form40-fa1.htm
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
Amendment No. 1
to
FORM 40-F

 [     ] REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2012
 
Commission File Number: 001-35400

JUST ENERGY GROUP INC.
(Exact name of Registrant as specified in its charter)

Canada
(Province or other Jurisdiction of Incorporation or Organization)
4924
(Primary Standard Industrial Classification Code Number)
Not Applicable
(I.R.S. Employer Identification No.)


6345 Dixie Road, Suite 200
Mississauga, Ontario, Canada L5T 2E6
(905) 795-4206
(Address and telephone number of Registrant’s principal executive offices)

Corporation Service Company
1090 Vermont Avenue N.W.
Washington DC 20005
(800) 927-9800

 (Name, address (including zip code) and telephone number
(including area code) of agent for service in the United States)
____________________
 
Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class
 
Name of Each Exchange on Which Registered
Common Shares, No Par Value
 
New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
For annual reports, indicate by check mark the information filed with this Form:

[X] Annual information form
 
[X] Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

The Registrant had 139,348,926 Common Shares outstanding as at March 31, 2012

 
 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes  X
No __

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
Yes __
No __






 
 

 

EXPLANATORY NOTICE TO READER

On May 31, 2012, Just Energy Group Inc. ("the Registrant") filed its annual report on Form 40-F for the year ended March 31, 2012 ("the Annual Report"). Subsequent to filing the Annual Report, the Registrant noted an omission in the Independent Auditors' Report, to be included in the Annual Report as part of Exhibit 1.3 – Audited Consolidated Financial Statements for the year ended March 31, 2012. Specifically, in the paragraphs of the Independent Auditors' Report called "Management's Responsibility for the Consolidated Financial Statements" and "Opinion", the Registrant's independent auditor noted that the consolidated financial statements were prepared in accordance with International Financial Reporting Standards without a reference to "as issued by International Accounting Standards Board". An amended version of the Independent Auditors' Report that adds such references is filed herewith, together with the Audited Consolidated Financial Statements for the year ended March 31, 2012 and a consent of Ernst & Young LLP, as well as certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

Other than as expressly set forth above, this amendment does not, and does not purport to, update or restate the information in any Item of the Annual Report or reflect any events that have occurred after the Annual Report was filed. The filing of this amendment shall not be deemed an admission that the Annual Report, when filed, included any untrue statement of material fact or omitted to state a material fact necessary to make a statement not misleading.


 
 

 

EXHIBITS

The following exhibits are filed as part of this Annual Report:

 
Number
 
Document
       
 
1.1*
 
Annual Information Form for the year ended March 31, 2012
       
 
1.2*
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended March 31, 2012
       
 
1.3**
 
Audited Consolidated Financial Statements for the year ended March 31, 2012, prepared in accordance with international financial reporting standards including the report of the auditors thereon
       
 
23.1**
 
Consent of Ernst & Young LLP
       
 
31.1**
 
Certification of the CEO and CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
       
 
32.1**
 
Certification of the CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

________________
* Previously Filed
** Filed herewith

 
 

 

SIGNATURE

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

 
JUST ENERGY GROUP INC.
   
   
   
   
Date: June 26, 2012
By:  
 /s/ Beth Summers
   
Name:  
     Beth Summers
   
Title:
     Chief Financial Officer


 
 

 

EXHIBIT INDEX

Number
 
Document
     
1.1*
 
Annual Information Form for the year ended March 31, 2012
     
1.2*
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended March 31, 2012
     
1.3**
 
Audited Consolidated Financial Statements for the year ended March 31, 2012, prepared in accordance with international financial reporting standards including the report of the auditors thereon
     
23.1**
 
Consent of Ernst & Young LLP
     
31.1**
 
Certification of the CEO and CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1**
 
Certification of the CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

________________
* Previously Filed
** Filed herewith
 
ex1-3.htm
 
Exhibit 1.3
Management’s responsibility
for financial reporting
 
The accompanying consolidated financial statements of Just Energy Group Inc. and all the information in this annual report are the responsibility of management and have been approved by the Board of Directors.
 
The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards. The consolidated financial statements include some amounts that are based on estimates and judgments. Management has determined such amounts on a reasonable basis in order to ensure that the consolidated financial statements are presented fairly, in all material respects. Financial information presented elsewhere in this annual report has been prepared on a consistent basis with that in the consolidated financial statements.
 
Just Energy Group Inc. maintains systems of internal accounting and administrative controls. These systems are designated to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Company assets are properly accounted for and adequately safeguarded.
 
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries out this responsibility principally through its Audit Committee.
 
The Audit Committee is appointed by the Board of Directors and is composed entirely of non-management directors. The Audit Committee meets periodically with management and the external auditors, to discuss auditing, internal controls, accounting policy and financial reporting matters. The committee reviews the consolidated financial statements with both management and the external auditors and reports its findings to the Board of Directors before such statements are approved by the Board.
 
The consolidated financial statements have been audited by Ernst & Young LLP, the external auditors, in accordance with Canadian generally accepted auditing standards on behalf of the shareholders. The external auditors have full and free access to the Audit Committee, with and without the presence of management, to discuss their audit and their findings as to the integrity of the financial reporting and the effectiveness of the system of internal controls.
 
On behalf of Just Energy Group Inc.
 
Ken Hartwick
 
Beth Summers
 
Chief Executive Officer and President
 
Chief Financial Officer
 

 
 
1.

 

Independent auditors’ report
 
To the Shareholders of Just Energy Group Inc.
 
We have audited the accompanying consolidated financial statements of Just Energy Group Inc., which comprise the consolidated statements of financial position as at March 31, 2012 and 2011, and April 1, 2010, and the consolidated statements of income (loss), comprehensive income (loss), shareholders’ deficit and cash flows for the years ended March 31, 2012 and 2011, and 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.
 
Auditors’ Responsibility
 
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ 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 auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting 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.
 
Opinion
 
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Just Energy Group Inc. as at March 31, 2012 and 2011, and April 1, 2010, and its financial performance and its cash flows for the years ended March 31, 2012 and 2011 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
 

 
   
/S/ Ernst & Young LLP
 
       
Toronto, Canada,
 
Chartered Accountants
 
May 17, 2012.
 
Licensed Public Accountants
 

 
 
2.

