Notes to Consolidated Financial Statements

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Year-end Dates
The Association's year end occurs on the last Friday of March. For the current year, the actual year-end date is March 30, 2007 and for the prior year, the year-end date was March 31, 2006. For the purpose of these consolidated financial statements, March 31 will refer to the actual dates mentioned above.

Basis of Presentation
These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ["GAAP"] and include the accounts of the Association and its subsidiaries. All significant inter-company balances and transactions have been eliminated on consolidation.

Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit and money market securities with an original term to maturity that is less than 90 days on the date of purchase. These securities are carried on the consolidated statement of financial position at cost plus accrued interest, which approximates market value.

Investments
Short-term and long-term investments are recorded at cost. Interest and dividends are reported as earned and gains when realized. Purchase premiums or discounts are amortized over the remaining term to maturity. Investments are written down in the year where there is deemed to be an impairment in value which is other than temporary. Investments with less than a 50% ownership interest are accounted for by the equity method.

Inventory
Inventory held for resale is valued at the lower of cost, determined on a first-in, first-out basis, and replacement cost. Work in progress is valued at the lower of cost and net realizable value.

Deferred Expenses
The Association incurs certain project-specific direct costs associated with major development projects. These costs are amortized as deferred expenses on a straight-line basis over the specific term of the project, generally three to five years.

Capital Assets
Capital assets are carried in the accounts at cost less accumulated depreciation.

Depreciation, which is recorded from the year the asset is placed in service, is provided over the estimated useful lives of the capital assets as follows:

Buildings	5% declining balance
Leasehold improvements	straight-line over term of lease
Equipment	20% declining balance
Computer equipment and major application software	3 years straight-line

Gains and losses arising on the disposal of individual assets are recognized in the results of operations in the year of disposal.

Intangible Assets and Goodwill
The Association follows the standard issued by The Canadian Institute of Chartered Accountants' ["CICA"] Handbook Section 3062, "Goodwill and other Intangible Assets". This standard eliminates the amortization of goodwill and intangible assets with indefinite lives, but requires an annual test for impairment of the unamortized carrying values.

Goodwill represents the excess of the purchase price, including acquisition costs, over the fair value of the net identifiable assets of businesses acquired.

Intangible assets are stated at their assigned value and amortized on a straight-line basis over their estimated useful lives.

Goodwill and intangible assets are subject to a fair value impairment test to be performed at least annually to ensure that the fair value remains greater than, or equal to, the carrying value. Any impairment to the carrying value will be included in the results of operations for that year.

Retirement Benefit Plans
The current service cost of pensions and other post-employment benefit plans [such as medical and dental care] is charged to income annually. Cost is calculated on an actuarial basis using the projected benefits method and based on management's best estimates of investment yields, salary escalation and other factors. Future salary levels and inflation affect the amount of future pensions. Adjustments resulting from plan amendments, experience gains and losses, or changes in assumptions are amortized over the remaining average service term of active employees. Cumulative gains and losses in excess of 10% of the greater of the accrued benefit obligation and the market-related value of plan assets are amortized over the expected average remaining service of active members expected to receive benefits under the plans. The expected return on pension plan assets is based on the fair value of plan assets. The non-pension post-employment benefit plan is a defined benefit plan funded on a cash basis by the Association.

The Association applied the recommendations of Section 3461 of the CICA Handbook prospectively and elected to amortize the transitional asset/obligation on a linear basis from April 1, 2000 over the average remaining service period of active members expected to receive benefits under the plans. The Association uses a measurement date of December 31 for the plan assets and the accrued benefit obligation.

Lease Inducements
Lease inducements represent leasehold improvements received from the landlord and the value of rent-free periods. Lease inducements are amortized on a straight-line basis over the term of the lease and the amortization is recorded as a reduction of rent expense.

Revenue Recognition
Revenue from testing, certification, registration and other services is recorded when the related service is completed. Revenue from the sale of goods is recognized when they are shipped. Annual fees are recorded as revenue in the period to which they apply. Standard Resource Support and other revenue are recognized based upon percentage of completion. Amounts received for services not yet rendered, or annual fees relating to a future period, are included in current liabilities as customer deposits or deferred revenue.

Foreign Currency Translation
Foreign operations are considered integrated and are translated using the temporal rate method. Monetary assets and liabilities are translated using the exchange rate in effect at year end, and revenue and expenses are translated at the average rate of the month the transaction is recorded. Non-monetary assets, liabilities, depreciation and amortization are translated at historical rates of exchange.

Foreign currency denominated monetary assets and liabilities of Canadian operations are translated at the exchange rate prevailing at year end, and revenue and expenses at average rates of the month the transaction is recorded.

Exchange gains and losses arising on the translation of the accounts are included in the results of operations in the current year.

Derivative Financial Instruments and Cash Flow Hedging Strategy
The Association utilizes derivative financial instruments in the management of its foreign currency exposure. The Association's policy is not to utilize derivative financial instruments for trading or speculative purposes.

The Association documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the consolidated statement of financial position or to specific firm commitments or forecasted transactions. The Association also assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The Association periodically enters into hedges of a portion of its foreign currency exposures on anticipated foreign currency denominated revenue by entering into offsetting forward foreign exchange contracts and option contracts, when it is deemed appropriate. The terms of the forward contracts or the option contracts are such that the Association effectively limits its exposure to foreign currency fluctuations to within a fixed range of conversion rates. Because the critical terms of the forward and options contracts coincide with a portion of the anticipated foreign currency denominated revenue, changes in the related cash flow attributable to the foreign exchange risk are expected to be completely offset by the hedging derivative. Foreign exchange translation gains and losses on foreign currency denominated derivative financial instruments used to hedge anticipated foreign currency denominated revenue are recognized as an adjustment of the revenue when the revenue is recorded. For forward foreign exchange contracts and option contracts used to hedge anticipated foreign currency denominated revenue, the portion of the forward premium or discount on the contract relating to the period prior to consummation of the revenue is also recognized as an adjustment of the revenue when the revenue is recorded. Realized and unrealized gains or losses associated with derivative instruments, which have been terminated or cease to be effective prior to maturity, are deferred under other current, or non-current, assets or liabilities on the consolidated statement of financial position and recognized in income in the period in which the underlying hedged transaction is recognized. In the event it is no longer probable that the anticipated transaction will occur, any realized or unrealized gain or loss on such derivative instrument is recognized currently in income.

Internally Restricted Net Assets
Certain net assets are restricted by the Board of Directors for specific purposes relating to the development of standards, research projects and new standards applications.