Accounting and Finance Policy

TITLE: NO.: PAGE NO.

Disposal of Impaired Inventory 1305 1
Approved By: “James Harbilas” Signature:”See Policy Approval Document”
EFFECTIVE DATE: June 25, 2009 REVISED DATE: March 3, 2011

Purpose and Scope

The purpose of this policy is to ensure the regular removal of impaired inventory from the
Fund’s financial statements is appropriately documented, approved by management,
and accounted for and disclosed in accordance with IFRS.

For further guidance on the determination of inventory impairment, the reader is directed
to: 1301 Inventory Impairment and Valuation.

Definitions

Net Realizable Value – Net realizable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the estimated costs
necessary to make the sale.

Application

This policy applies to all Business Units that record inventory on the balance sheet.

Controllers are accountable for compliance with this policy. Business Units are
responsible for working with the Controllers to ensure this policy is consistently applied.
Any exception to this policy requires prior approval in writing from the Corporate
Controller.

Policy

Business Units shall review inventory for indicators of impairment as per 1301 Inventory
Impairment and Valuation and dispose of impaired inventory at their discretion.

Impaired inventory shall be disposed of in a manner that obtains the best economic
benefit to Enerflex, with due consideration given to the company’s social and
environmental responsibilities. Methods of disposal include:

• Return to suppliers;
• Sale to customers at a reduced rate;
• Sale to another Enerflex Business Unit;
• Sale as scrap; and
• Disposal to a recycler or to scrap.

All proceeds from the disposal of inventory must be payable to the Business Unit and
deposited to a Business Unit’s bank account. The disposal is recorded against the
inventory impairment account at carrying cost.
 Accounting and Finance Policy
TITLE: NO.: PAGE NO.
Disposal of Impaired Inventory 1305 2
Approved By: “James Harbilas” Signature:”See Policy Approval Document”
EFFECTIVE DATE: June 25, 2009 REVISED DATE: March 3, 2011

Accounting entries relating to the reduction of inventory, adjustment of the inventory

impairment account and the disposal proceeds shall be reviewed and approved in
writing by the Business Unit Controller/Accounting Manager and retained, with
supporting documentation, as evidence of policy compliance.

Business Units shall establish written procedures for the identification of impaired
inventory, reversals of inventory impairments, and the management authorization
required to approve the write-off and the methods of disposal.

Information to be maintained:

Business units shall maintain the following documentation, to be made available to

Corporate Financial Reporting, for the purposes of consolidated financial statement
disclosures and as evidence of policy compliance:

• Accounting entries and supporting documentation relating to the reduction of

inventory, adjustment of the inventory impairment account and the disposal
proceeds.
• Documentation of the procedures for the identification of impaired inventory and
the management authorization required to approve the write-off and the methods
of disposal; and
• The amount of any reversal of write-down of inventories recognized as a
reduction in expense in the period and the related circumstances.