 
 
JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT
(thousands of Canadian dollars)

 
 
 
Notes
   
March 31, 2012
   
March 31, 2011
   
April 1, 2010
 
ASSETS
 
 
   
 
   
 
   
 
 
Non-current assets
 
 
   
 
   
 
   
 
 
Property, plant and equipment
    5     $ 291,061     $ 234,002     $ 216,676  
Intangible assets
    6       543,775       640,219       528,854  
Contract initiation costs
            44,225       29,654       5,587  
Other non-current financial assets
    11       15,315       5,384       5,027  
Non-current receivables
            6,475       4,569       2,014  
Deferred tax asset
    16       78,398       121,785       265,107  
 
            979,249       1,035,613       1,023,265  
Current assets
                               
Inventory
    8       9,988       6,906       6,323  
Gas delivered in excess of consumption
            12,844       3,481       7,410  
Gas in storage
            11,453       6,133       4,058  
Current trade and other receivables
            299,945       281,685       232,579  
Accrued gas receivables
            2,875       26,535       20,793  
Unbilled revenues
            130,796       112,147       61,070  
Prepaid expenses and deposits
            9,451       6,079       20,038  
Other current assets
    11       12,799       3,846       2,703  
Corporate tax recoverable
            8,225       9,135       -  
Restricted cash
    7       12,199       833       18,650  
Cash and cash equivalents
            53,220       97,633       60,132  
 
            563,795       554,413       433,756  
TOTAL ASSETS
          $ 1,543,044     $ 1,590,026     $ 1,457,021  
 
                               
DEFICIT AND LIABILITIES
                               
Deficit attributable to equity holders of the parent
                               
Deficit
          $ (1,652,188 )   $ (1,349,928 )   $ (1,556,669 )
Accumulated other comprehensive income
    12       70,293       123,919       221,969  
Unitholders’ capital
            -       -       777,856  
Shareholders’ capital
    13       993,181       963,982       -  
Equity component of convertible debenture
    15       25,795       18,186       -  
Contributed surplus
            62,147       52,723       -  
Shareholders’ deficit
            (500,772 )     (191,118 )     (556,844 )
 
                               
Non-controlling interest
            (637 )     -       20,421  
TOTAL DEFICIT
            (501,409 )     (191,118 )     (536,423 )
 
                               
Non-current liabilities
                               
Long-term debt
    15       679,072       507,460       231,837  
Provisions
    17       3,068       3,244       3,124  
Deferred lease inducements
            1,778       1,622       1,984  
Other non-current financial liabilities
    11       309,617       355,412       590,572  
Deferred tax liability
    16       6,073       22,919       6,776  
Liability associated with Exchangeable Shares and equity-based compensation
    29       -       -       181,128  
 
            999,608       890,657       1,015,421  
Current liabilities
                               
Bank indebtedness
            1,060       2,314       8,236  
Trade and other payables
            287,145       275,503       177,368  
Accrued gas payable
            2,960       19,353       15,093  
Deferred revenue
            11,985       -       7,202  
Unit distribution payable
                    -       13,182  
Income taxes payable
            4,814       9,788       6,410  
Current portion of long-term debt
    15       97,611       94,117       61,448  
Provisions
    17       3,226       4,006       3,884  
Other current financial liabilities
    11       636,044       485,406       685,200  
 
            1,044,845       890,487       978,023  
TOTAL LIABILITIES
            2,044,453       1,781,144       1,993,444  
TOTAL DEFICIT AND LIABILITIES
          $ 1,543,044     $ 1,590,026     $ 1,457,021  
 
                               
Guarantees (Note 23) Commitments (Note 26)
                               
See accompanying notes to the consolidated financial statements
                 

 
 
3.

 
 
JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED MARCH 31
 
(thousands of Canadian dollars, except where indicated and per share amounts)

 
 
 
Notes
   
2012
   
2011
 
SALES
    19     $ 2,785,269     $ 2,953,192  
COST OF SALES
    18(b)       2,267,780       2,471,630  
GROSS MARGIN
            517,489       481,562  
EXPENSES
                       
Administrative expenses
            122,397       109,400  
Selling and marketing expenses
            177,302       133,607  
Other operating expenses
    18(a)       154,357       165,575  
 
            454,056       408,582  
Operating profit
            63,433       72,980  
Finance costs
    15       (60,935 )     (59,883 )
Change in fair value of derivative instruments
    11       (96,345 )     506,047  
Proportionate share of loss from joint venture
    10       (1,971 )     -  
Other income
            6,702       7,235  
Income (loss) before income taxes
            (89,116 )     526,379  
Provision for income taxes
    16       37,527       173,439  
PROFIT (LOSS) FOR THE YEAR
          $ (126,643 )   $ 352,940  
 
                       
Attributable to:
                       
Shareholders of Just Energy
          $ (126,522 )   $ 355,076  
Non-controlling interest
            (121 )     (2,136 )
PROFIT (LOSS) FOR THE YEAR
          $ (126,643 )   $ 352,940  
 
                       
See accompanying notes to the consolidated financial statements
 
 
                       
 
                       
Profit (loss) per share
    21                  
Basic
          $ (0.92 )   $ 2.77  
Diluted
          $ (0.92 )   $ 2.40  

 
 
4.

 
 
JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED MARCH 31
(thousands of Canadian dollars)

 
 
 
Notes
   
2012
   
2011
 
Profit (loss) for the year
 
 
    $ (126,643 )   $ 352,940  
 
 
 
                 
Other comprehensive income (loss)
    12                  
 
                       
Unrealized gain on translation of foreign operations
            2,386       449  
 
                       
                         
Amortization of deferred unrealized gain of discontinued hedges, net of income taxes of $13,150 (2011 - $21,384)
            (56,012 )     (98,499 )
 
                       
Other comprehensive loss for the year, net of tax
            (53,626 )     (98,050 )
 
                       
Total comprehensive income (loss) for the year, net of tax
          $ (180,269 )   $ 254,890  
 
                       
 
                       
Total comprehensive income (loss) attributable to:
                       
 
                       
Shareholders of Just Energy
          $ (180,148 )   $ 257,026  
 
                       
Non-controlling interest
            (121 )     (2,136 )
 
                       
Total comprehensive income (loss) for the year, net of tax
          $ (180,269 )   $ 254,890  
 
                       
See accompanying notes to the consolidated financial statements
 

 
 
5.

 
 
JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED MARCH 31
(thousands of Canadian dollars)

 
 
 
Notes
   
2012
   
2011
 
ATTRIBUTABLE TO THE SHAREHOLDERS/UNITHOLDERS
 
 
   
 
   
 
 
Accumulated deficit
 
 
   
 
   
 
 
Accumulated deficit, beginning of year
 
 
    $ (315,934 )   $ (671,010 )
Loss on cancellation of shares
    13       (356 )     -  
Profit (loss) for the year, attributable to the shareholders
            (126,522 )     355,076  
Accumulated deficit, end of year
            (442,812 )     (315,934 )
 
                       
DISTRIBUTIONS/DIVIDENDS
                       
Distributions and dividends, beginning of year
            (1,033,994 )     (885,659 )
Distributions and dividends
    25       (175,382 )     (148,335 )
Distributions and dividends, end of year
            (1,209,376 )     (1,033,994 )
DEFICIT
          $ (1,652,188 )   $ (1,349,928 )
 
                       
ACCUMULATED OTHER COMPREHENSIVE INCOME
    12                  
Accumulated other comprehensive income, beginning of year
          $ 123,919     $ 221,969  
Other comprehensive loss
            (53,626 )     (98,050 )
Accumulated other comprehensive income, end of year
          $ 70,293     $ 123,919  
 
                       
SHAREHOLDERS’/UNITHOLDERS’ CAPITAL
    13                  
Shareholders’/Unitholders’ capital, beginning of year
          $ 963,982     $ 777,856  
Shares/units exchanged  and issued
            -       158,520  
Shares/units issued on exercise/exchange of unit compensation
            1,385       1,559  
Repurchase and cancellation of shares
            (599 )     -  
Dividend reinvestment plan
            28,413       26,047  
Shareholders’/Unitholders’ capital, end of year
          $ 993,181     $ 963,982  
 
                       
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES
    15                  
Balance, beginning of year
          $ 18,186     $ -  
Allocations of new convertible debentures issued
            10,188       33,914  
Future tax impact on convertible debentures
            (2,579 )     (15,728 )
Balance, end of year
          $ 25,795     $ 18,186  
 
                       
CONTRIBUTED SURPLUS
                       
Balance, beginning of year
          $ 52,723     $ -  
Reclassification on conversion
            -       43,147  
Gain on acquisition of non-controlling interest
            -       7,957  
Add:  Share-based compensation awards
            10,662       2,683  
Non-cash deferred share grant distributions
            147       33  
Less: Share-based awards exercised
            (1,385 )     (1,097 )
Balance, end of year
          $ 62,147     $ 52,723  
 
                       
NON-CONTROLLING INTEREST
                       
Balance, beginning of year
          $ -     $ 20,421  
Non-controlling interest acquired
    9       (540 )     -  
Foreign exchange on non-controlling interest
            24       -  
Acquisition of non-controlling interest
            -       (18,285 )
Net loss attributable to non-controlling interest
            (121 )     (2,136 )
Balance, end of year
          $ (637 )   $ -  
See accompanying notes to the consolidated financial statements
                       

 
 
6.

 
 
JUST ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31
 (thousands of Canadian dollars)


Net inflow (outflow) of cash related to the following activities
 
Notes
   
2012
   
2011
 
 
 
 
   
 
   
 
 
OPERATING
 
 
   
 
   
 
 
Income before income taxes
 
 
    $ (89,116 )   $ 526,379  
Items not affecting cash
 
 
                 
Amortization of intangible assets and related supply contracts
 
 
      108,233       120,841  
Amortization of contract initiation costs
 
 
      13,977       12,429  
Amortization of property, plant and equipment
 
 
      5,847       5,698  
Amortization included in cost of sales
 
 
      12,640       9,837  
Share-based compensation
 
 
      10,662       9,914  
Financing charges, non-cash portion
 
 
      8,760       7,799  
Transaction costs on acquisition
 
 
      1,101       1,284  
Other
 
 
      (150 )     6,860  
Change in fair value of derivative instruments
 
 
      96,345       (506,047 )
 
 
 
      257,415       (331,385 )
Adjustment required to reflect net cash receipts from gas sales
    27       7,740       (1,725 )
 
                       
Changes in non-cash working capital
    28       (27,032 )     (39,063 )
 
            149,007       154,206  
Income tax paid
            (4,617 )     (8,651 )
Cash inflow from operating activities
            144,390       145,555  
 
                       
INVESTING
                       
Purchase of property, plant and equipment
            (74,829 )     (33,412 )
Purchase of intangible assets
            (5,867 )     (5,784 )
Acquisitions, net of cash acquired
    9       (93,325 )     (261,389 )
Proceeds (advances) of long-term receivables
            (1,881 )     2,232  
Transaction costs on acquisition
            (1,101 )     (1,284 )
Contract initiation costs
            (28,244 )     (19,210 )
Cash outflow from investing activities
            (205,247 )     (318,847 )
 
                       
FINANCING
                       
Dividends paid
            (146,822 )     (134,589 )
Shares purchased for cancellation
            (955 )     -  
Decrease in bank indebtedness
            (1,254 )     (5,922 )
Issuance of long-term debt
            464,520       484,844  
Repayment of long-term debt
            (288,005 )     (150,449 )
Restricted cash
            (11,366 )     17,817  
Cash inflow from financing activities
            16,118       211,701  
Effect of foreign currency translation on cash balances
            326       (908 )
Net cash inflow (outflow)
            (44,413 )     37,501  
Cash and cash equivalents, beginning of year
            97,633       60,132  
Cash and cash equivalents, end of year
          $ 53,220     $ 97,633  
 
                       
 
                       
Supplemental cash flow information:
                       
Interest paid
          $ 52,810     $ 39,167  
 
                       
See accompanying notes to the consolidated financial statements
 

 
 
7.

 


 
JUST ENERGY GROUP INC.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)

1.
ORGANIZATION
 
Just Energy Group Inc. (“JEGI”, “Just Energy” or the “Company”) is a corporation established under the laws of Canada to hold securities and to distribute the income of it’s directly or indirectly owned operating subsidiaries and affiliates.
 
Effective January 1, 2011, Just Energy completed the conversion from an income trust, Just Energy Income Fund (the “Fund”), to a corporation (the “Conversion”). A plan of arrangement was approved by unitholders on June 29, 2010, and by the Alberta Court of the Queen’s Bench on June 30, 2010, and going forward operates under the name, Just Energy Group Inc. JEGI was a newly incorporated entity for the purpose of acquiring the outstanding units of the Fund, Exchangeable Shares of Just Energy Exchange Corp. (“JEEC”) and the Class A preference shares of Just Energy Corp. (“JEC”) in each case on a one for one basis for common shares of JEGI.  There was no change in the ownership of the business, and therefore, there is no impact to the consolidated financial statements except for the elimination of unitholders’ equity, the recording of shareholders’ equity and the reallocation of the liability associated with the Exchangeable Shares and equity-based compensation to shareholders’ equity.
 
The registered office of Just Energy is First Canadian Place, 100 King Street West, Toronto, Ontario, Canada. The consolidated financial statements consist of Just Energy and its subsidiaries and affiliates. The financial statements were approved by the Board of Directors on May 17, 2012.

2.
OPERATIONS
 
Just Energy’s business primarily involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price, price-protected or variable-priced contracts. Just Energy markets its gas and electricity contracts in Canada and the U.S. under the following trade names: Just Energy, Hudson Energy, Commerce Energy, Amigo Energy and Tara Energy. By fixing the price of natural gas or electricity under its fixed-price or price-protected program contracts for a period of up to five years, Just Energy’s customers offset their exposure to changes in the price of these essential commodities. Variable rate products allow customers to maintain competitive rates while retaining the ability to lock into a fixed price at their discretion.  Just Energy derives its margin or gross profit from the difference between the price at which it is able to sell the commodities to its customers and the related price at which it purchases the associated volumes from its suppliers.
 
Just Energy also offers green products through its JustGreen and JustClean programs. The electricity JustGreen product offers customers the option of having all or a portion of their electricity sourced from renewable green sources such as wind, run of the river hydro or biomass. The gas JustGreen product offers carbon offset credits that allow customers to reduce or eliminate the carbon footprint of their homes or businesses. JustClean products allow customers in certain jurisdictions to offset their carbon footprint without purchasing commodity from Just Energy. JustClean can be offered in all states and provinces and is not dependent on energy deregulation. Management believes that the JustGreen and JustClean products will not only add to profits but will also increase sales receptivity and improve renewal rates.
 
In addition, Just Energy sells and rents high efficiency and tankless water heaters, air conditioners and furnaces to Ontario residents, through a subsidiary under the trade name, National Home Services (“NHS”). Just Energy also operates a network marketing division under the trade name, Momentis. Through its subsidiary, Terra Grain Fuels, Inc. (“TGF”), Just Energy produces and sells wheat-based ethanol. Just Energy’s subsidiary, Hudson Energy Solar Corp (“HES”), also provides a solar project development platform operating in New Jersey, Pennsylvania and Massachusetts, under the trade name, Hudson Energy Solar.
 
Just Energy also holds a 50% ownership in Just Ventures LLC and Just Ventures L.P. (collectively “Just Ventures”), a jointly controlled entity, which is involved in the marketing of Just Energy’s gas and electricity contracts.  The other 50% is owned by Red Ventures LLC, a South Carolina based entity which specializes in internet based marketing.
 
 
8.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
3.
BASIS OF PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
 
In 2010, the Canadian Institute of Chartered Accountants (“CICA”) Handbook was revised to incorporate International Financial Reporting Standards (″IFRS″) and requires publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. Accordingly, the Company has commenced reporting on this basis in these consolidated financial statements. In the consolidated financial statements, the term “CGAAP” refers to Canadian Generally Accepted Accounting Principles before the adoption of IFRS.
 
The consolidated financial statements have been prepared in compliance with IFRS as issued by the International Accounting Standards Board (“IASB”). Subject to certain transition elections, the Company has consistently applied the same accounting policies in its opening IFRS consolidated balance sheet at April 1, 2010, and throughout all periods presented, as if these policies had always been in effect. Note 31 discloses the impact of the transition to IFRS on the Company’s reported financial position, financial performance and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Company’s audited annual consolidated financial statements for the year ended March 31, 2011, prepared under CGAAP.

 
(a)
Basis of presentation

The consolidated financial statements are presented in Canadian dollars, the functional currency of Just Energy, and all values are rounded to the nearest thousand. The consolidated financial statements are prepared on an historical cost basis except for the derivative financial instruments, which are stated at fair value.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening IFRS consolidated statement of financial position as at April 1, 2010, for the purposes of the transition.

 
(b)
Principles of consolidation

The consolidated financial statements include the accounts of Just Energy and its directly or indirectly owned subsidiaries and affiliates as at March 31, 2012. Subsidiaries and affiliates are consolidated from the date of acquisition and control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries and affiliates are prepared for the same reporting period as Just Energy, using consistent accounting policies. All intercompany balances, income, expenses, and unrealized gains and losses resulting from intercompany transactions are eliminated on consolidation.

 
(c)
Cash and cash equivalents

All highly liquid temporary cash investments with an original maturity of three months or less when purchased are considered to be cash equivalents. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

 
(d)
Accrued gas receivables/accrued gas payable or gas delivered in excess of consumption/deferred revenues

Accrued gas receivables are stated at estimated realizable value and result when customers consume more gas than has been delivered by Just Energy to local distribution companies (“LDCs”). Accrued gas payable represents the obligation to the LDCs with respect to gas consumed by customers in excess of that delivered to the LDCs.

 
 
9.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
Gas delivered to LDCs in excess of consumption by customers is stated at the lower of cost and net realizable value. Collections from customers in advance of their consumption of gas result in deferred revenues.

Due to the seasonality of operations, during the winter months, customers will have consumed more than what was delivered resulting in the recognition of unbilled revenues/accrued gas payable; however, in the summer months, customers will have consumed less than what was delivered, resulting in the recognition of gas delivered in excess of consumption/deferred revenues.

These adjustments are applicable solely to the Ontario, Manitoba, Quebec and Michigan gas markets.

 
(e)
Inventory

Inventory consists of water heaters, furnaces and air conditioners for selling purposes, gas in storage, ethanol, ethanol in process and grain inventory. Water heaters, furnaces and air conditioners are stated at the lower of cost and net realizable value with cost being determined on a weighted average basis.

Gas in storage represents the gas delivered to the LDCs. The balance will fluctuate as gas is injected or withdrawn from storage.

Gas in storage, ethanol, ethanol in process and grain inventory are valued at the lower of cost and net realizable value with cost being determined on a weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

 
(f)
Property, plant and equipment

Property, plant and equipment are stated at cost, net of any accumulated depreciation and impairment losses.  Cost includes the purchase price and, where relevant, any costs directly attributable to bringing the asset to the location and condition necessary and/or the present value of all dismantling and removal costs. Where major components of property, plant and equipment have different useful lives, the components are recognized and depreciated separately. Just Energy recognizes in the carrying amount, the cost of replacing part of an item when the cost is incurred and if it is probable that the future economic benefits embodied with the item can be reliably measured. All other repair and maintenance costs are recognized in the consolidated income statement as an expense when incurred. Depreciation is provided over the estimated useful lives of the assets as follows:

Asset category
 
Depreciation method
 
Rate/useful life
Furniture and fixtures
 
Declining balance
 
20%
Office equipment
 
Declining balance
 
20%
Computer equipment
 
Declining balance
 
30%
Buildings and ethanol plant
 
Straight line
 
15-35 years
Water heaters
 
Straight line
 
15 years
Furnaces and air conditioners
 
Straight line
 
15 years
Leasehold improvements
 
Straight line
 
Term of lease
Vehicles
 
Straight line
 
5 years
Solar equipment
 
Straight line
 
15-20 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on

 
 
10.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
derecognition of the asset is included in the consolidated income statement when the asset is derecognized.

