EX-99.2 3 exh99_2.htm EXHIBIT 99.2 CPG YE 2014 FS
Exhibit 99.2
MANAGEMENT'S REPORT

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Crescent Point Energy Corp. is responsible for the preparation of the consolidated financial statements. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and include certain estimates that reflect management’s best estimates and judgments. Management has determined such amounts on a reasonable basis in order to determine that the consolidated financial statements are presented fairly in all material respects.
PricewaterhouseCoopers LLP, an independent firm of chartered accountants, was appointed by a resolution of the Board of Directors to audit the consolidated financial statements of the Company and to provide an independent professional opinion. PricewaterhouseCoopers LLP was appointed to hold such office until the next annual meeting of the shareholders of the Company.
The Board of Directors, through its Audit Committee, has reviewed the consolidated financial statements including notes thereto with management and PricewaterhouseCoopers LLP. The members of the Audit Committee are composed of independent directors who are not employees of the Company. The Audit Committee meets regularly with Management and PricewaterhouseCoopers LLP to review and approve the consolidated financial statements. The Board of Directors has approved the information contained in the consolidated financial statements based on the recommendation of the Audit Committee.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management has developed and maintains an extensive system of internal accounting controls that provide reasonable assurance that all transactions are accurately recorded, that the consolidated financial statements realistically report the Company’s operating and financial results, and that the Company’s assets are safeguarded. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Management has assessed the effectiveness of the Company's internal control over financial reporting as at December 31, 2014. The assessment was based on the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") framework in Internal Control - Integrated Framework (2013) to evaluate the design and effectiveness of internal control over financial reporting. Management concluded that this system of internal controls was effective as of December 31, 2014. The Company has effective disclosure controls and procedures to ensure timely and accurate disclosure of material information relating to the Company which complies with the requirements of Canadian securities legislation and the United States Sarbanes - Oxley Act of 2002.
PricewaterhouseCoopers LLP, an independent firm of chartered accountants who also audited the Company's consolidated financial statement for the year ended December 31, 2014, has audited the the effectiveness of the Company's internal control over financial reporting as at December 31, 2014.

Scott Saxberg
President and Chief Executive Officer
Greg Tisdale
Chief Financial Officer

March 10, 2015














CRESCENT POINT ENERGY CORP.
1


INDEPENDENT AUDITOR’S REPORT


To the Shareholders of Crescent Point Energy Corp.
We have completed an integrated audit of Crescent Point Energy Corp. and its subsidiaries’ (together the “Corporation”) December 31, 2014 consolidated financial statements and their internal control over financial reporting as at December 31, 2014 and an audit of their December 31, 2013 consolidated financial statements. Our opinions, based on our audits, are presented below.

Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of the Corporation, which comprise the consolidated balance sheets as at December 31, 2014 and December 31, 2013 and the consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audit as at December 31, 2014 and for the year then ended in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). We conducted our audit as at December 31, 2013 and for the year then ended in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.
An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.

Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Crescent Point Energy Corp. and its subsidiaries as at December 31, 2014 and December 31, 2013 and their financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Report on internal control over financial reporting
We have also audited the Corporation’s internal control over financial reporting as at December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Management’s responsibility for internal control over financial reporting
Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s report on internal control over financial reporting.

Auditor’s responsibility
Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

CRESCENT POINT ENERGY CORP.
2


An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we consider necessary in the circumstances.
We believe that our audit provides a reasonable basis for our audit opinion on the company’s internal control over financial reporting.

Definition of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent limitations
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Opinion
In our opinion, Crescent Point Energy Corp. and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as at December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.




(signed)
PricewaterhouseCoopers LLP
Chartered Accountants
Calgary, Alberta
March 10, 2015





CRESCENT POINT ENERGY CORP.
3



CONSOLIDATED BALANCE SHEETS
As at December 31
 
 
(Cdn$000s)
Notes
2014

 
2013

 
ASSETS
 
 
 
 
 
Cash
 
3,953

 
15,941

 
Accounts receivable
 
418,688

 
352,519

 
Prepaids and deposits
 
6,519

 
5,532

 
Derivative asset
23
520,601

 
3,126

 
Total current assets
 
949,761

 
377,118

 
Long-term investments
5
49,878

 
74,229

 
Derivative asset
23
283,379

 
48,098

 
Other long-term assets
6
59,577

 
37,958

 
Exploration and evaluation
7, 8
622,509

 
688,324

 
Property, plant and equipment
8, 9
14,250,062

 
11,259,147

 
Goodwill
10
251,919

 
251,919

 
Total assets
 
16,467,085

 
12,736,793

 
LIABILITIES
 
 
 
 
 
Accounts payable and accrued liabilities
 
839,228

 
789,305

 
Dividends payable
14
102,697

 
90,849

 
Current portion of long-term debt
11
93,504

 
-

 
Derivative liability
23
3,389

 
99,388

 
Decommissioning liability
13
52,280

 
18,469

 
Total current liabilities
 
1,091,098

 
998,011

 
Long-term debt
11
2,849,570

 
1,734,114

 
Derivative liability
23
215

 
25,846

 
Other long-term liabilities
12, 21
46,055

 
3,072

 
Decommissioning liability
13
971,078

 
611,069

 
Deferred income tax
20
1,348,180

 
864,608

 
Total liabilities
 
6,306,196

 
4,236,720

 
SHAREHOLDERS’ EQUITY
 
 
 
 
 
Shareholders’ capital
14
14,157,519

 
11,990,305

 
Contributed surplus
 
118,045

 
109,564

 
Deficit
15
(4,357,053
)
 
(3,692,437
)
 
Accumulated other comprehensive income
 
242,378

 
92,641

 
Total shareholders' equity
 
10,160,889

 
8,500,073

 
Total liabilities and shareholders' equity
 
16,467,085

 
12,736,793

 
Commitments (Note 25)
See accompanying notes to the consolidated financial statements.
Approved on behalf of the Board of Directors:
Gerald A. Romanzin
Director
D. Hugh Gillard
Director


CRESCENT POINT ENERGY CORP.
4


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31
 
 
 
 
 
(Cdn$000s, except per share amounts)
Notes
2014

 
2013

 
REVENUE AND OTHER INCOME
 
 
 
 
 
Oil and gas sales
 
4,210,112

 
3,526,448

 
Royalties
 
(750,206
)
 
(644,240
)
 
Oil and gas revenue
 
3,459,906

 
2,882,208

 
Derivative gains (losses)
17, 23
776,048

 
(202,747
)
 
Other loss
18
(24,351
)
 
(10,064
)
 
 
 
4,211,603

 
2,669,397

 
EXPENSES
 
 
 
 
 
Operating
 
647,713

 
505,060

 
Transportation
 
117,622

 
95,317

 
General and administrative
 
91,627

 
67,466

 
Interest on long-term debt
 
103,921

 
77,754

 
Foreign exchange loss
19
124,362

 
64,505

 
Share-based compensation
21
69,681

 
67,752

 
Depletion, depreciation, amortization and impairment
7, 9
2,222,556

 
1,558,899

 
Accretion on decommissioning liability
13
21,187

 
14,162

 
 
 
3,398,669

 
2,450,915

 
Net income before tax
 
812,934

 
218,482

 
 
 
 
 
 
 
Tax expense
 
 
 
 
 
Current
20
67

 
173

 
Deferred
20
303,973

 
73,433

 
Net income
 
508,894

 
144,876

 
 
 
 
 
 
 
Other comprehensive income
 
 
 
 
 
Items that may be subsequently reclassified to profit or loss
 
 
 
 
Foreign currency translation of foreign operations
 
149,737

 
93,920

 
Comprehensive income
 
658,631

 
238,796

 
 
 
 
 
 
 
Net income per share
22
 
 
 
 
Basic
 
1.22

 
0.38

 
Diluted
 
1.21

 
0.37

 
See accompanying notes to the consolidated financial statements.

CRESCENT POINT ENERGY CORP.
5


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Cdn$000s, except per share amounts)
Notes
Shareholders’ capital

 
Contributed surplus

 
Deficit

 
Accumulated other comprehensive income (loss)

 
Total
shareholders’
equity

 
December 31, 2013
 
11,990,305

 
109,564

 
(3,692,437
)
 
92,641

 
8,500,073

 
Issued for cash
14
800,079

 
 
 
 
 
 
 
800,079

 
Issued on capital acquisitions
14
974,164

 
 
 
 
 
 
 
974,164

 
Issued pursuant to the DRIP (1) and SDP (2)
14
339,883

 


 


 


 
339,883

 
Redemption of restricted shares
14
77,896

 
(79,403
)
 
1,118

 


 
(389
)
 
Share issue costs, net of tax
 
(24,808
)
 


 


 


 
(24,808
)
 
Share-based compensation
21


 
88,493

 


 


 
88,493

 
Forfeit of restricted shares
21


 
(609
)
 


 


 
(609
)
 
Net income
 


 


 
508,894

 


 
508,894

 
Dividends ($2.76 per share)
 


 


 
(1,174,628
)
 


 
(1,174,628
)
 
Foreign currency translation adjustment
 


 


 


 
149,737

 
149,737

 
December 31, 2014
 
14,157,519

 
118,045

 
(4,357,053
)
 
242,378

 
10,160,889

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
11,249,168

 
102,755

 
(2,755,832
)
 
(1,279
)
 
8,594,812

 
Issued pursuant to the DRIP (1)
 
659,140

 


 


 


 
659,140

 
Redemption of restricted shares
 
82,395

 
(82,887
)
 
70

 


 
(422
)
 
Share issue costs, net of tax
 
(398
)
 


 


 


 
(398
)
 
Share-based compensation
 


 
89,749

 


 


 
89,749

 
Forfeit of restricted shares
 


 
(53
)
 


 


 
(53
)
 
Net income
 


 


 
144,876

 


 
144,876

 
Dividends ($2.76 per share)
 


 


 
(1,081,551
)
 


 
(1,081,551
)
 
Foreign currency translation adjustment
 


 


 


 
93,920

 
93,920

 
December 31, 2013
 
11,990,305

 
109,564

 
(3,692,437
)
 
92,641

 
8,500,073

 
(1)
Premium Dividend TM and Dividend Reinvestment Plan.
(2)
Share Dividend Plan.
See accompanying notes to the consolidated financial statements.

