining the fair values: Killam ProPerties inc | 2013  73 (K) Financial Assets and Liabilities Financial assets at fair value through profit or loss (“FVTPL”) Loans and receivables Financial liabilities at FVTPL Other financial liabilities  Measurement in subsequent periods depends on the classification of the financial instrument as follows: