---

Exhibit 99.2

| | CONSOLIDATED FINANCIAL
STATEMENTS
| | ---------------------------------

MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements have been
prepared by management and approved by the Board of Directors of the Company.
The consolidated financial statements were prepared in accordance with
International Financial Reporting Standards and, where appropriate, reflect
managements best estimates and judgments. Where alternative accounting methods
exist, management has chosen those methods deemed most appropriate in the
circumstances. Management is responsible for the accuracy, integrity and
objectivity of the consolidated financial statements within reasonable limits of
materiality, and for maintaining a system of internal controls over financial
reporting as described in Managements annual report on internal control over
financial reporting of the 2012 Annual Managements Discussion and Analysis.
Management is also responsible for the preparation and presentation of other
financial information included in the 2012 Annual Report and its consistency
with the consolidated financial statements.

The Audit and Finance Committee, which is appointed annually by
the Board of Directors and comprised exclusively of independent directors, meets
with management as well as with the independent auditors and internal auditors
to satisfy itself that management is properly discharging its financial
reporting responsibilities and to review the consolidated financial statements
and the independent auditors report. The Audit and Finance Committee reports
its findings to the Board of Directors for consideration in approving the
consolidated financial statements for presentation to the shareholders. The
Audit and Finance Committee considers, for review by the Board of Directors and
approval by the shareholders, the engagement or reappointment of the independent
auditors.

The consolidated financial statements have been independently
audited by KPMG LLP, on behalf of the shareholders, in accordance with Canadian
generally accepted auditing standards and the standards of the Public Company
Accounting Oversight Board (United States). Their report outlines the nature of
their audit and expresses their opinion on the consolidated financial statements
of the Company. In addition, our auditors have issued an attestation report on
the Companys internal controls over financial reporting as at September 30,
2012. KPMG LLP has direct access to the Audit and Finance Committee of the Board
of Directors.



|(Signed: Glenn J. Chamandy)           | (Signed: Laurence G. Sellyn)              
|------------------------------------- | ------------------------------------------
|                                      |                                           
|Glenn J. Chamandy                     | Laurence G. Sellyn                        
|President and Chief Executive Officer | Executive Vice-President,                 
|                                      | Chief Financial and Administrative Officer
|                                      |                                           
|December 7, 2012                      |                                           

GILDAN 2012 REPORT TO SHAREHOLDERS P.45

---



| | CONSOLIDATED FINANCIAL
STATEMENTS
| | ---------------------------------

INDEPENDENT AUDITORS REPORT OF REGISTERED PUBLIC ACCOUNTING
FIRM

To the Shareholders of Gildan Activewear Inc.

We have audited the accompanying consolidated financial
statements of Gildan Activewear Inc. (the "Company"), which comprise the
consolidated statements of financial position as at September 30, 2012, October
2, 2011 and October 4, 2010, the consolidated statements of earnings and
comprehensive income, changes in equity and cash flows for the years ended
September 30, 2012 and October 2, 2011, and notes, comprising a summary of
significant accounting policies and other explanatory information.

Managements Responsibility for the Consolidated Financial
StatementsManagement 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 ResponsibilityOur 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 and the standards of the Public Company Accounting Oversight
Board (United States). 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 our 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, we
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. 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.

OpinionIn our opinion, the consolidated financial
statements present fairly, in all material respects, the consolidated financial
position of Gildan Activewear Inc. as at September 30, 2012, October 2, 2011 and
October 4, 2010, and its consolidated financial performance and its consolidated
cash flows for the years ended September 30, 2012 and October 2, 2011 in
accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.

We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Company's
internal control over financial reporting as at September 30, 2012, based on
criteria established in Internal Control - Integrated Frameworkissued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and
our report dated November 28, 2012 expressed an unqualified opinion on the
effectiveness of the Company's internal control over financial
reporting.



|*CPA auditor, CA, public accountancy permit No.
    A120841 | KPMG LLP is a Canadian limited liability
      partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
      International Cooperative ("KPMG International"), a Swiss entity. KPMG Canada provides services to
      KPMG LLP.
|----------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

GILDAN 2012 REPORT TO SHAREHOLDERS P.46

---

CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Shareholders and Board of Directors of Gildan Activewear
Inc.