The useful lives and methods of depreciation are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

 
(g)
Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments and liabilities incurred or assumed at the date of exchange. Acquisition costs for business combinations incurred subsequent to April 1, 2010, are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair values on the date of acquisition, irrespective of the extent of any non-controlling interest.

Goodwill is initially measured at cost, which is the excess of the cost of the business combination over Just Energy’s share in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Any negative difference is recognized directly in the consolidated income statement. If the fair values of the assets, liabilities and contingent liabilities can only be calculated on a provisional basis, the business combination is recognized using provisional values. Any adjustments resulting from the completion of the measurement process are recognized within 12 months of the date of acquisition.

After initial recognition, goodwill is measured at cost, less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of Just Energy’s operating segments that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the acquiree are assigned to those segments.

On first-time adoption of IFRS, Just Energy elected to not apply IFRS 3, Business Combinations, to transactions that occurred prior to the transition date. Accordingly, the goodwill associated with acquisitions carried out prior to April 1, 2010, is carried at that date, at the amount reported in the last consolidated financial statements prepared under CGAAP as at March 31, 2010.

 
(h)
Intangible assets

Intangible assets acquired outside of a business combination are measured at cost on initial recognition. Intangible assets acquired in a business combination are recorded at fair value on the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and/or accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite useful lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and amortization period of an intangible asset with a finite useful life is reviewed at least once annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense related to intangible assets with finite lives is recognized in the consolidated income statement in the expense category associated with the function of the intangible assets.

Intangible assets consist of gas customer contracts, electricity customer contracts, water heater customer contracts, sales network, brand and goodwill, all acquired through business combinations, as well as software, commodity billing and settlement systems and information technology system development.

 
 
11.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
Internally generated intangible assets are capitalized when the product or process is technically and commercially feasible and Just Energy has sufficient resources to complete development. The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management.

The brand and goodwill are considered to have an indefinite useful life and are not amortized, but rather tested annually for impairment. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net  disposal proceeds and the carrying amount of the asset, and are recognized in the consolidated income statement when the asset is derecognized.

Asset category
 
Amortization method
 
Rate
Customer contracts
 
Straight line
 
Term of contract
Contract initiation costs
 
Straight line
 
Term of contract
Commodity billing and settlement systems
 
Straight line
 
5 years
Sales network
 
Straight line
 
5 years
Information technology system development
 
Straight line
 
5 years
Software
 
Declining balance
 
100%
Other intangible assets
 
Straight line
 
5 years

 
(i)
Impairment of non-financial assets

Just Energy assesses whether there is an indication that an asset may be impaired at each reporting date. If such an indication exists or when annual testing for an asset is required, Just Energy estimates the asset's recoverable amount. The recoverable amount of goodwill and intangible assets with an indefinite useful life, if any, as well as intangible assets not yet available for use, are estimated at least annually. The recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value-in-use. Value-in-use is determined by discounting estimated future cash flows using a pre-tax discount rate that reflects the current market assessment of the time value of money and the specific risks of the asset. In determining fair value less costs to sell, an appropriate valuation model has to be used. The recoverable amount of assets that do not generate independent cash flows is determined based on the cash-generating unit to which the asset belongs.

An impairment loss is recognized in the consolidated income statement if an asset's carrying amount or that of the cash-generating unit to which it is allocated is higher than its recoverable amount. Impairment losses of cash-generating units are first charged against the value of assets, in proportion to their carrying amount.

In the consolidated income statement, an impairment loss is recognized in the expense category associated with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, Just Energy estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization, had no

 
 
12.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
impairment loss been recognized for the asset in prior years. Such a reversal is recognized in the consolidated income statement.

Goodwill is tested for impairment annually as at March 31 and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each segment to which the goodwill relates. Where the recoverable amount of the segment is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

 
(j)
Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date and whether fulfilment of the arrangement is dependent on the use of a specific asset or assets, or the arrangement conveys a right to use the asset.

Just Energy as a lessee
Operating lease payments are recognized as an expense in the consolidated income statement on a straight-line basis over the lease term.

Just Energy as a lessor
Leases where Just Energy does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income.

 
(k)
Financial instruments

Financial assets and liabilities
Just Energy classifies its financial instruments as either (i) financial assets at fair value through profit or loss instruments, or (ii) loans and receivables, and its financial liabilities as either (i) financial liabilities at fair value through profit or loss or (ii) other financial liabilities. Appropriate classification of financial assets and liabilities is determined at the time of initial recognition or when reclassified in the consolidated statement of financial position.

Financial instruments are recognized on the trade date, which is the date on which Just Energy commits to purchase or sell the asset.

Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held-for-trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held-for-trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into that are not designated as hedging instruments in hedge relationships as defined by IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”). Included in this class are primarily physical delivered energy contracts, for which the own-use exemption could not be applied, financially settled energy contracts and foreign currency forward contracts.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 11.  Related realized and unrealized gains and losses are included in the consolidated income statement.
 
 
 
13.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets in this category include receivables. Loans and receivables are initially recognized at fair value plus transaction costs. They are subsequently measured at amortized cost using the effective interest method less any impairment. The effective interest amortization is included in finance costs in the consolidated income statement.

Derecognition
A financial asset is derecognized when the rights to receive cash flows from the asset have expired or when Just Energy has transferred its rights to receive cash flows from the asset.

Impairment of financial assets
Just Energy assesses whether there is objective evidence that a financial asset is impaired at each reporting date. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the fund of financial assets that can be reliably estimated.

For financial assets carried at amortized cost, Just Energy first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively, for financial assets that are not individually significant. If Just Energy determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of other income in the consolidated income statement.

Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to other operating costs in the consolidated income statement.

Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held-for-trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held-for-trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by Just Energy that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Included in this class are primarily physically delivered energy contracts, for which the own-use exemption could be not applied, financially settled energy contracts and foreign currency forward contracts.

 
 
14.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
Gains or losses on liabilities held-for-trading are recognized in the consolidated income statement.

Other financial liabilities
Other financial liabilities are measured at amortized cost using the effective interest rate method. Financial liabilities include long-term debt issued, which is initially measured at fair value, which is the consideration received, net of transaction costs incurred, trade and other payables and bank indebtedness. Transaction costs related to the long-term debt instruments are included in the value of the instruments and amortized using the effective interest rate method. The effective interest expense is included in finance costs in the consolidated income statement.

Derecognition
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated income statement.

 
(l)
Derivative instruments

Just Energy enters into fixed-term contracts with customers to provide electricity and gas at fixed prices. These customer contracts expose Just Energy to changes in consumption as well as changes in the market prices of gas and electricity. To reduce its exposure to movements in commodity prices, Just Energy enters into derivative contracts.