CRESCENT POINT ENERGY CORP.
6


CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
 
 
 
(Cdn$000s)
Notes
2014

 
2013

 
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
 
 
 
 
 
Net income
 
508,894

 
144,876

 
Items not affecting cash
 
 
 
 
 
Other loss
18
24,351

 
10,064

 
Deferred tax expense
 
303,973

 
73,433

 
Share-based compensation
21
69,681

 
67,752

 
Depletion, depreciation, amortization and impairment
 
2,222,556

 
1,558,899

 
Accretion on decommissioning liability
 
21,187

 
14,162

 
Unrealized (gains) losses on derivatives
17, 23
(880,831
)
 
111,876

 
Unrealized loss on foreign exchange
19
121,876

 
60,994

 
Non-cash lease inducement
 
2,540

 
-

 
Decommissioning expenditures
 
(38,043
)
 
(11,375
)
 
Change in non-cash working capital
27
99,372

 
(57,349
)
 
 
 
2,455,556

 
1,973,332

 
INVESTING ACTIVITIES
 
 
 
 
 
Development capital and other expenditures
 
(2,168,667
)
 
(1,746,873
)
 
Capital acquisitions, net
8
(845,597
)
 
(127,415
)
 
Other long-term assets
 
(21,619
)
 
(15,726
)
 
Change in non-cash working capital
27
(81,435
)
 
152,173

 
 
 
(3,117,318
)
 
(1,737,841
)
 
FINANCING ACTIVITIES
 
 
 
 
 
Issue of shares, net of issue costs
 
764,987

 
(1,033
)
 
Increase in long-term debt
 
706,162

 
198,547

 
Cash dividends
 
(834,745
)
 
(422,411
)
 
Change in non-cash working capital
27
11,848

 
4,667

 
 
 
648,252

 
(220,230
)
 
Impact of foreign currency on cash balances
 
1,522

 
680

 
INCREASE (DECREASE) IN CASH
 
(11,988
)
 
15,941

 
CASH AT BEGINNING OF YEAR
 
15,941

 
-

 
CASH AT END OF YEAR
 
3,953

 
15,941

 
See accompanying notes to the consolidated financial statements.

Supplementary Information:
Cash taxes recovered

 

 
364

 
-

 
Cash interest paid

 

 
(105,474
)
 
(77,028
)
 


CRESCENT POINT ENERGY CORP.
7


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    
December 31, 2014 and 2013
1.
STRUCTURE OF THE BUSINESS
The principal undertakings of Crescent Point Energy Corp. (the “Company” or “Crescent Point”) are to carry on the business of acquiring, developing and holding interests in petroleum and natural gas properties and assets related thereto through a general partnership and wholly owned subsidiaries.
Crescent Point is the ultimate parent company and is amalgamated in Alberta, Canada under the Alberta Business Corporations Act. The address of the principal place of business is 2000, 585 - 8th Ave S.W., Calgary, Alberta, Canada, T2P 1G1.
These annual consolidated financial statements were approved and authorized for issue by the Company's Board of Directors on March 10, 2015.
2.
BASIS OF PREPARATION
a)
Preparation
These consolidated financial statements are presented under International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The policies applied in these consolidated financial statements are based on IFRS issued and outstanding as of March 10, 2015, the date the Board of Directors approved the statements.
The Company’s presentation currency is Canadian dollars and all amounts reported are Canadian dollars unless noted otherwise. References to “US$” are to United States dollars. Crescent Point's operations are aggregated into one reportable segment based on the similarities between the Company's Canadian and U.S. operations.
b)
Basis of measurement, functional and presentation currency
The Company’s presentation currency is Canadian dollars. The accounts of the Company’s foreign operations that have a functional currency different from the Company’s presentation currency are translated into the Company’s presentation currency at period end exchange rates for assets and liabilities and at the average rate over the period for revenues and expenses. Translation gains and losses relating to the foreign operations are recognized in Other Comprehensive Income (“OCI”) as cumulative translation adjustments.
c)
Use of estimates and judgments
The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future years affected. Significant estimates and judgments made by management in the preparation of consolidated financial statements are outlined below.
Oil and gas activities
Reserves estimates, although not reported as part of the Company’s consolidated financial statements, can have a significant effect on net income, assets and liabilities as a result of their impact on depletion, depreciation and amortization (“DD&A”), decommissioning liability, deferred taxes, asset impairments and business combinations. Independent petroleum reservoir engineers perform evaluations of the Company’s oil and gas reserves on an annual basis. The estimation of reserves is an inherently complex process requiring significant judgment. Estimates of economically recoverable oil and gas reserves are based upon a number of variables and assumptions such as geoscientific interpretation, production forecasts, commodity prices, costs and related future cash flows, all of which may vary considerably from actual results. These estimates are expected to be revised upward or downward over time, as additional information such as reservoir performance becomes available, or as economic conditions change.
For purposes of impairment testing, property, plant and equipment (“PP&E”) is aggregated into cash-generating units (“CGUs”), based on separately identifiable and largely independent cash inflows. The determination of the Company’s CGUs is subject to judgment. Factors considered in the classification of CGUs include the integration between assets, shared infrastructures, the existence of common sales points, geography, geologic structure and the manner in which management monitors and makes decisions regarding operations.
The determination of technical feasibility and commercial viability, based on the presence of reserves and which results in the transfer of assets from exploration and evaluation ("E&E") to PP&E, is subject to judgment.
Decommissioning liability
Upon retirement of its oil and gas assets, the Company anticipates incurring substantial costs associated with decommissioning. Estimates of these costs are subject to uncertainty associated with the method, timing and extent of future decommissioning activities. The liability, the related asset and the expense are impacted by estimates with respect to the cost and timing of decommissioning.

CRESCENT POINT ENERGY CORP.
8


Business combinations
Business combinations are accounted for using the acquisition method of accounting. The determination of fair value often requires management to make assumptions and estimates about future events. The assumptions and estimates with respect to determining the fair value of PP&E and E&E assets acquired generally require the most judgment and include estimates of reserves acquired, forecast benchmark commodity prices and discount rates. Changes in any of the assumptions or estimates used in determining the fair value of acquired assets and liabilities could impact the amounts assigned to assets, liabilities and goodwill. Future net earnings can be affected as a result of changes in future DD&A, asset impairment or goodwill impairment.
Fair value measurement
The estimated fair value of derivative instruments resulting in derivative assets and liabilities, by their very nature, are subject to measurement uncertainty. Estimates included in the determination of the fair value of derivative instruments include forward benchmark prices, discount rates and forward foreign exchange rates.
Joint control
Judgment is required to determine when the Company has joint control over an arrangement, which requires an assessment of the capital and operating activities of the projects it undertakes with partners and when the decisions in relation to those activities require unanimous consent.
Share-based compensation
Compensation costs recorded pursuant to share-based compensation plans are subject to estimated fair values, forfeiture rates and the future attainment of performance criteria.
Income taxes
Tax regulations and legislation and the interpretations thereof are subject to change. In addition, deferred income tax liabilities recognize the extent that temporary differences will be payable in future periods. The calculation of the liability involves a significant amount of estimation including an evaluation of when the temporary differences will reverse, an analysis of the amount of future taxable earnings, the availability of cash flows and the application of tax laws. Changes in tax regulations and legislation and the other assumptions listed are subject to measurement uncertainty.
3.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently by the Company and its subsidiaries for all periods presented in these annual consolidated financial statements.
a)
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries and any reference to the “Company” throughout these consolidated financial statements refers to the Company and its subsidiaries. All transactions between the Company and its subsidiaries have been eliminated.
The Company conducts many of its oil and gas production activities through jointly controlled operations and the financial statements reflect only the Company's proportionate interest in such activities. Joint control exists for contractual arrangements governing the Company's assets whereby the Company has less than 100 percent working interest, all of the partners have control of the arrangement collectively, and spending on the project requires unanimous consent of all parties that collectively control the arrangement and share the associated risks. The Company does not have any joint arrangements that are material to the Company or that are structured through joint venture arrangements.
b)
Property, Plant and Equipment
Items of PP&E, which primarily consist of oil and gas development and production assets, are measured at cost less accumulated depletion, depreciation and any accumulated impairment losses. Development and production assets are accumulated into major area cost centres and represent the cost of developing the commercial reserves and initiating production.
Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of PP&E are recognized as development and production assets only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in net income as incurred. Capitalized development and production assets generally represent costs incurred in developing reserves and initiating or enhancing production from such reserves. The carrying amount of any replaced or sold component is derecognized.
Depletion and Depreciation
Development and production costs accumulated within major areas are depleted using the unit-of-production method based on estimated proved plus probable reserves before royalties, as determined by independent petroleum reservoir engineers. Natural gas reserves and production are converted to equivalent barrels of oil based upon the relative energy content (6:1). The depletion base includes capitalized costs, plus future costs to be incurred in developing proved plus probable reserves.
Corporate assets are depreciated over the estimated useful lives of the related assets, ranging from 5 to 16 years on a straight-line basis.