We have audited Gildan Activewear Inc.'s internal control over
financial reporting as at September 30, 2012, based on the criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).Gildan Activewear Inc.s
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting as presented in the section entitled
Managements Annual Report on Internal Control over Financial Reporting
included in Managements Discussion and Analysis. Our responsibility is to
express an opinion on the Company's internal control over financial reporting
based on our audit.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing
such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.

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

In our opinion, Gildan Activewear Inc. maintained, in all
material respects, effective internal control over financial reporting as of
September 30, 2012, based on criteria established in Internal Control -
Integrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).

Management has excluded from its assessment of the
effectiveness of internal control over financial reporting as of September 30,
2012 the internal control over financial reporting of Anvil Holdings, Inc.
(Anvil) which Gildan Activewear Inc. acquired on May 9, 2012. The total assets
and total net sales of Anvil represent approximately 6.5% of the consolidated
total assets and approximately 4.4% of the consolidated net sales included in
the consolidated financial statements of Gildan Activewear Inc. as at and for
the year ended September 30, 2012. Our audit of internal control over financial
reporting of Gildan Activewear Inc. also excluded an evaluation of the internal
control over financial reporting of Anvil.

We also have audited in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statements of financial
position of Gildan Activewear Inc. as at September 30, 2012, October 2, 2011 and
October 4, 2010 and the related consolidated statements of earnings and
comprehensive income, changes in equity and cash flows for the years ended
September 30, 2012 and October 2, 2011, and our report dated November 28, 2012
expressed an unqualified (unmodified) opinion on those consolidated financial
statements.



|*CPA auditor, CA, public accountancy permit No.
    A120841 | KPMG LLP is a Canadian limited liability
      partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
      International Cooperative ("KPMG International"), a Swiss entity. KPMG Canada provides services to
      KPMG LLP.
|----------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

GILDAN 2012 REPORT TO SHAREHOLDERS P.47

---

| | CONSOLIDATED FINANCIAL
STATEMENTS
| | ---------------------------------

|GILDAN ACTIVEWEAR INC.                       
|---------------------------------------------
|CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|(in thousands of U.S. dollars)               

|                                                                   |   | September 30, |   |   | October 2, |   |   | October 4, |  
|------------------------------------------------------------------ | - | ------------- | - | - | ---------- | - | - | ---------- | -
|                                                                   |   | 2012          |   |   | 2011       |   |   | 2010       |  
|                                                                   |   |               |   |   | (note 29   | ) |   | (note 29   | )
|Current assets:                                                    |   |               |   |   |            |   |   |            |  
|Cash and cash equivalents (note 6)                                 | $ | 70,410        |   | $ | 82,025     |   | $ | 250,843    |  
|Trade accounts
      receivable (note 7)                           |   | 260,595       |   |   | 191,594    |   |   | 145,684    |  
|Income taxes receivable                                            |   | 353           |   |   | 515        |   |   | -          |  
|Inventories (note 8)                                               |   | 553,068       |   |   | 568,311    |   |   | 329,518    |  
|Prepaid expenses and deposits                                      |   | 14,451        |   |   | 10,827     |   |   | 8,848      |  
|Assets held for sale
      (note 19)                               |   | 8,029         |   |   | 13,142     |   |   | 3,246      |  
|Other current assets                                               |   | 8,694         |   |   | 9,228      |   |   | 8,670      |  
|Total current assets                                               |   | 915,600       |   |   | 875,642    |   |   | 746,809    |  
|Non-current assets:                                                |   |               |   |   |            |   |   |            |  
|Property, plant and
      equipment (note 9)                       |   | 552,437       |   |   | 550,324    |   |   | 483,013    |  
|Investment in joint venture                                        |   | 12,126        |   |   | 13,038     |   |   | 12,533     |  
|Intangible assets (note
      10)                                  |   | 259,981       |   |   | 261,653    |   |   | 66,811     |  
|Goodwill (note 10)                                                 |   | 141,933       |   |   | 141,933    |   |   | 10,197     |  
|Deferred income taxes
      (note 20)                              |   | 3,371         |   |   | -          |   |   | -          |  
|Other non-current assets                                           |   | 10,989        |   |   | 15,909     |   |   | 15,140     |  
|Total non-current assets                                           |   | 980,837       |   |   | 982,857    |   |   | 587,694    |  
|Total assets                                                       | $ | 1,896,437     |   | $ | 1,858,499  |   | $ | 1,334,503  |  
|                                                                   |   |               |   |   |            |   |   |            |  
|Current liabilities:                                               |   |               |   |   |            |   |   |            |  
|Accounts payable and
      accrued liabilities                     | $ | 256,442       |   | $ | 297,960    |   | $ | 179,795    |  
|Income taxes payable                                               |   | -             |   |   | -          |   |   | 5,024      |  
|Current portion of
      long-term debt                            |   | -             |   |   | -          |   |   | 16,879     |  
|Total current liabilities                                          |   | 256,442       |   |   | 297,960    |   |   | 201,698    |  
|Non-current liabilities:                                           |   |               |   |   |            |   |   |            |  
|Long-term debt (note 12)                                           |   | 181,000       |   |   | 209,000    |   |   | -          |  
|Deferred income taxes
      (note 20)                              |   | -             |   |   | 11,977     |   |   | 4,771      |  
|Employee benefit obligations (note 13)                             |   | 19,612        |   |   | 20,246     |   |   | 12,179     |  
|Provisions (note 14)                                               |   | 13,042        |   |   | 8,226      |   |   | 7,951      |  
|Total non-current liabilities                                      |   | 213,654       |   |   | 249,449    |   |   | 24,901     |  
|Total liabilities                                                  |   | 470,096       |   |   | 547,409    |   |   | 226,599    |  
|                                                                   |   |               |   |   |            |   |   |            |  
|Commitments, guarantees and contingent
      liabilities (note 25) |   |               |   |   |            |   |   |            |  
|                                                                   |   |               |   |   |            |   |   |            |  
|Equity:                                                            |   |               |   |   |            |   |   |            |  
|Share capital                                                      |   | 101,113       |   |   | 100,436    |   |   | 97,036     |  
|Contributed surplus                                                |   | 25,579        |   |   | 16,526     |   |   | 10,091     |  
|Retained earnings                                                  |   | 1,306,724     |   |   | 1,194,804  |   |   | 1,002,487  |  
|Accumulated other
      comprehensive income                       |   | (7,075        | ) |   | (676       | ) |   | (1,710     | )
|Total equity attributable to shareholders of the Company           |   | 1,426,341     |   |   | 1,311,090  |   |   | 1,107,904  |  
|Total liabilities and equity                                       | $ | 1,896,437     |   | $ | 1,858,499  |   | $ | 1,334,503  |  

See accompanying notes to consolidated financial
statements.

On behalf of the Board of Directors:

|(Signed: Glenn J.
      Chamandy) | (Signed: Russell Goodman)
|--------------------------------- | -------------------------
|Director                          | Director                 
|Glenn J. Chamandy                 | Russell Goodman          

GILDAN 2012 REPORT TO SHAREHOLDERS P.48

---

| | CONSOLIDATED FINANCIAL
STATEMENTS
| | ---------------------------------

|GILDAN ACTIVEWEAR INC.                                            
|------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE
      INCOME
|Years ended September 30, 2012 and October 2, 2011                
|(in thousands of U.S. dollars, except per share
      data)       

|                                                                                  |   | 2012      |   |   | 2011      |  
|--------------------------------------------------------------------------------- | - | --------- | - | - | --------- | -
|                                                                                  |   |           |   |   | (note 29  | )
|Net sales                                                                         | $ | 1,948,253 |   | $ | 1,725,712 |  
|Cost of sales                                                                     |   | 1,552,128 |   |   | 1,288,106 |  
|Gross profit                                                                      |   | 396,125   |   |   | 437,606   |  
|Selling, general and administrative expenses (note 18)                            |   | 226,035   |   |   | 198,858   |  
|Restructuring and acquisition-related costs
      (note 19)                       |   | 14,962    |   |   | 18,177    |  
|Operating income                                                                  |   | 155,128   |   |   | 220,571   |  
|Financial expenses, net (note 16(c))                                              |   | 11,598    |   |   | 6,142     |  
|Equity earnings in investment in joint venture                                    |   | (597      | ) |   | (504      | )
|Earnings before income taxes                                                      |   | 144,127   |   |   | 214,933   |  
|Income tax recovery (note 20)                                                     |   | (4,337    | ) |   | (19,223   | )
|Net earnings                                                                      |   | 148,464   |   |   | 234,156   |  
|Other comprehensive (loss) income, net of related income
      taxes (note 16(d)) |   |           |   |   |           |  
|Cash flow hedges                                                                  |   | (6,399    | ) |   | 1,034     |  
|Actuarial gain (loss) on employee
      benefit obligations                       |   | 323       |   |   | (3,952    | )
|                                                                                  |   | (6,076    | ) |   | (2,918    | )
|Comprehensive income                                                              | $ | 142,388   |   | $ | 231,238   |  
|                                                                                  |   |           |   |   |           |  
|                                                                                  |   |           |   |   |           |  
|Earnings per share:                                                               |   |           |   |   |           |  
|Basic (note 21)                                                                   | $ | 1.22      |   | $ | 1.93      |  
|Diluted (note 21)                                                                 | $ | 1.22      |   | $ | 1.91      |  

See accompanying notes to consolidated financial statements.

GILDAN 2012 REPORT TO SHAREHOLDERS P.49

---

| | CONSOLIDATED FINANCIAL
STATEMENTS
| | ---------------------------------

|GILDAN ACTIVEWEAR INC.                            
|--------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY      
|Years ended September 30, 2012 and October 2, 2011
|(in thousands or thousands of U.S. dollars)       

|                                                                                            |  |               |   |   |             |   |   |               |   |   | Accumulated   |   |   |           |   |   |           |  
|------------------------------------------------------------------------------------------- |  | ------------- | - | - | ----------- | - | - | ------------- | - | - | ------------- | - | - | --------- | - | - | --------- | -
|                                                                                            |  |               |   |   |             |   |   |               |   |   | other         |   |   |           |   |   |           |  
|                                                                                            |  | Share capital |   |   | Contributed |   |   | comprehensive |   |   | Retained      |   |   | Total     |  
|                                                                                            |  | Number        |   |   | Amount      |   |   | surplus       |   |   | income (loss) |   |   | earnings  |   |   | equity    |  
|Balance, October 4, 2010 (note 29)                                                          |  | 121,352       |   | $ | 97,036      |   | $ | 10,091        |   | $ | (1,710        | ) | $ | 1,002,487 |   | $ | 1,107,904 |  
|                                                                                            |  |               |   |   |             |   |   |               |   |   |               |   |   |           |   |   |           |  
|Share-based compensation related to stock
      options and Treasury restricted share units |  | -             |   |   | -           |   |   | 4,899         |   |   | -             |   |   | -         |   |   | 4,899     |  
|Shares issued under employee share purchase plan                                            |  | 23            |   |   | 642         |   |   | -             |   |   | -             |   |   | -         |   |   | 642       |  
|Shares issued pursuant to exercise of stock
      options                                   |  | 379           |   |   | 3,594       |   |   | (219          | ) |   | -             |   |   | -         |   |   | 3,375     |  
|Shares issued or distributed pursuant to vesting of
      restricted share units            |  | 26            |   |   | 588         |   |   | (588          | ) |   | -             |   |   | -         |   |   | -         |  
|Shares issued for costs incurred in a
      business acquisition                            |  | 30            |   |   | 1,065       |   |   | -             |   |   | -             |   |   | -         |   |   | 1,065     |  
|Shares repurchased and cancelled (note 15)                                                  |  | (400          | ) |   | (337        | ) |   | -             |   |   | -             |   |   | (10,200   | ) |   | (10,537   | )
|Share repurchases (note 15)                                                                 |  | (79           | ) |   | (2,152      | ) |   | 2,152         |   |   | -             |   |   | -         |   |   | -         |  
|Dividends declared                                                                          |  | -             |   |   | -           |   |   | 191           |   |   | -             |   |   | (27,687   | ) |   | (27,496   | )
|Transactions with shareholders of the
      Company recognized directly in equity           |  | (21           | ) |   | 3,400       |   |   | 6,435         |   |   | -             |   |   | (37,887   | ) |   | (28,052   | )
|                                                                                            |  |               |   |   |             |   |   |               |   |   |               |   |   |           |   |   |           |  
|Cash flow hedges                                                                            |  | -             |   |   | -           |   |   | -             |   |   | 1,034         |   |   | -         |   |   | 1,034     |  
|Actuarial loss on employee benefit obligations                                              |  | -             |   |   | -           |   |   | -             |   |   | -             |   |   | (3,952    | ) |   | (3,952    | )
|Net earnings                                                                                |  | -             |   |   | -           |   |   | -             |   |   | -             |   |   | 234,156   |   |   | 234,156   |  
|Comprehensive income                                                                        |  | -             |   |   | -           |   |   | -             |   |   | 1,034         |   |   | 230,204   |   |   | 231,238   |  
|                                                                                            |  |               |   |   |             |   |   |               |   |   |               |   |   |           |   |   |           |  
|Balance, October 2, 2011 (note 29)                                                          |  | 121,331       |   | $ | 100,436     |   | $ | 16,526        |   | $ | (676          | ) | $ | 1,194,804 |   | $ | 1,311,090 |  
|                                                                                            |  |               |   |   |             |   |   |               |   |   |               |   |   |           |   |   |           |  
|Share-based compensation related to stock options and
      Treasury restricted share units |  | -             |   |   | -           |   |   | 4,606         |   |   | -             |   |   | -         |   |   | 4,606     |  
|Shares issued under employee share purchase
      plan                                      |  | 28            |   |   | 728         |   |   | -             |   |   | -             |   |   | -         |   |   | 728       |  
|Shares issued pursuant to exercise of stock options                                         |  | 56            |   |   | 982         |   |   | (209          | ) |   | -             |   |   | -         |   |   | 773       |  
|Shares issued or distributed pursuant to vesting of restricted share units                  |  | 181           |   |   | 4,957       |   |   | (4,957        | ) |   | -             |   |   | -         |   |   | -         |  
|Share-based consideration in connection
      with a business acquisition (note 5)          |  | -             |   |   | -           |   |   | 3,432         |   |   | -             |   |   | -         |   |   | 3,432     |  
|Share repurchases (note 15)                                                                 |  | (210          | ) |   | (5,990      | ) |   | 5,929         |   |   | -             |   |   | -         |   |   | (61       | )
|Dividends declared                                                                          |  | -             |   |   | -           |   |   | 252           |   |   | -             |   |   | (36,867   | ) |   | (36,615   | )
|Transactions with shareholders of the Company recognized
      directly in equity           |  | 55            |   |   | 677         |   |   | 9,053         |   |   | -             |   |   | (36,867   | ) |   | (27,137   | )
|                                                                                            |  |               |   |   |             |   |   |               |   |   |               |   |   |           |   |   |           |  
|Cash flow hedges                                                                            |  | -             |   |   | -           |   |   | -             |   |   | (6,399        | ) |   | -         |   |   | (6,399    | )
|Actuarial gain on employee benefit
      obligations                                        |  | -             |   |   | -           |   |   | -             |   |   | -             |   |   | 323       |   |   | 323       |  
|Net earnings                                                                                |  | -             |   |   | -           |   |   | -             |   |   | -             |   |   | 148,464   |   |   | 148,464   |  
|Comprehensive income (loss)                                                                 |  | -             |   |   | -           |   |   | -             |   |   | (6,399        | ) |   | 148,787   |   |   | 142,388   |  
|                                                                                            |  |               |   |   |             |   |   |               |   |   |               |   |   |           |   |   |           |  
|Balance, September 30, 2012                                                                 |  | 121,386       |   | $ | 101,113     |   | $ | 25,579        |   | $ | (7,075        | ) | $ | 1,306,724 |   | $ | 1,426,341 |  

See accompanying notes to consolidated financial
statements.

