Page 102 - Suncor AR English

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In addition, these provisions are based on estimated costs, which take into account the anticipated method and extent of

restoration, technological advances and the possible future use of the site. Actual costs are uncertain and estimates can
vary as a result of changes to relevant laws and regulations, the emergence of new technology, operating experience,

prices and closure plans. The estimated timing of future decommissioning and restoration may change due to certain
factors, including reserve life. Changes to estimates related to future expected costs, discount rates and timing may have

a material impact on the amounts presented.

Employee Future Benefits
The company provides benefits to employees, including pensions and other post-retirement benefits. The cost of defined

benefit pension plans and other post-retirement benefits received by employees is estimated based on actuarial valuation
methods that require professional judgment. Estimates typically used in determining these amounts include, as applicable,

rates of employee turnover, future claim costs, discount rates, future salary and benefit levels, the return on plan assets,
mortality rates and future medical costs. Changes to these estimates may have a material impact on the amounts

presented.

Other Provisions
The determination of other provisions, including, but not limited to, provisions for royalty disputes, onerous contracts,

litigation and constructive obligations, is a complex process that involves judgments about the outcomes of future events,
the interpretation of laws and regulations, and estimates on timing and amount of expected future cash flows and

discount rates.

Income Taxes
Management evaluates tax positions, annually or when circumstances require, which involves judgment and could be

subject to differing interpretations of applicable tax legislation. The company recognizes a tax provision when a payment
to tax authorities is considered probable. However, the results of audits and reassessments and changes in the

interpretations of standards may result in changes to those positions and potentially a material increase or decrease in the
company’s assets, liabilities and net earnings.

Deferred Income Taxes

Deferred tax assets are recognized when it is considered probable that deductible temporary differences will be recovered
in the foreseeable future. To the extent that future taxable income and the application of existing tax laws in each

jurisdiction differ significantly from the company’s estimate, the ability of the company to realize the deferred tax assets
could be impacted.

Deferred tax liabilities are recognized when there are taxable temporary differences that will reverse and result in a future
outflow of funds to a taxation authority. The company records a provision for the amount that is expected to be settled,

which requires judgment as to the ultimate outcome. Deferred tax liabilities could be impacted by changes in the
company’s judgment of the likelihood of a future outflow and estimates of the expected settlement amount, timing of

reversals, and the tax laws in the jurisdictions in which the company operates.

Control and Significant Influence
Control is defined as the power to govern the financial and operating decisions of an entity so as to obtain benefits from

its activities, and significant influence is defined as the power to participate in the financial and operating decisions of the
investee. The assessment of whether the company has control, joint control, or significant influence over another entity

requires judgment of the impact it has over the financial and operating decisions of the entity and the extent of the
benefits it obtains.

Joint Arrangements

The classification of joint arrangements structured through separate vehicles as either joint ventures or joint operations
requires significant judgment and depends on the legal form and contractual terms of the arrangement as well as other

facts and circumstances. These include whether there is exclusive dependence on the parties to the joint arrangement for
cash flows through the sale of product and funding of operations, and to assess the rights of the economic benefits of

the assets and obligation for funding the liabilities of the arrangements.

98 SUNCOR ENERGY INC. ANNUAL REPORT 2013