Just Energy analyzes all its contracts, of both a financial and non-financial nature, to identify the existence of any “embedded” derivatives. Embedded derivatives are accounted for separately from the underlying contract at inception date when their risks and characteristics are not closely related to those of the underlying contracts and the underlying contracts are not carried at fair value.  An embedded derivative is a provision in a contract that modifies the cash flow of a contract by making it dependent on an underlying measurement.

All derivatives are recognized at fair value on the date on which the derivative is entered into and are re-measured to fair value at each reporting date. Derivatives are carried in the consolidated statements of financial position as other financial assets when the fair value is positive and as other financial liabilities when the fair value is negative. Just Energy does not utilize hedge accounting. Therefore, changes in the fair value of these derivatives are taken directly to the consolidated income statement and are included within change in fair value of derivative instruments.

 
(m)
Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statements of financial position if, and only if, there is currently an enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

 
(n)
Fair value of financial instruments

Fair value is the estimated amount that Just Energy would pay or receive to dispose of these contracts in an arm’s-length transaction between knowledgeable, willing parties who are under no compulsion to act. The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques that are recognized by market participants. Such techniques may include using recent arm’s-length market

 
 
15.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis, or other valuation models.  An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 11.

 
(o)
Revenue recognition

Revenue is recognized when significant risks and rewards of ownership are transferred to the customer. In the case of gas and electricity, transfer of risk and rewards generally coincides with consumption.  Ethanol and dried distillery grain sales are recognized when the risk and reward of ownership passes, which is typically on delivery.  Revenue from sales of water heaters, furnaces and air conditioners is recognized upon installation. Just Energy recognizes revenue from water heater and HVAC leases, based on rental rates over the term commencing from the installation date.
Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and sales taxes.
The Company assumes credit risk for all customers in Illinois, Texas, Pennsylvania, Maryland, Massachusetts, California and Georgia and for large-volume customers in British Columbia and Ontario. In these markets, the Company ensures that credit review processes are in place prior to commodity flowing to the customer.

 
(p)
Foreign currency translation

Functional and presentation currency
Items included in the consolidated financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Canadian dollars, which is the parent company’s presentation and functional currency.

Transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated income statement, except when deferred in other comprehensive income (loss) as qualifying net investment hedges.

Translation of foreign operations
The results and consolidated financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 
·
assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at the date of that consolidated statement of financial position; and
 
·
income and expenses for each consolidated income statement are translated at the exchange rates prevailing at the dates of the transactions.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income (loss).

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in accumulated other comprehensive income (loss) are recognized in the consolidated income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of

 
 
16.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
the foreign entity and translated at the closing rate.

 
(q)
Per share/unit amounts

The computation of income per unit/share is based on the weighted average number of units/shares outstanding during the year. Diluted earnings per unit/share are computed in a similar way to basic earnings per unit/share except that the weighted average units/shares outstanding are increased to include additional units/shares assuming the exercise of stock options, restricted share grants (“RSGs”), deferred share grants (“DSGs”) and convertible debentures, if dilutive.

 
(r)
Share-based compensation plans

Equity-based compensation liability
Prior to the Conversion to a corporation on January 1, 2011, Just Energy’s equity-based compensation plans entitled the holders to receive trust units which under IFRS, were considered puttable financial instruments, and thus the awards were classified as liability-based awards.  The liability was measured at the redemption value of the instruments and re-measured at each reporting date with the gain or loss associated with the re-measurement recorded within profit.  When the awards were converted into trust units, the conversions were recorded as an extinguishment of the liability and accordingly, the re-measured amount at the date of conversion was then reclassified to equity.

Subsequent to the Conversion, Just Energy accounted for its share-based compensation as equity-settled transactions as a result of the stock-based plans that were no longer convertible into a puttable financial liability.  The cost of a share-based compensation is measured by reference to the fair value at the date on which it was granted. Awards are valued at the grant date and are not adjusted for changes in the prices of the underlying shares and other measurement assumptions. The cost of equity-settled transactions is recognized, together with the corresponding increase in equity, over the period in which the performance or service conditions are fulfilled, ending on the date on which the relevant grantee becomes fully entitled to the award. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting period reflects the extent to which the vesting period has expired and Just Energy’s best estimate of the number of the shares that will ultimately vest. The expense or credit recognized for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

When options, RSGs and DSGs are exercised or exchanged, the amounts credited to contributed surplus are reversed and credited to shareholders' capital.

 
(s)
Employee future benefits

Just Energy established a long-term incentive plan (the "Plan") for all permanent full-time and part-time Canadian employees (working more than 20 hours per week) of its subsidiaries. The Plan consists of two components, a Deferred Profit Sharing Plan ("DPSP") and an Employee Profit Sharing Plan ("EPSP").  For participants of the DPSP, Just Energy contributes an amount equal to a maximum of 2% per annum of an employee's base earnings. For the EPSP, Just Energy contributes an amount up to a maximum of 2% per annum of an employee's base earnings towards the purchase of shares of Just Energy, on a matching one for one basis.

For U.S. employees, Just Energy has established a long-term incentive plan (the "Plan") for all permanent full-time and part-time employees (working more than 26 hours per week) of its subsidiaries. The Plan consists of two components, a 401(k) and an Employee Share Purchase Plan ("ESPP").  For participants of the ESPP, Just Energy contributes an amount up to a maximum of 3% per annum of an employee's base earnings towards the purchase of Just Energy shares, on a matching one for one basis. For participants in the 401(k), Just Energy contributes an amount up to a maximum of 4% per annum of an employee's base earnings, on a matching one for one basis. In the event an employee participates in both the ESPP and 401(k), the maximum Just Energy will contribute to the 401k is 2%.

Participation in the plans in Canada or the U.S is voluntary. The plans have a two-year vesting period beginning from the later of the plan's effective date and an employee's starting date. During the year, Just Energy contributed $2,034 (2011 - $1,572) to the plans, which was paid in full during the year.

 
 
17.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
Obligations for contributions to the Plan are recognized as an expense in the consolidated income statement as incurred.

 
(t)
Trust units of the Fund

Prior to the Conversion which occurred on January 1, 2011, the Fund’s outstanding equity instruments consisted of publicly traded trust units of the Fund, Class A preference shares of JEC and Exchangeable Shares of JEEC. Pursuant to applicable legislation, those trust units included a redemption feature which required Just Energy to assess the appropriate presentation of those units under IFRS.

Generally, IFRS requires that financial instruments, which include a redemption feature, making the instruments puttable, should be presented as a financial liability rather than an equity item. However, an exception to this requirement is available if the financial instrument meets certain criteria. Just Energy determined that its trust units met the requirements for this exception and accordingly, the trust units are presented as equity for the periods prior to the Conversion.