GILDAN 2012 REPORT TO SHAREHOLDERS P.50

---

| | CONSOLIDATED FINANCIAL
STATEMENTS
| | ---------------------------------

|GILDAN ACTIVEWEAR INC.                            
|--------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS             
|Years ended September 30, 2012 and October 2, 2011
|(in thousands of U.S. dollars)                    

|                                                                                                       |   | 2012     |   |   | 2011     |  
|------------------------------------------------------------------------------------------------------ | - | -------- | - | - | -------- | -
|                                                                                                       |   |          |   |   | (note 29 | )
|Cash flows from (used in) operating
      activities:                                                  |   |          |   |   |          |  
|Net earnings                                                                                           | $ | 148,464  |   | $ | 234,156  |  
|Adjustments to
      reconcile net earnings to cash flows from operating activities (note
      23(a)) |   | 94,221   |   |   | 47,917   |  
|                                                                                                       |   | 242,685  |   |   | 282,073  |  
|Changes in non-cash
      working capital balances:                                                    |   |          |   |   |          |  
|Trade accounts receivable                                                                              |   | (36,660  | ) |   | (18,861  | )
|Income taxes
      receivable                                                                          |   | 2,440    |   |   | (5,341   | )
|Inventories                                                                                            |   | 77,111   |   |   | (177,821 | )
|Prepaid expenses
      and deposits                                                                    |   | (1,828   | ) |   | (569     | )
|Other current assets                                                                                   |   | (2,368   | ) |   | 1,553    |  
|Accounts payable
      and accrued liabilities                                                         |   | (61,798  | ) |   | 82,605   |  
|Cash flows from operating activities                                                                   |   | 219,582  |   |   | 163,639  |  
|                                                                                                       |   |          |   |   |          |  
|Cash flows from (used in) financing activities:                                                        |   |          |   |   |          |  
|(Decrease)
    increase in amounts drawn under revolving long-term credit facility                     |   | (28,000  | ) |   | 209,000  |  
|Dividends paid                                                                                         |   | (36,615  | ) |   | (27,496  | )
|Repayment of other long-term debt                                                                      |   | -        |   |   | (17,233  | )
|Proceeds from the
      issuance of shares                                                             |   | 1,501    |   |   | 4,017    |  
|Repurchase and cancellation of shares
      (note 15(d))                                               |   | -        |   |   | (10,537  | )
|Repurchase of shares
      (note 15(e))                                                                |   | (5,990   | ) |   | (2,152   | )
|Cash flows from (used in) financing activities                                                         |   | (69,104  | ) |   | 155,599  |  
|                                                                                                       |   |          |   |   |          |  
|Cash flows from (used in) investing activities:                                                        |   |          |   |   |          |  
|Purchase of property,
      plant and equipment                                                        |   | (71,316  | ) |   | (155,178 | )
|Purchase of intangible assets                                                                          |   | (5,439   | ) |   | (4,776   | )
|Business acquisitions
      (note 5)                                                                   |   | (87,373  | ) |   | (342,368 | )
|Proceeds on disposal of corporate asset
      (note 23(a))                                             |   | -        |   |   | 13,226   |  
|Proceeds on disposal of
      assets held for sale                                                     |   | 600      |   |   | 1,125    |  
|Dividend received from investment in
      joint venture                                               |   | 1,509    |   |   | -        |  
|Cash flows used in investing activities                                                                |   | (162,019 | ) |   | (487,971 | )
|                                                                                                       |   |          |   |   |          |  
|Effect of exchange rate changes on cash and
      cash equivalents denominated in foreign currencies   |   | (74      | ) |   | (85      | )
|Net decrease in cash and cash equivalents during the year                                              |   | (11,615  | ) |   | (168,818 | )
|Cash and cash equivalents, beginning of
      year                                                     |   | 82,025   |   |   | 250,843  |  
|Cash and cash equivalents, end of year                                                                 | $ | 70,410   |   | $ | 82,025   |  
|                                                                                                       |   |          |   |   |          |  
|Cash paid during the period (included in cash flows from
      operating activities):                  |   |          |   |   |          |  
|Interest                                                                                               | $ | 8,101    |   | $ | 3,481    |  
|Income taxes                                                                                           |   | 4,331    |   |   | 8,620    |  
|                                                                                                       |   |          |   |   |          |  
|Supplemental disclosure of cash flow
      information (note 23)                                       |   |          |   |   |          |  
|See accompanying notes to consolidated
      financial statements.                                     |   |          |   |   |          |  

GILDAN 2012 REPORT TO SHAREHOLDERS P.51

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended September 30, 2012 and October 2,
2011(Tabular amounts in thousands or thousands of U.S. dollars except
per share data, unless otherwise indicated)

1. REPORTING ENTITY:

Gildan Activewear Inc. (the "Company") is domiciled in Canada
and is incorporated under the Canada Business Corporations Act.Its
principal business activity is the manufacture and sale of activewear, socks and
underwear. The Companys fiscal year ends on the first Sunday following
September 28.