CRESCENT POINT ENERGY CORP.
9


Impairment
The carrying amounts of PP&E are grouped into CGUs and reviewed quarterly for indicators of impairment. Indicators are events or changes in circumstances that indicate the carrying amount may not be recoverable. If indicators of impairment exist, the recoverable amount of the CGU is estimated. If the carrying amount of the CGU exceeds the recoverable amount, the CGU is written down with an impairment recognized in net income.
Assets are grouped into CGUs based on the integration between assets, shared infrastructures, the existence of common sales points, geography, geologic structure and the manner in which management monitors and makes decisions regarding operations. Estimates of future cash flows used in the calculation of the recoverable amount are based on reserve evaluation reports prepared by independent petroleum reservoir engineers. The recoverable amount is the higher of fair value less costs of disposal and the value-in-use. Fair value less costs of disposal is derived by estimating the discounted after-tax future net cash flows. Discounted future net cash flows are based on forecasted commodity prices and costs over the expected economic life of the reserves and discounted using market-based rates to reflect a market participant’s view of the risks associated with the assets. Value-in-use is assessed using the expected future cash flows discounted at a pre-tax rate.
Impairment losses recognized in prior periods, other than goodwill impairments, are assessed at each reporting date for any indicators that the impairment losses may no longer exist or may have decreased. In the event that an impairment loss reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the carrying amount does not exceed the amount that would have been determined, net of depletion, had no impairment loss been recognized on the asset in prior periods. The amount of the reversal is recognized in net income.
c)
Exploration and Evaluation
Exploration and evaluation assets are comprised of the accumulated expenditures incurred in an area where technical feasibility and commercial viability has not yet been determined. Exploration and evaluation assets include undeveloped land and any drilling costs thereon.
Technical feasibility and commercial viability are considered to be determinable when reserves are discovered. Upon determination of reserves, E&E assets attributable to those reserves are first tested for impairment and then reclassified from E&E assets to PP&E.
Costs incurred prior to acquiring the legal rights to explore an area are expensed as incurred.
Amortization
Undeveloped land classified as E&E is amortized by major area over the average primary lease term and recognized in net income. Drilling costs classified as E&E assets are not amortized but are subject to impairment.
Impairment
Exploration and evaluation assets are reviewed quarterly for indicators of impairment and upon reclassification from E&E to PP&E. Exploration and evaluation assets are tested for impairment at the operating segment level by combining E&E assets with PP&E. The recoverable amount is the greater of fair value less costs of disposal or value-in-use. Fair value less costs of disposal is derived by estimating the discounted after-tax future net cash flows as described in the PP&E impairment test, plus the fair market value of undeveloped land and seismic. Value-in-use is assessed using the present value of the expected future cash flows discounted at a pre-tax rate.
Impairments of E&E assets are reversed when there has been a subsequent increase in the recoverable amount, but only to the extent of what the carrying amount would have been had no impairment been recognized.
d)
Decommissioning Liability
The Company recognizes the present value of a decommissioning liability in the period in which it is incurred. The obligation is recorded as a liability on a discounted basis using the relevant risk free rate, with a corresponding increase to the carrying amount of the related asset. Over time, the liabilities are accreted for the change in their present value and the capitalized costs are depleted on a unit-of-production basis over the life of the underlying proved plus probable reserves. Accretion expense is recognized in net income. Revisions to the discount rate, estimated timing or amount of future cash flows would also result in an increase or decrease to the decommissioning liability and related asset.
e)
Reclamation Fund
The Company established a reclamation fund to fund future decommissioning costs and environmental initiatives. Effective April 1, 2014, the Board of Directors approved contributions of $1.00 per barrel of oil equivalent (“boe”) of production. Prior to this, 2014 contributions were $1.10 per boe and 2013 contributions were $0.70 per boe. Additional contributions can be made at the discretion of management.

CRESCENT POINT ENERGY CORP.
10


f)
Goodwill
The Company records goodwill relating to business combinations when the purchase price exceeds the fair value of the net identifiable assets and liabilities of the acquired business. The goodwill balance is assessed for impairment annually or as events occur that could result in impairment. Goodwill is tested for impairment at an operating segment level by combining the carrying amounts of PP&E, E&E assets and goodwill and comparing this to the recoverable amount. The recoverable amount is the greater of fair value less costs of disposal or value-in-use. Fair value less costs of disposal is derived by estimating the discounted after-tax future net cash flows as described in the PP&E impairment test, plus the fair market value of undeveloped land and seismic. Value-in-use is assessed using the present value of the expected future cash flows discounted at a pre-tax rate. Any excess of the carrying amount over the recoverable amount is the impairment amount. Impairment charges, which are not tax affected, are recognized in net income. Goodwill is reported at cost less any accumulated impairment. Goodwill impairments are not reversed.
g)
Share-based Compensation
Restricted shares granted under the Restricted Share Bonus Plan are accounted for at fair value. Share-based compensation expense is determined based on the estimated fair value of shares on the date of grant. Forfeitures are estimated at the grant date and are subsequently adjusted to reflect actual forfeitures. The expense is recognized over the service period, with a corresponding increase to contributed surplus. The Company capitalizes the portion of share-based compensation directly attributable to development activities, with a corresponding decrease to share-based compensation expense. At the time the restricted shares vest, the issuance of shares is recorded as an increase to shareholders’ capital and a corresponding decrease to contributed surplus.
Deferred share units (“DSUs”) are accounted for at fair value. Share-based compensation expense is determined based on the estimated fair value of the DSUs on the date of the grant and subsequently adjusted to reflect the fair value at each period end. Fair value is based on the prevailing Crescent Point share price.
h)
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the estimated effect of any differences between the accounting and tax basis of assets and liabilities, using enacted or substantively enacted income tax rates expected to apply when the deferred tax asset or liability is settled. The effect of a change in income tax rates on deferred income taxes is recognized in net income in the period in which the change occurs.
The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
The Company is able to deduct certain settlements under its Restricted Share Bonus Plan. To the extent the tax deduction exceeds the cumulative remuneration cost for a particular restricted share grant recorded in net income, the tax benefit related to the excess is recorded directly within equity.
Deferred income tax assets and liabilities are presented as non-current.
i)
Financial Instruments
The Company has early adopted IFRS 9, Financial Instruments (“IFRS 9”), with a date of initial application of January 1, 2010. This new standard replaces the current multiple classification and measurement model for non-equity financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. Classification depends on the entity’s business model for managing financial instruments and the contractual cash flow characteristics of the financial instrument.
In addition, the fair value option for financial liabilities was amended. The changes in fair value attributable to a liability’s credit risk will be recorded in other comprehensive income rather than through net income, unless this presentation creates an accounting mismatch. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to net income.
For investments in equity instruments which are not subject to control, joint control, or significant influence, on initial recognition IFRS 9 allows an entity to irrevocably elect classification at “fair value through profit or loss” or “fair value through other comprehensive income”.
The Company uses financial derivative instruments and physical delivery commodity contracts from time to time to reduce its exposure to fluctuations in commodity prices, foreign exchange rates and interest rates. The Company also makes investments in companies from time to time in connection with the Company’s acquisition and divestiture activities.
Financial derivative instruments
Financial derivative instruments are included in current assets/liabilities except for those with maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets/liabilities.
The Company has not designated any of its financial derivative contracts as effective accounting hedges and, accordingly, fair values its financial derivative contracts with the resulting gains and losses recorded in net income.