Liabilities associated with the Class A preference shares of JEC and the Exchangeable Shares of JEEC (collectively the “Exchangeable Shares”)

Prior to the Conversion, the outstanding Exchangeable Shares did not meet the criteria to be recorded as equity because the Exchangeable Shares were ultimately required to be exchanged for trust units, which were considered puttable financial instruments.  Accordingly, the Exchangeable Shares were recorded as a liability until exchanged for trust units.  The liability was measured at the redemption value of the instruments and re-measured at each reporting date with the gain or loss associated with the re-measurement recorded within profit.  When the Exchangeable Shares were converted into trust units, the conversions were recorded as an extinguishment of the liability, and accordingly, the re-measured amount at the date of conversion was then reclassified to equity.

Transaction costs

Transaction costs incurred by Just Energy in issuing, acquiring or selling its own equity instruments are accounted for as a deduction from equity to the extent that they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

 
(u)
Income taxes

Just Energy follows the liability method of accounting for deferred taxes. Under this method, income tax liabilities and assets are recognized for the estimated tax consequences attributable to the temporary differences between the carrying value of the assets and liabilities on the consolidated financial statements and their respective tax bases.

Deferred tax assets/liabilities are recognized for all taxable temporary differences, except:

 
·
Where the deferred tax asset/liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
 
·
In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses, can be utilized except:

 
 
18.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
 
·
Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
 
·
In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

 
(v)
Provisions

Provisions are recognized when Just Energy has a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where Just Energy expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated income statement, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost in the consolidated income statement.

 
(w)
Selling and marketing expenses and contract initiation costs

Commissions and various other costs related to obtaining and renewing customer contracts are charged to income in the period incurred except as disclosed below:

Commissions related to obtaining and renewing commercial customer contracts are paid in one of the following ways: all or partially upfront or as a residual payment over the life of the contract. If the commission is paid all or partially upfront, it is recorded as contract initiation costs and amortized in selling and marketing expenses over the term for which the associated revenue is earned.  If the commission is paid as a residual payment, the amount is expensed as earned.

 
 
19.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
In addition, commissions related to obtaining customer contracts signed by NHS are recorded as contract initiation costs and amortized in selling and marketing expenses over the remaining life of the contract.

 
(x)
Investment in joint venture

Just Energy accounts for its interest in joint ventures using the equity method.  Under this method any investments made increases the asset value, the proportionate share of income/losses, increases/decreases the asset value, with an offsetting adjustment in the consolidated statements of operations and any dividends received decreases the asset value.
 
4.
(i)
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the consolidated financial statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, income, expenses and the disclosure of contingent liabilities. The estimates and related assumptions are based on previous experience and other factors considered reasonable under the circumstances, the results of which form the basis for making the assumptions about carrying values of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Judgments made by management in the application of IFRS that have a significant impact on the consolidated financial statements relate to the following:

Impairment of non-financial assets
Just Energy’s impairment test is based on value-in-use calculations that use a discounted cash flow model. The cash flows are derived from the budget for the next five years and are sensitive to the discount rate used as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

Deferred taxes
Significant management judgment is required to determine the amount of deferred tax assets that can be   recognized, based upon the likely timing and the level of future taxable income realized, including the usage of tax-planning strategies.

Development costs
Development costs are capitalized in accordance with the accounting policy in Note 3 (h). Initial capitalization of costs is based on management’s judgment that technical and economical feasibility is confirmed, usually when a project has reached a defined milestone according to an established project management model. As at March 31, 2012, the carrying amount of capitalized development costs was $13,343 (2011 - $16,275). This amount primarily includes costs for the internal development of software tools for the customer billing and analysis in the various operating jurisdictions. These software tools are developed by the internal information technology and operations department, for the specific regional market requirements.

Useful life of key property, plant and equipment and intangible assets
The amortization method and useful lives reflect the pattern in which management expects the asset’s future economic benefits to be consumed by Just Energy. Refer to Note 3(f) and Note 3(h) for the estimated useful lives.

Provisions for litigation
The State of California has filed a number of complaints to the Federal Energy Regulatory Commission (“FERC”) against many suppliers of electricity, including Commerce, a subsidiary of Just Energy, with respect to events stemming from the 2001 energy crises in California.  Pursuant to the complaints, the State of California is challenging the FERC’s

 
 
20.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
enforcement of its market-based rate system. At this time, the likelihood of damages or recoveries and the ultimate amounts, if any, with respect to this litigation are not certain; however, an estimated amount has been recorded in these consolidated financial statements as at March 31, 2012. In the general course of operations, Just Energy has made additional provisions for litigation matters that have arisen. Refer to Note 17 for further details.

Trade receivables
Just Energy reviews its individually significant receivables at each reporting date to assess whether an impairment loss should be recorded in the consolidated income statement. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, Just Energy makes judgments about the borrower’s financial situation and the net realizable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.

Fair value of financial instruments
Where the fair value of financial assets and financial liabilities recorded in the consolidated statements of financial position cannot be derived from active markets, they are determined using valuation techniques including discounted cash flow models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgment includes consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer to Note 11 for further details about the assumptions as well as sensitivity analysis.

Acquisition accounting
For acquisition accounting purposes, all identifiable assets, liabilities and contingent liabilities acquired in a business combination are recognized at fair value on the date of acquisition. Estimates are used to calculate the fair value of these assets and liabilities as at the date of acquisition.

 
(ii)
ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED

IFRS 9, Financial Instruments
As of April 1, 2015, Just Energy will be required to adopt IFRS 9, Financial Instruments, which is the result of the first phase of the IASB’s project to replace IAS 39, Financial Instruments: Recognition and Measurement.  The new standard replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 10, Consolidated Financial Statements
As of April 1, 2013, IFRS 10, Consolidated Financial Statements will replace portions of IAS 27, Consolidated and Separate Financial Statements and interpretation SIC-12, Consolidation-Special Purpose Entities. The new standard requires consolidated financial statements to include all controlled entities under a single control model. The Company will be considered to control an investee when it is exposed, or has rights to variable returns from its involvement with the investee and has the current ability to affect those returns through its power over the investee.