CRESCENT POINT ENERGY CORP.
11


The fair value of a financial derivative instrument on initial recognition is normally the transaction price. Subsequent to initial recognition, the fair values are based on quoted market prices where available from active markets, otherwise fair values are estimated based on market prices at the reporting date for similar assets or liabilities with similar terms and conditions, or by discounting future payments of interest and principal at estimated interest rates that would be available to the Company at the reporting date.
Financial assets and liabilities
Financial assets and liabilities are measured at fair value on initial recognition. For non-equity instruments, measurement in subsequent periods depends on the classification of the financial asset or liability as “fair value through profit or loss” or “amortized cost”.
Financial assets and liabilities classified as fair value through profit or loss are subsequently carried at fair value, with changes recognized in net income.
Financial assets and liabilities classified as amortized cost are subsequently carried at amortized cost using the effective interest rate method.
Currently, the Company classifies all non-equity financial instruments which are not financial derivative instruments as amortized cost.
At each reporting date, the Company assesses whether there is objective evidence that a financial asset carried at amortized cost is impaired. If such evidence exists, the Company recognizes an impairment loss in net income. Impairment losses are reversed in subsequent periods if the impairment loss decrease can be related objectively to an event occurring after the impairment was recognized.
For investments in equity instruments, the subsequent measurement is dependent on the Company’s election to classify such instruments as fair value through profit or loss or fair value through other comprehensive income. Currently, the Company classifies all investments in equity instruments as fair value through profit or loss, whereby the Company recognizes movements in the fair value of the investment (adjusted for dividends) in net income. If the fair value through other comprehensive income classification is selected, the Company would recognize any dividends from the investment in net income and would recognize fair value re-measurements of the investment in other comprehensive income.
j)
Business Combinations
Business combinations are accounted for using the acquisition method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the acquisition date. The excess of the cost of the acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of the net assets acquired, the difference is recognized immediately in net income. Transaction costs associated with business combinations are expensed as incurred.
k)
Foreign Currency Translation
Foreign operations
The Company has operations in the United States (“U.S.”) transacted via U.S. subsidiaries. The assets and liabilities of foreign operations are restated to Canadian dollars at exchange rates in effect at the balance sheet date. The income and expenses of foreign operations are translated to Canadian dollars using the average exchange rate for the period. The resulting unrealized gain or loss is included in other comprehensive income.
Foreign transactions
Transactions in foreign currencies not incurred by the Company’s U.S. subsidiaries are translated to Canadian dollars at exchange rates in effect at the transaction dates. Foreign currency assets and liabilities are restated to Canadian dollars at exchange rates in effect at the balance sheet date and income and expenses are restated to Canadian dollars using the average exchange rate for the period. Both realized and unrealized gains and losses resulting from the settlement or restatement of foreign currency transactions are included in net income.
l)
Revenue Recognition
Oil and gas revenue includes the sale of crude oil, natural gas and natural gas liquids and is recognized when the risks and rewards of ownership have been substantially transferred.
m)
Cash and Cash Equivalents
Cash and cash equivalents include short-term investments with original maturities of three months or less.
n)
Leases
Leases in which substantially all of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

CRESCENT POINT ENERGY CORP.
12


Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance leases within property, plant and equipment.
All of the Company's leases are treated as operating leases and are recognized in net income on a straight-line basis.
o)
Earnings Per Share
Basic earnings per share (“EPS”) is calculated by dividing the net income for the period attributable to equity owners of the Company by the weighted average number of common shares outstanding during the period.
Diluted EPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to dilutive instruments, being restricted shares issued under the Company’s Restricted Share Bonus Plan, is computed using the treasury stock method. The treasury stock method assumes that the deemed proceeds related to unrecognized share-based compensation are used to repurchase shares at the average market price during the period.
4.
CHANGES IN ACCOUNTING POLICIES
Effective January 1, 2014, the Company adopted the following IFRS:
IAS 32 Financial Instruments: Presentation - IAS 32 was amended to clarify that the right to offset financial assets and liabilities must be available on the current date and cannot be contingent on a future event. The application of the amendment had no impact on the Company's consolidated financial statements.
IAS 36 Impairment of Assets - IAS 36 was amended in May 2013 to reduce the circumstances in which the recoverable amount of CGUs is required to be disclosed and clarify the disclosures required when an impairment loss has been recognized or reversed in the period. The amendments require retrospective application and were adopted by the Company on January 1, 2014. The adoption will only impact Crescent Point's disclosures in the notes to the financial statements in periods when an impairment loss or impairment recovery is recognized. The application of the amendment had no impact on the consolidated statements of comprehensive income or the consolidated balance sheets.
IFRIC 21 Levies - IFRIC 21 provides clarification on accounting for levies in accordance with the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation and confirms that a liability for a levy is recognized only when the triggering event specified in the legislation occurs. The retrospective adoption of this interpretation does not have any impact on the Company’s consolidated financial statements.
In future accounting periods, the Company will adopt the following IFRS:
IFRS 15 Revenue from Contracts with Customers - IFRS 15 was issued in May 2014 and replaces IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. The standard is required to be adopted either retrospectively or using a modified transaction approach for fiscal years beginning on or after January 1, 2017 with earlier adoption permitted. IFRS 15 will be adopted by the Company on January 1, 2017 and the Company is currently evaluating the impact of the standard on the consolidated financial statements.
IFRS 9 Financial Instruments - IFRS 9 was amended in July 2014 to include guidance to assess and recognize impairment losses on financial assets based on an expected loss model. The amendments are effective for fiscal years beginning on or after January 1, 2018 with earlier adoption permitted. This amendment will be adopted by the Company on January 1, 2018 and the Company is currently evaluating the impact of the amendment on the consolidated financial statements.
5.
LONG-TERM INVESTMENTS
($000s)
2014

 
2013

 
Investments in public companies, beginning of year
24,259

 
28,314

 
Unrealized loss recognized in other loss
(3,235
)
 
(4,055
)
 
Investments in public companies, end of year
21,024

 
24,259

 
 
 
 
 
 
Investments in private companies, beginning of year
49,970

 
56,592

 
Unrealized loss recognized in other loss
(21,116
)
 
(6,622
)
 
Investments in private companies, end of year
28,854

 
49,970

 
 
 
 
 
 
Long-term investments, end of year
49,878

 
74,229

 

CRESCENT POINT ENERGY CORP.
13


a)
Public Companies
The Company holds common shares in publicly traded oil and gas companies. The investments are classified as financial assets at fair value through profit or loss and are fair valued with the resulting gain or loss recorded in net income. At December 31, 2014, the investments are recorded at a fair value of $21.0 million which is $82.9 million less than the original cost of the investments. At December 31, 2013, the investments were recorded at a fair value of $24.3 million which was $79.7 million less than the original cost of the investments.
b)
Private Companies
The Company holds common shares in private oil and gas companies. The investments are classified as financial assets at fair value through profit or loss and are fair valued with the resulting gain or loss recorded in net income. At December 31, 2014, the investments are recorded at a fair value of $28.9 million which is $38.1 million less than the original cost of the investments. At December 31, 2013, the investments were recorded at a fair value of $50.0 million which was $17.0 million less than the original cost of the investments. See Note 23 - "Financial Instruments and Derivatives" for additional information regarding the Company's Level 3 investments.
6.
OTHER LONG-TERM ASSETS
($000s)
2014

 
2013

 
Reclamation fund
47,800

 
26,181

 
Other receivables
11,777

 
11,777

 
Other long-term assets
59,577

 
37,958

 
a)
Reclamation fund
The following table reconciles the reclamation fund:
($000s)
2014

 
2013

 
Balance, beginning of year
26,181

 
10,455

 
Contributions
60,318

 
30,734

 
Expenditures
(38,699
)
 
(15,008
)
 
Balance, end of year
47,800

 
26,181

 
b)
Other receivables
At December 31, 2014, the Company had investment tax credits of $11.8 million (December 31, 2013 - $11.8 million).
7.
EXPLORATION AND EVALUATION ASSETS
($000s)
2014

 
2013

 
Exploration and evaluation assets at cost
1,789,812

 
1,590,298

 
Accumulated amortization
(1,167,303
)
 
(901,974
)
 
Net carrying amount
622,509

 
688,324

 
 
 
 
 
 
Reconciliation of movements during the year
 
 
 
 
Cost, beginning of year
1,590,298

 
1,700,442

 
Accumulated amortization, beginning of year
(901,974
)
 
(619,685
)
 
Net carrying amount, beginning of year
688,324

 
1,080,757

 
 
 
 
 
 
Net carrying amount, beginning of year
688,324

 
1,080,757

 
Acquisitions through business combinations, net
65,029

 
6,600

 
Additions
578,942

 
471,900

 
Dispositions
-

 
(1,993
)
 
Transfers to property, plant and equipment
(486,466
)
 
(614,446
)
 
Amortization
(248,854
)
 
(275,504
)
 
Foreign exchange
25,534

 
21,010

 
Net carrying amount, end of year
622,509

 
688,324

 

CRESCENT POINT ENERGY CORP.
14


Exploration and evaluation assets consist of the Company's undeveloped land and exploration projects which are pending the determination of technical feasibility. Additions represent the Company's share of the cost of E&E assets. At December 31, 2014, $622.5 million remains in E&E assets after $486.5 million was transferred to PP&E following the determination of technical feasibility during the year ended December 31, 2014 (year ended December 31, 2013 - $688.3 million and $614.4 million, respectively).
Impairment test of exploration and evaluation assets
As a result of the decrease in forward benchmark commodity prices at December 31, 2014 compared to December 31, 2013, an impairment test on the Company’s E&E assets was performed. At December 31, 2014, the Company determined that the fair value less costs of disposal exceeded its carrying amount. As a result, no impairment was recorded. There were no indicators of impairment at December 31, 2013.
8.
CAPITAL ACQUISITIONS AND DISPOSITIONS
If the material business combinations outlined below under Corporate Acquisitions and under Major Property Acquisitions had closed on January 1, 2014, Crescent Point's oil and gas sales and oil and gas sales less royalties, transportation and operating expenses for the year ended December 31, 2014 would have been approximately $4.5 billion and $2.9 billion, respectively. This pro-forma information is not necessarily indicative of the results should the material business combinations have actually occurred on January 1, 2014.
In the year ended December 31, 2014, the Company incurred $13.8 million (December 31, 2013 - $5.8 million) of transaction costs related to business combinations that are recorded as general and administrative expenses.
a) Corporate Acquisitions
CanEra Energy Corp.
On May 15, 2014, Crescent Point completed the acquisition, by way of plan of arrangement, of all issued and outstanding common shares of CanEra Energy Corp. ("CanEra"), a private oil and gas company with properties in southeast Saskatchewan. Total consideration for the CanEra shares was approximately $1.1 billion and included the issuance of approximately 12.9 million Crescent Point common shares, cash consideration of $191.8 million, assumed long-term debt and working capital ($1.3 billion was allocated to PP&E and $21.1 million was allocated to E&E assets).
($000s)
 
 
 
 
Fair value of net assets acquired
 
 
 
 
Accounts receivable
 
 
45,115

 
Property, plant and equipment
 
 
1,327,982

 
Exploration and evaluation
 
 
21,078

 
Accounts payable and accrued liabilities
 
 
(37,949
)
 
Derivative liability
 
 
(6,445
)
 
Long-term debt
 
 
(360,456
)
 
Decommissioning liability
 
 
(65,607
)
 
Deferred income tax liability
 
 
(169,450
)
 
Total net assets acquired
 
 
754,268

 
Consideration
 
 
 
 
Shares issued (12,928,091 shares)
 
 
562,501

 
Cash
 
 
191,767

 
Total purchase price

 
754,268

 
Oil and gas sales and oil and gas sales less royalties, transportation and operating expenses from the acquisition date to the year ended December 31, 2014 includes approximately $141.2 million and $74.3 million, respectively, attributable to the CanEra acquisition.
T.Bird Oil Ltd.
On August 13, 2014, Crescent Point completed the acquisition of all issued and outstanding common shares of T.Bird Oil Ltd. ("T.Bird"), a private oil and gas company with properties in southeast Saskatchewan and Manitoba. Total consideration for the T.Bird shares was approximately $85.7 million and included the issuance of approximately 1.5 million Crescent Point common shares, cash consideration of $0.3 million, assumed long-term debt and working capital ($109.7 million was allocated to PP&E).

CRESCENT POINT ENERGY CORP.
15


($000s)
 
 
 
 
Fair value of net assets acquired
 
 
 
 
Accounts receivable

 
 
2,823

 
Property, plant and equipment
 
 
109,727

 
Accounts payable and accrued liabilities

 
 
(2,320
)
 
Long-term debt
 
 
(20,575
)
 
Decommissioning liability
 
 
(2,740
)
 
Deferred income tax liability
 
 
(21,315
)
 
Total net assets acquired
 
 
65,600

 
Consideration
 
 
 
 
Shares issued (1,482,477 shares)
 
 
65,259

 
Cash
 
 
341

 
Total purchase price
 
 
65,600

 
Oil and gas sales and oil and gas sales less royalties, transportation and operating expenses from the acquisition date to the year ended December 31, 2014 includes approximately $7.1 million and $5.6 million, respectively, attributable to the T.Bird acquisition.
b) Major Property Acquisitions
Oil and gas sales and oil and gas sales less royalties, transportation and operating expenses from the acquisition dates to the year ended December 31, 2014 includes approximately $49.3 million and $39.7 million, respectively, attributable to these major property acquisitions.
Saskatchewan Viking Asset Acquisition
On June 12, 2014, Crescent Point completed the acquisition of Saskatchewan Viking oil assets for total consideration of $331.7 million comprised of the issuance of approximately 7.6 million Crescent Point common shares less net cash received on customary closing adjustments of $12.0 million ($338.8 million was allocated to PP&E, including $7.1 million related to decommissioning liability). These assets were acquired with full tax pools and no working capital items.
Southeast Saskatchewan and Manitoba Asset Acquisition
On September 30, 2014, Crescent Point completed the acquisition of certain assets in southeast Saskatchewan and Manitoba. Total consideration for the assets included certain Crescent Point assets in Creelman, Saskatchewan and net cash consideration of $374.3 million ($378.5 million was allocated to PP&E and $8.0 million was allocated to E&E assets, including $12.2 million related to decommissioning liability). These assets were acquired with full tax pools and no working capital items.
c) Minor Property Acquisitions and Dispositions
Crescent Point completed minor property acquisitions and dispositions during the year ended December 31, 2014 for net consideration of $293.8 million ($265.2 million was allocated to PP&E and $35.9 million was allocated to E&E assets, including $6.8 million related to decommissioning liability). These minor property acquisitions and dispositions were completed with full tax pools and no working capital items.

CRESCENT POINT ENERGY CORP.
16


9.
PROPERTY, PLANT AND EQUIPMENT
($000s)
2014

 
2013

 
Development and production assets
19,891,460

 
14,964,220

 
Corporate assets
87,692

 
26,176

 
Property, plant and equipment at cost
19,979,152

 
14,990,396

 
Accumulated depletion, depreciation and impairment
(5,729,090
)
 
(3,731,249
)
 
Net carrying amount
14,250,062

 
11,259,147

 
 
 
 
 
 
Reconciliation of movements during the year
 
 
 
 
 
 
 
 
 
Development and production assets
 
 
 
 
Cost, beginning of year
14,964,220

 
12,740,337

 
Accumulated depletion and impairment, beginning of year
(3,715,311
)
 
(2,431,102
)
 
Net carrying amount, beginning of year
11,248,909

 
10,309,235

 
 
 
 
 
 
Net carrying amount, beginning of year
11,248,909

 
10,309,235

 
Acquisitions through business combinations, net
2,420,584

 
119,611

 
Additions
1,871,391

 
1,414,067

 
Dispositions
(283
)
 
(2,454
)
 
Transfers from exploration and evaluation assets
486,466

 
614,446

 
Depletion
(1,380,412
)
 
(1,181,383
)
 
Impairment
(588,200
)
 
(98,291
)
 
Foreign exchange
124,973

 
73,678

 
Net carrying amount, end of year
14,183,428

 
11,248,909

 
 
 
 
 
 
Cost, end of year
19,891,460

 
14,964,220

 
Accumulated depletion and impairment, end of year
(5,708,032
)
 
(3,715,311
)
 
Net carrying amount, end of year
14,183,428

 
11,248,909

 
 
 
 
 
 
Corporate assets
 
 
 
 
Cost, beginning of year
26,176

 
22,843

 
Accumulated depreciation, beginning of year
(15,938
)
 
(12,210
)
 
Net carrying amount, beginning of year
10,238

 
10,633

 
 
 
 
 
 
Net carrying amount, beginning of year
10,238

 
10,633

 
Additions
61,408

 
3,285

 
Depreciation
(5,090
)
 
(3,721
)
 
Foreign exchange
78

 
41

 
Net carrying amount, end of year
66,634

 
10,238

 
 
 
 
 
 
Cost, end of year
87,692

 
26,176

 
Accumulated depreciation, end of year
(21,058
)
 
(15,938
)
 
Net carrying amount, end of year
66,634

 
10,238

 
At December 31, 2014, future development costs of $6.9 billion (December 31, 2013 - $5.9 billion) are included in costs subject to depletion.
Direct general and administrative costs capitalized by the Company during the year ended December 31, 2014 were $41.3 million (year ended December 31, 2013 - $42.2 million), including $18.0 million of share-based compensation costs (year ended December 31, 2013 - $23.1 million).


CRESCENT POINT ENERGY CORP.
17


Impairment test of property, plant and equipment
For the purposes of determining whether impairment of assets has occurred, and the extent of any impairment or its reversal, management exercises their judgment in estimating future cash flows for the recoverable amount, being the higher of fair value less costs of disposal and value in use. These key judgments include estimates about recoverable reserves (see "Use of estimates and judgments" discussion in Note 2c), forecast benchmark commodity prices, royalties, operating costs and discount rates. The fair value less costs of disposal and value in use estimates are categorized as Level 3 according to the IFRS 13 fair value hierarchy.
Forecast benchmark commodity price assumptions tend to be stable because short-term increases or decreases in prices are not considered indicative of long-term price levels, but are nonetheless subject to change.
The following table outlines the forecast benchmark commodity prices and the exchange rate used in the impairment calculation of property, plant and equipment at December 31, 2014. The Company used an average after-tax discount rate of 10 percent.
 