As required by this standard, control is reassessed as facts and circumstances change. All facts and circumstances must be considered to make a judgment about whether the Company controls another entity; there are no clear lines. Additional guidance is given on how to evaluate whether certain relationships give the Company the current ability to affect its returns, including how to consider options and convertible instruments, holding less than a majority of voting rights, how to consider protective rights, and principal-agency relationships (including removal rights), all of which may differ from current practice. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

 
 
21.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 
IFRS 11, Joint Arrangements
On April 1, 2013, Just Energy will be required to adopt IFRS 11, Joint Arrangements, which applies to accounting for interests in joint arrangements where there is joint control. The standard requires the joint arrangements to be classified as either joint operations or joint ventures. The structure of the joint arrangement would no longer be the most significant factor when classifying the joint arrangement as either a joint operation or a joint venture. In addition, the option to account for joint ventures (previously called jointly controlled entities) using proportionate consolidation will be removed and replaced by equity accounting.

The adoption of this new section will have no impact on the Company as joint ventures are currently accounted for using the equity method.

IFRS 12, Disclosure of Interests in Other Entities
On April 1, 2013, Just Energy will be required to adopt IFRS 12, Disclosure of Interests in Other Entities, which includes disclosure requirements about subsidiaries, joint ventures, and associates, as well as unconsolidated structured entities and replaces existing disclosure requirements. Due to this new section, the Company will be required to disclose the following: judgments and assumptions made when deciding how to classify involvement with another entity, interests that non-controlling interests have in consolidated entities, and nature of the risks associated with interests in other entities. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IFRS 13, Fair Value Measurement
On April 1, 2013, Just Energy will be required to adopt IFRS 13, Fair Value Measurement. The new standard will establish a single source of guidance for fair value measurements, when fair value is required or permitted by IFRS. Upon adoption, the Company will provide a single framework for measuring fair value while requiring enhanced disclosures when fair value is applied. In addition, fair value will be defined as the ‘exit price’ and concepts of ‘highest and best use’ and ‘valuation premise’ would be relevant only for non-financial assets and liabilities. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IAS 27, Separate Financial Statements
On April 1, 2013 Just Energy will be required to adopt IAS 27, Separate Financial Statements. As a result of the issue of the new consolidation suite of standards, IAS 27 has been reissued to reflect the change as the consolidation guidance has recently been included in IFRS 10.

In addition, IAS 27 will now only prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when the Company prepares separate financial statements. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

IAS 28, Investments in Associates and Joint Ventures
On April 1, 2013, Just Energy will be required to adopt IAS 28, Investments in Associates and Joint Ventures. As a consequence of the issue of IFRS 10, IFRS 11, IFRS 12 and IAS 28 have been amended and will further provide the accounting guidance for investments in associates and will set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

This standard will be applied by the Company when there is joint control or significant influence over an investee. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not include control or joint control of those policy decisions. When determined that the Company has an interest in a joint venture, the Company will recognize an investment and will account for it using the equity method in accordance with IAS 28. The Company has not yet assessed the impact of the standard or determined whether it will adopt the

 
 
22.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 

standard early.

IAS 1, Presentation of Financial Statements
IAS 1, Presentation of Financial Statements, was amended in 2011 to expand on the disclosures required of items within Other Comprehensive Income.  The revised standard requires that an entity distinguishes between those items that are recycled to profit and loss versus those items that are not recycled. Retrospective application is required and the standard is effective for annual periods beginning on or after July 1, 2012. The Company does not expect the amendments to IAS 1 to have a significant impact on its consolidated financial statements.
 
 

 
 
23.

 
 
JUST ENERGY GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2012
(thousands of Canadian dollars, except where indicated and per share/unit amounts)
 

5.
PROPERTY, PLANT AND EQUIPMENT

As at March 31, 2012
 
 
Computer
   
Buildings and
   
 
   
Furniture
   
 
   
Office
   
Water
   
Furnaces and air
   
Leasehold
   
Solar
   
 
 
 
 
equipment
   
ethanol plant
   
Land
   
and fixtures
   
Vehicles
   
equipment
   
heaters
   
conditioners
   
improvements
   
equipment
   
Total
 
Cost:
 
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Operating balance -
 
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
April 1, 2011
  $ 7,750     $ 158,482     $ 299     $ 6,090     $ 215     $ 17,976     $ 78,223     $ 3,813     $ 8,567     $ 283     $ 281,698  
Additions/(Disposals)
    1,347       -       -       441       (32 )     1,668       28,048       7,671       62       35,624       74,829  
Acquisition of subsidiary
    348       -       -       8       31       371       -       -       -       -       758  
Exchange differences
    8       18       -       33       (2 )     13       -       -       13       (118 )     (35 )
March 31, 2012
    9,453       158,500       299       6,572       212       20,028       106,271       11,484       8,642       35,789       357,250  
Accumulated Amortization:
                                                                                       
Opening balance -
                                                                                       
April 1, 2011
    (4,958 )     (17,426 )     -       (3,561 )     (88 )     (9,520 )     (6,887 )     (179 )     (5,077 )     -       (47,696 )
Amortization charge to cost of sales
    -       (5,871 )     -       -       -       -       (5,961 )     (808 )     -       -       (12,640 )
Amortization charge for the year
    (1,205 )     (1,201 )     -       (569 )     (41 )     (1,905 )     -       -       (913 )     (13 )     (5,847 )
Disposals
    12       -       -       -       21       (1 )     -       -       -       -       32  
Exchange differences
    (9 )     -       -       (11 )     -       (9 )     -       -       (9 )     -       (38 )
Ending balance,
                                                                                       
March 31, 2012
    (6,160 )     (24,498 )     -       (4,141 )     (108 )     (11,435 )     (12,848 )     (987 )     (5,999 )     (13 )     (66,189 )
Net book value,
                                                                                       
March 31, 2012
  $ 3,293     $ 134,002     $ 299     $ 2,431     $ 104     $ 8,593     $ 93,423     $ 10,497     $ 2,643     $ 35,776     $ 291,061  

As at March 31, 2011
 
 
Computer
   
Buildings and
   
 
   
Furniture
   
 
   
Office
   
Water
   
Furnaces and air
   
Leasehold
   
Solar
   
 
 
 
 
equipment
   
ethanol plant
   
Land
   
and fixtures
   
Vehicles
   
equipment
   
heaters
   
conditioners
   
improvements
   
equipment
   
Total
 
Cost:
 
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Operating balance -
 
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
April 1, 2010
  $ 6,417     $ 159,897     $ 299     $ 5,581     $ 197     $ 16,724     $ 51,059     $ 317     $ 8,409     $ -     $ 248,900  
Additions/(Disposals)
    1,137       (2,055 )     -       468       18       684       27,164       3,496       148       297       31,357  
Acquisition of subsidiary
    233       670       -       94       -       621       -       -       30       -       1,648  
Exchange differences
    (37 )     (30 )     -       (53 )     -       (53 )     -       -       (20 )     (14 )     (207 )
Ending balance,
                                                                                       
March 31, 2011
    7,750       158,482       299       6,090       215       17,976       78,223       3,813       8,567       283