2015

2016

2017

2018

2019

2020

2021

2022

2023

2024 (2)

WTI ($US/bbl)
62.50

75.00

80.00

85.00

90.00

95.00

98.54

100.51

102.52

104.57

Exchange Rate ($US/$Cdn)
0.850

0.875

0.875

0.875

0.875

0.875

0.875

0.875

0.875

0.875

WTI ($Cdn/bbl)
73.53

85.71

91.43

97.14

102.86

108.57

112.62

114.87

117.17

119.51

AECO ($Cdn/MMbtu)
3.31

3.77

4.02

4.27

4.53

4.78

5.03

5.28

5.53

5.71

(1)
The forecast benchmark commodity prices listed above are adjusted for quality differentials, heat content, distance to market and other factors in performing our impairment tests.
(2)
Forecast benchmark commodity prices are assumed to increase by 2% in each year after 2024 to the end of the reserve life. Exchange rates are assumed to be constant at 0.875.
At December 31, 2014, the Company determined that the carrying amount of the Southern Alberta CGU exceeded its fair value less costs of disposal of $937.7 million. The full amount of the impairment was attributed to PP&E and, as a result, an impairment loss of $303.8 million was recorded as a component of depletion, depreciation, amortization and impairment expense. The Southern Alberta CGU is comprised primarily of properties in the early stages of development for which the operating results are included in the Canadian operating segment. The impairment in 2014 was largely a result of the decrease in forecast benchmark commodity prices at December 31, 2014 compared to December 31, 2013 and the early development of the Company's Alberta resource plays which resulted in negative technical revisions to proved plus probable reserves.
The Company also determined that the carrying amounts of the Northern USA and Southern USA CGUs exceeded their fair value less costs of disposal of $405.6 million and $1.0 billion, respectively. The full amounts of the impairment were attributed to PP&E and, as a result, impairment losses of $92.0 million and $192.4 million were recorded as a component of depletion, depreciation, amortization and impairment expense for the Northern USA and Southern USA CGUs, respectively. The Northern USA and Southern USA CGUs are comprised primarily of properties in the early stages of development for which the operating results are included in the U.S. operating segment. The impairment in 2014 was largely a result of the decrease in forecast benchmark commodity prices at December 31, 2014 compared to December 31, 2013, partially offset by positive technical revisions to proved plus probable reserves from the Company's successful drilling and development program.
Changes in any of the key judgments, such as a downward revision in reserves, a decrease in forecast benchmark commodity prices, changes in foreign exchange rates, an increase in royalties or an increase in operating costs would decrease the recoverable amounts of assets and any impairment charges would affect net income. For the year ended December 31, 2014, a one percent increase in the assumed discount rate would result in an additional impairment for the Southern Alberta, Northern USA and Southern USA CGUs of approximately $188.7 million, while a five percent decrease in the forecast benchmark commodity price estimate in conjunction with a one percent decrease in Cdn$ relative to US$ would result in an additional impairment of approximately $322.2 million. The increase in discount rate and decrease in forecast benchmark commodity price estimates would not result in additional impairments in any of the Company's remaining CGUs.
At December 31, 2013, the Company determined that the carrying amount of the Southern Alberta CGU exceeded its fair value less costs of disposal of $864.0 million. The Company reported an impairment loss of $98.3 million related to the Southern Alberta CGU largely as a result of the exploratory nature of the Alberta Bakken resource play which resulted in negative technical revisions to proved plus probable reserves and an increase in expected operating and abandonment costs. The Company reported no impairment losses for the year ended December 31, 2013 related to the Northern USA and Southern USA CGUs.
10.
GOODWILL
The carrying value of goodwill at December 31, 2014 is $251.9 million (December 31, 2013 - $251.9 million). Goodwill has been assigned to the Canadian operating segment.
Impairment test of goodwill
The impairment test of goodwill at December 31, 2014 and 2013 concluded that the estimated recoverable amount exceeded the carrying amount. As such, no goodwill impairment existed. The recoverable amount of the Canadian operating segment was estimated to be $15.3 billion at December 31, 2014 and was determined based on fair value less costs of disposal. The fair value measurement of the recoverable amount of the Canadian operating segment is categorized as Level 3 according to the IFRS 13 fair value hierarchy. Refer to Note 9 - “Property, Plant and Equipment” for a description of the key input estimates and the methodology used in the determination of the estimated recoverable amount related to goodwill.

CRESCENT POINT ENERGY CORP.
18


11.
LONG-TERM DEBT
The following table reconciles long-term debt:
($000s)
2014

 
2013

 
Bank credit facilities
1,261,065

 
546,595

 
Senior guaranteed notes
1,682,009

 
1,187,519

 
Long-term debt
2,943,074

 
1,734,114

 
Long-term debt due within one year
93,504

 
-

 
Long-term debt due beyond one year
2,849,570

 
1,734,114

 
a)
Bank Credit Facilities
At December 31, 2014, the Company had a syndicated unsecured credit facility with sixteen banks and an operating credit facility with one Canadian chartered bank, for a total amount available under the combined facilities of $2.6 billion. The syndicated unsecured credit facility also includes an accordion feature that allows the Company to increase the facility by up to $500.0 million.
The Company was in compliance with all debt covenants at December 31, 2014.
The Company had letters of credit in the amount of $0.5 million outstanding at December 31, 2014.
On March 10, 2015, the syndicated unsecured credit facility and the operating credit facility were renewed and increased to a total amount available under the combined facilities of $3.6 billion. The syndicated unsecured credit facility continues to include an accordion feature that allows the Company to increase the facility by up to $500.0 million. The credit facilities bear interest at the Canadian prime rate plus a margin based on a sliding scale ratio of the Company's senior debt to EBITDA, adjusted for certain non-cash items. The syndicated unsecured credit facility constitutes a revolving credit facility for a three year term which is extendible annually; the current maturity date is June 8, 2018. The operating credit facility constitutes a revolving facility for a three year term which is extendible annually; the current maturity date is June 8, 2018. The combined credit facilities have covenants which restrict the Company's ratio of senior debt to EBITDA, adjusted for certain non-cash items, to a maximum of 3.5:1.0 and the ratio of debt to capital, adjusted for certain non-cash items, to a maximum of 0.55:1.0. The Company manages its credit facilities through a combination of bankers' acceptance loans and interest rate swaps.

CRESCENT POINT ENERGY CORP.
19


b)
Senior Guaranteed Notes
The Company has closed private offerings of senior guaranteed notes raising total gross proceeds of US$1.29 billion and Cdn$182.0 million. The notes are unsecured and rank pari passu with the Company's bank credit facilities and carry a bullet repayment on maturity. The senior guaranteed notes have financial covenants similar to those of the combined credit facilities described above. The terms, rates and carrying amounts of the Company's outstanding senior guaranteed notes are detailed below:
Principal ($000s)
Maturity Date
Coupon Rate

Interest Payment Dates
2014

 
2013

 
Cdn$50,000
March 24, 2015
4.92
%
September 24 and March 24
50,000

 
50,000

 
US$37,500
March 24, 2015
4.71
%
September 24 and March 24
43,504

 
39,885

 
US$52,000
April 14, 2016
3.93
%
October 14 and April 14
60,325

 
55,307

 
US$67,500
March 24, 2017
5.48
%
September 24 and March 24
78,306

 
71,793

 
US$31,000
April 14, 2018
4.58
%
October 14 and April 14
35,963

 
32,972

 
US$20,000
June 12, 2018
2.65
%
December 12 and June 12
23,202

 
21,272

 
Cdn$7,000
May 22, 2019
4.29
%
November 22 and May 22
7,000

 
7,000

 
US$68,000
May 22, 2019
3.39
%
November 22 and May 22
78,887

 
72,325

 
US$155,000
March 24, 2020
6.03
%
September 24 and March 24
179,816

 
164,858

 
Cdn$50,000
April 14, 2021
5.53
%
October 14 and April 14
50,000

 
50,000

 
US$82,000
April 14, 2021
5.13
%
October 14 and April 14
95,128

 
87,215

 
US$52,500
June 20, 2021
3.29
%
December 20 and June 20
60,905

 
-

 
Cdn$25,000
May 22, 2022
4.76
%
November 22 and May 22
25,000

 
25,000

 
US$200,000
May 22, 2022
4.00
%
November 22 and May 22
232,020

 
212,720

 
Cdn$10,000
June 12, 2023
4.11
%
December 12 and June 12
10,000

 
10,000

 
US$270,000
June 12, 2023
3.78
%
December 12 and June 12
313,227

 
287,172

 
Cdn$40,000
June 20, 2024
3.85
%
December 20 and June 20
40,000

 
-

 
US$257,500
June 20, 2024
3.75
%
December 20 and June 20
298,726

 
-

 
Senior guaranteed notes
 
 
1,682,009

 
1,187,519

 
Senior guaranteed notes due within one year
 
93,504

 
-

 
Senior guaranteed notes due beyond one year
 
1,588,505

 
1,187,519

 
Concurrent with the issuance of US$1.26 billion senior guaranteed notes, the Company entered into cross currency interest rate swaps (''CCIRS'') with a syndicate of financial institutions. To manage the Company's foreign exchange risk, the CCIRS fix the US dollar amount of the notes for purposes of interest and principal repayments at a notional amount of $1.29 billion. Concurrent with the issuance of US$30.0 million senior guaranteed notes, the Company entered a cross currency principal swap which fixed the principal repayment at a notional amount of $32.2 million. See additional information in Note 23 - “Financial Instruments and Derivatives”.
12.
OTHER LONG-TERM LIABILITIES
($000s)
2014

 
2013

 
Lease inducement (1)
43,784

 
-

 
Long-term compensation liability (2)
2,271

 
3,072

 
Other long-term liabilities
46,055

 
3,072

 
(1)
The Company's lease inducement is associated with the building lease for Crescent Point's corporate office. This non-cash liability will be amortized on a straight-line basis over the term of the lease commencing in June 2015 and extending to June 2030.
(2)
Long-term compensation liability relates to the Deferred Share Unit ("DSU") Plan. See additional information in Note 21 - "Share-based Compensation".

CRESCENT POINT ENERGY CORP.
20


13.
DECOMMISSIONING LIABILITY
The following table reconciles the decommissioning liability:
($000s)
2014

 
2013

 
Decommissioning liability, beginning of year
629,538

 
502,432

 
Liabilities incurred
41,892

 
32,562

 
Liabilities acquired through capital acquisitions
94,775

 
4,291

 
Liabilities disposed through capital dispositions
(226
)
 
(793
)
 
Liabilities settled
(38,043
)
 
(11,375
)
 
Revaluation of acquired decommissioning liabilities (1)
80,625

 
3,256

 
Change in estimated future costs
70,626

 
115,266

 
Change in discount rate
122,984

 
(30,263
)
 
Accretion expense
21,187

 
14,162

 
Decommissioning liability, end of year
1,023,358

 
629,538

 
Expected to be incurred within one year
52,280

 
18,469

 
Expected to be incurred beyond one year
971,078

 
611,069

 
(1)
These amounts relate to the revaluation of acquired decommissioning liabilities at the end of the period using a risk-free discount rate. At the date of acquisition, acquired decommissioning liabilities are fair valued.
The total future decommissioning liability was estimated by management based on the Company’s net ownership in all wells and facilities. This includes all estimated costs to reclaim and abandon the wells and facilities and the estimated timing of the costs to be incurred in future periods. The Company has estimated the net present value of its total decommissioning liability to be $1.0 billion at December 31, 2014 (December 31, 2013 - $629.5 million) based on total estimated undiscounted cash flows to settle the obligation of $1.1 billion (December 31, 2013 - $739.8 million). These obligations are expected to be settled through 2048, with the majority expected after 2030. The estimated cash flows have been discounted using an average risk free rate of approximately 2.25 percent and an inflation rate of 2 percent (December 31, 2013 - approximately 3 percent and 2 percent, respectively).
14.
SHAREHOLDERS' CAPITAL
Crescent Point has an unlimited number of common shares authorized for issuance.
 
2014
 
 
2013
 
 


Number of
shares

 
Amount
($000s)

 
Number of
shares

 
Amount
($000s)

 
Common shares, beginning of year
394,993,566

 
12,181,396

 
374,702,264

 
11,439,861

 
Issued for cash
18,435,000

 
800,079

 
-

 
-

 
Issued on capital acquisitions
22,054,895

 
974,164

 
-

 
-

 
Issued on redemption of restricted shares (1)
1,887,180

 
77,896

 
2,045,169

 
82,395

 
Issued pursuant to DRIP (2) and SDP (3)
9,139,569

 
339,883

 
18,246,133

 
659,140

 
Common shares, end of year
446,510,210

 
14,373,418

 
394,993,566

 
12,181,396

 
Cumulative share issue costs, net of tax
-

 
(215,899
)
 
-

 
(191,091
)
 
Total shareholders’ capital, end of year
446,510,210

 
14,157,519

 
394,993,566

 
11,990,305

 
(1)
The amount of shares issued on redemption of restricted shares is net of any employee withholding taxes.
(2)
Premium Dividend TM and Dividend Reinvestment Plan.
(3)
Share Dividend Plan.
At December 31, 2014, the Company recorded dividends payable of $102.7 million which was settled with cash of $72.9 million and Crescent Point common shares issued pursuant to the DRIP and SDP valued at $29.8 million (1,181,265 common shares) on January 15, 2015.  At December 31, 2013, the Company recorded dividends payable of $90.8 million which was settled with cash of $65.0 million and Crescent Point common shares issued pursuant to the DRIP valued at $25.8 million (678,361 common shares) on January 15, 2014. 
During the second quarter of 2014, the Company implemented a Share Dividend Plan ("SDP"). The SDP enables shareholders to receive their dividends in the form of common shares which are issued at a five percent discount to the prevailing market price.



CRESCENT POINT ENERGY CORP.
21


15.
DEFICIT
($000s)
2014

 
2013

 
Accumulated earnings
1,563,243

 
1,054,349

 
Accumulated tax effect on redemption of restricted shares
9,854

 
8,736

 
Accumulated dividends
(5,930,150
)
 
(4,755,522
)
 
Deficit
(4,357,053
)
 
(3,692,437
)
 
16.
CAPITAL MANAGEMENT
The Company’s capital structure is comprised of shareholders’ equity, long-term debt and working capital. The balance of each of these items is as follows:
($000s)
2014

 
2013

 
Long-term debt
2,943,074

 
1,734,114

 
Working capital deficiency (1)
433,081

 
406,134

 
Unrealized foreign exchange on translation of US dollar senior guaranteed notes
(185,046
)
 
(63,170
)
 
Net debt
3,191,109

 
2,077,078

 
Shareholders’ equity
10,160,889

 
8,500,073

 
Total capitalization
13,351,998

 
10,577,151

 
(1)
Working capital deficiency is calculated as accounts payable and accrued liabilities plus dividends payable, less cash, accounts receivable, prepaids and deposits and long-term investments, excluding the equity settled component of dividends payable.
Crescent Point's objective for managing capital is to maintain a strong balance sheet and capital base to provide financial flexibility, stability to dividends and to position the Company for future development of the business. Ultimately, Crescent Point strives to maximize long-term stakeholder value by ensuring the Company has the financing capacity to fund projects that are expected to add value to stakeholders and distribute any excess cash that is not required for financing projects.
Crescent Point manages and monitors its capital structure and short-term financing requirements using a non-GAAP measure, the ratio of net debt to funds flow from operations. Net debt is calculated as long-term debt plus accounts payable and accrued liabilities and dividends payable, less cash, accounts receivable, prepaids and deposits and long-term investments, excluding the equity settled component of dividends payable and unrealized foreign exchange on translation of US dollar senior guaranteed notes. Funds flow from operations is calculated as cash flow from operating activities before changes in non-cash working capital, transaction costs and decommissioning expenditures. Crescent Point's long-term objective is to maintain a net debt to funds flow from operations ratio of approximately 1.0 times. This metric is used to measure the Company's overall debt position and measure the strength of the Company's balance sheet. Crescent Point monitors this ratio and uses this as a key measure in making decisions regarding financing, capital spending and dividend levels. The Company's net debt to funds flow from operations ratio at December 31, 2014 was 1.3 times (December 31, 2013 - 1.0 times). The funds flow from operations only reflects funds flow from operations generated on acquired properties since the closing date of the acquisitions.
Crescent Point strives to provide stability to its dividends over time by managing risks associated with the oil and gas industry. To accomplish this, the Company maintains a conservative balance sheet with significant unutilized lines of credit, manages its exposure to fluctuating interest rates and foreign exchange rates on its long-term debt, and actively hedges commodity prices using a 3½ year risk management program by hedging up to 65 percent, unless otherwise approved by the Board of Directors, of after royalty volumes using a portfolio of swaps, collars and put option instruments and up to 35 percent of after royalty volumes using a combination of financial derivatives and fixed differential physical contracts to manage price differentials.
Crescent Point is subject to certain financial covenants on its credit facility and senior guaranteed notes agreements and is in compliance with all financial covenants as at December 31, 2014.
17.
DERIVATIVE GAINS (LOSSES)
($000s)
2014

 
2013

 
Realized losses
(104,783
)
 
(90,871
)
 
Unrealized gains (losses)
880,831

 
(111,876
)
 
Derivative gains (losses)
776,048

 
(202,747
)
 
18.
OTHER LOSS
($000s)
2014

 
2013

 
Unrealized loss on long-term investments
(24,351
)
 
(10,677
)
 
Other gain
-

 
613

 
Other loss
(24,351
)
 
(10,064
)
 

CRESCENT POINT ENERGY CORP.
22


19.
FOREIGN EXCHANGE LOSS
($000s)
2014

 
2013

 
Realized
 
 
 
 
Foreign exchange loss on cross currency interest rate swaps
(2,094
)
 
(4,308
)
 
Other foreign exchange gain
523

 
1,134

 
Unrealized
 
 
 
 
Foreign exchange loss on translation of US dollar senior guaranteed notes
(121,876
)
 
(60,994
)
 
Other foreign exchange loss
(915
)
 
(337
)
 
Foreign exchange loss
(124,362
)
 
(64,505
)
 
20.
INCOME TAXES
The provision for income taxes is as follows:
($000s)
 
2014

 
2013

 
Current tax:
 
 
 
 
 
Canada
(244
)
 
137

 
 
Luxembourg
311

 
36

 
Current tax expense
67

 
173

 
Deferred tax:
 
 
 
 
 
Canada
280,515

 
76,801

 
 
United States
23,458

 
(3,368
)
 
Deferred tax expense
303,973

 
73,433

 
Income tax expense
304,040

 
73,606

 
The following table reconciles income taxes calculated at the Canadian statutory rate with the recorded income taxes:
($000s)
2014

 
2013

 
Net income before tax
812,934

 
218,842

 
Statutory income tax rate
26.14%

 
26.04%

 
Expected provision for income taxes
212,501

 
56,893

 
Effect of change in corporate tax rates
3,977

 
(3,101
)
 
Effect of tax rates in foreign jurisdictions
(48,534
)
 
(9,009
)
 
Effect of restricted share bonus plan
(2,414
)
 
(3,373
)
 
Deferred tax assets not recognized
134,786

 
20,530

 
Effect of non-taxable capital losses
3,758

 
8,617

 
Other
(34
)
 
3,049

 
Income tax expense
304,040

 
73,606

 
The statutory combined federal and provincial income tax rate increased from 26.04% in 2013 to 26.14% in 2014 due to a change in the allocation of taxable income between provinces.
The deferred income tax liabilities are expected to be settled in the following periods:
($000s)
2014

 
2013

 
Deferred income tax:
 
 
 
 
To be settled within 12 months
(121,533
)
 
31,121

 
To be settled after more than 12 months
(1,226,647
)
 
(895,729
)
 
Deferred income tax
(1,348,180
)
 
(864,608
)
 

CRESCENT POINT ENERGY CORP.
23


The movement in deferred income tax liabilities and assets is as follows:
($000s)
At January 1,
 2014

 
(Charges) / credits due to acquisitions & other

 
(Charged) / credited to earnings

 
At December 31, 2014

 
Deferred income tax assets:
 
 
 
 
 
 
 
 
Decommissioning liability
167,014

 
17,802

 
73,235

 
258,051

 
Income tax losses carried forward
122,580

 
16,102

 
(118,748
)
 
19,934

 
Share issue costs
22,412

 
8,779

 
(13,067
)
 
18,124

 
Risk management contracts
32,611

 
1,678

 
(33,347
)
 
942

 
Other
2,046

 
2,967

 
(768
)
 
4,245

 
 
346,663

 
47,328

 
(92,695
)
 
301,296

 
Deferred income tax liabilities:
 
 
 
 
 
 
 
 
Property, plant & equipment
(1,060,521
)
 
(226,927
)
 
(104,707
)
 
(1,392,155
)
 
Timing of partnership items
(137,411
)
 
-

 
41,915

 
(95,496
)
 
Risk management contracts
(13,339
)
 
-

 
(148,486
)
 
(161,825
)
 
 
(1,211,271
)
 
(226,927
)
 
(211,278
)
 
(1,649,476
)
 
Net deferred income tax liabilities
(864,608
)
 
(179,599
)
 
(303,973
)
 
(1,348,180
)
 
($000s)
At January 1,
 2013

 
(Charges) / credits due to acquisitions & other

 
(Charged) / credited to earnings

 
At December 31, 2013

 
Deferred income tax assets:
 
 
 
 
 
 
 
 
Decommissioning liability
134,144

 
-

 
32,870

 
167,014

 
Income tax losses carried forward
184,974

 
-

 
(62,394
)
 
122,580

 
Share issue costs
33,195

 
141

 
(10,924
)
 
22,412

 
Risk management contracts
6,230

 
-

 
26,381

 
32,611

 
Other
11,308

 
1,349

 
(10,611
)
 
2,046

 
 
369,851

 
1,490

 
(24,678
)
 
346,663

 
Deferred income tax liabilities:
 
 
 
 
 
 
 
 
Property, plant & equipment
(966,007
)
 
-

 
(94,514
)
 
(1,060,521
)
 
Timing of partnership items
(180,381
)
 
-

 
42,970

 
(137,411
)
 
Risk management contracts
(16,128
)
 
-

 
2,789

 
(13,339
)
 
 
(1,162,516
)
 
-

 
(48,755
)
 
(1,211,271
)
 
Net deferred income tax liabilities
(792,665
)
 
1,490

 
(73,433
)
 
(864,608
)
 
The approximate amounts of tax pools available as at December 31, 2014 and 2013 are as follows:
($000s)
2014

 
2013

 
Tax pools:
 
 
 
 
Canada
7,873,959

 
6,751,472

 
United States
2,101,951

 
1,626,298

 
Total
9,975,910

 
8,377,770

 
The tax pools presented do not include the impact of income from the general partnership for its fiscal period ended December 31, 2014 for which the Company is entitled to claim a reserve for current income tax purposes. Including the impact of income from the general partnership which is taxable to the Company in future years, the net tax pools remaining at December 31, 2014 are approximately $9.6 billion (December 31, 2013 - $7.9 billion).
The above tax pools include estimated Canadian non-capital losses carried forward of $76.3 million (December 31, 2013 - $387.2 million) that expire in the years 2030 through 2031, and U.S. net operating losses of $231.1 million (December 31, 2013 - $72.5 million) which expire in the years 2024 through 2033. A deferred income tax asset has not been recognized for realized and unrealized U.S. net operating losses of $388.0 million (December 31, 2013 - $15.3 million) as there is not sufficient certainty regarding future utilization.
A deferred tax asset has not been recognized in respect of certain unrealized capital losses and capital losses carried forward for Canadian tax purposes in the amount of $117.8 million (December 31, 2013 - $157.7 million). Recognition is dependent on the realization of future taxable capital gains.

CRESCENT POINT ENERGY CORP.
24


A deferred tax asset has not been recognized in respect of temporary differences associated with investments in subsidiaries as it is not likely that the temporary differences will reverse in the foreseeable future. The deductible temporary differences associated with investments in subsidiaries is approximately $385.8 million (December 31, 2013 - $52.8 million).
21.
SHARE-BASED COMPENSATION
Restricted Share Bonus Plan
The Company has a Restricted Share Bonus Plan pursuant to which the Company may grant restricted shares to directors, officers, employees and consultants. The restricted shares vest on terms up to three years from the grant date as determined by the Board of Directors.
Restricted shareholders are eligible for monthly dividends on their restricted shares, immediately upon grant.
Deferred Share Unit Plan
The Company has a DSU plan for directors. Each DSU vests on the date of the grant, however, the settlement of the DSU occurs following a change of control or when the individual ceases to be a director of the Company. Deferred Share Units are settled in cash based on the prevailing Crescent Point share price.
The following table reconciles the number of restricted shares and DSUs for the year ended December 31, 2014:
 
Restricted Shares

 
Deferred Share Units

 
Balance, beginning of year
2,588,143

 
75,380

 
Granted
3,117,851

 
33,967

 
Adjustment in accordance with grant
-

 
(8,377
)
 
Redeemed
(1,922,677
)
 
(16,574
)
 
Forfeited
(134,752
)
 
-

 
Balance, end of year
3,648,565

 
84,396

 
For the year ended December 31, 2014, the Company calculated total share-based compensation, net of estimated forfeitures and forfeiture true-ups, of $87.7 million (December 31, 2013 - $90.8 million), of which $18.0 million was capitalized (December 31, 2013 - $23.1 million).
22.
PER SHARE AMOUNTS
The following table summarizes the weighted average shares used in calculating net income per share:
 
2014

 
2013

 
Weighted average shares  basic
418,688,308

 
386,253,999

 
Dilutive impact of restricted shares
2,371,936

 
1,476,739

 
Weighted average shares  diluted
421,060,244

 
387,730,738

 
23.
FINANCIAL INSTRUMENTS AND DERIVATIVES
The Company's financial assets and liabilities are comprised of cash, accounts receivable, long-term investments, reclamation fund, derivative assets and liabilities, accounts payable and accrued liabilities, dividends payable and long-term debt.
Crescent Point's derivative assets and liabilities are transacted in active markets. Crescent Point's long-term investments are transacted in active and non-active markets. The Company classifies the fair value of these transactions according to the following fair value hierarchy based on the amount of observable inputs used to value the instrument:
Level 1 - Values are based on unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 - Values are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting date.
Level 3 - Values are based on prices or valuation techniques that are not based on observable market data.
Accordingly, Crescent Point's derivative assets and liabilities are classified as Level 2. Long-term investments are classified as Level 1, Level 2 or Level 3 depending on the valuation methods and inputs used and whether the applicable company is publicly traded or private. Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy.
Crescent Point's valuation of investments in private companies is based primarily on recent trading activity in the relevant company's common shares. Crescent Point validates these valuations using a variety of peer comparison metrics and industry data. The Company's finance department is responsible for performing the valuation of financial instruments, including the calculation of Level 3 fair values. Refer to Note 5 for changes in the Company's Level 3 investments.

CRESCENT POINT ENERGY CORP.
25


Discussions of the fair values and risks associated with financial assets and liabilities, as well as summarized information related to derivative positions are detailed below:
a) Carrying Amount and Fair Value of Financial Instruments
The fair value of cash, accounts receivable, reclamation fund, accounts payable and accrued liabilities and dividends payable approximate their carrying amount due to the short-term nature of those instruments. The fair value of the amounts drawn on bank credit facilities is equal to its carrying amount as the facility bears interest at floating rates and credit spreads within the facility are indicative of market rates. These financial instruments are classified as financial assets and liabilities at amortized cost and are reported at amortized cost.
The following table summarizes the carrying value of the Company's remaining financial assets and liabilities as compared to their respective fair values as of December 31, 2014:
 
2014 Carrying Value

 
2014 Fair Value

 
Quoted prices in active markets for identical assets
(Level1)

 
Significant other observable inputs
(Level 2)

 
Significant unobservable inputs
 (Level 3)

 
($000s)
 
 
 
Financial assets
 
 
 
 
 
 
 
 
 
 
Derivatives
803,980

 
803,980

 
-

 
803,980

 
-

 
Long-term investments (1)
49,878

 
49,878

 
21,024

 
-

 
28,854

 
 
853,858

 
853,858

 
21,024

 
803,980

 
28,854

 
Financial liabilities
 
 
 
 
 
 
 
 
 
 
Derivatives
3,604

 
3,604

 
-

 
3,604

 
-

 
Senior guaranteed notes (2)
1,682,009

 
1,795,213

 
-

 
1,795,213

 
-

 
 
1,685,613

 
1,798,817

 
-

 
1,798,817

 
-