The address of the Companys registered office is 600 de
Maisonneuve Boulevard West, Suite 3300, Montreal, Quebec. The consolidated
financial statements include the accounts of the Company and its subsidiaries
and its interest in a joint venture. The Company is a publicly listed entity and
its shares are traded on the Toronto Stock Exchange and New York Stock Exchange
under the symbol GIL.

2. BASIS OF PREPARATION:

|(a) | Statement of compliance:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | The Companys consolidated financial statements have been
      prepared in accordance with International Financial Reporting Standards
      (IFRS) as issued by the International Accounting Standards Board
      (IASB). These are the Companys first annual consolidated financial
      statements in accordance with IFRS and IFRS 1, First-time Adoption of
      International Financial Reporting Standards has been applied. An
      explanation of the impact of the changeover from previous Canadian GAAP to
      IFRS of our reported financial position, financial performance and cash
      flows is provided in note 29, First Time Adoption of IFRS.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | These consolidated financial statements for fiscal year
      ended September 30, 2012 were authorized for issuance by the Board of
      Directors of the Company on November 28, 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(b) | Basis of measurement:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The consolidated financial statements have been prepared
      on the historical cost basis except for the following items in the
      consolidated statements of financial position:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

The functional and presentation
currency of the Company is the U.S. dollar.

GILDAN 2012 REPORT TO SHAREHOLDERS P.52

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

3. SIGNIFICANT ACCOUNTING POLICIES:

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 statement of financial position as at October
4, 2010 for the purposes of the transition to IFRS, unless otherwise
indicated.

|(a) | Basis of consolidation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | Foreign currency translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Monetary assets and liabilities of the Companys Canadian
      and foreign operations denominated in currencies other than the U.S.
      dollar are translated using exchange rates in effect at the reporting
      date. Non-monetary assets and liabilities denominated in currencies other
      than U.S. dollars are translated at the rates prevailing at the respective
      transaction dates. Income and expenses denominated in currencies other
      than U.S. dollars are translated at average rates prevailing during the
      year. Gains or losses on foreign exchange are recorded in net earnings,
      and presented in the statement of earnings and comprehensive income within
      financial expenses.

GILDAN 2012 REPORT TO SHAREHOLDERS P.53

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES
      (continued):
|-----------------------------------------------------

|(c) | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | The Company considers all liquid investments with
      maturities of three months or less when acquired to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(d) | Trade accounts receivable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Trade accounts receivable consist of amounts due from our
      normal business activities. An allowance for doubtful accounts is
      maintained to reflect expected credit losses. Bad debts are provided for
      based on collection history and specific risks identified on a
      customer-by-customer basis. Uncollected accounts are written off through
      the allowance for doubtful accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(e) | Inventories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Inventories are stated at the lower of first-in first-out
      cost and net realizable value. Inventory costs include the purchase price
      and other costs directly related to the acquisition of raw materials and
      spare parts held for use in the manufacturing process, and the cost of
      purchased finished goods. Inventory costs also include the costs directly
      related to the conversion of materials to finished goods, such as direct
      labour, and a systematic allocation of fixed and variable production
      overhead, including manufacturing depreciation expense. The allocation of
      fixed production overheads to the cost of inventories is based on the
      normal capacity of the production facilities. Normal capacity is the
      average production expected to be achieved over a number of periods under
      normal circumstances. Net realizable value is the estimated selling price
      in the ordinary course of business, less the estimated costs of completion
      and selling expenses. Raw materials and spare parts are not written down
      if the finished products in which they will be incorporated are expected
      to be sold at or above cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(f) | Assets held for sale:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Non-current assets are classified as assets held for
      sale, and are reported in current assets in the statement of financial
      position, when their carrying amount is to be recovered principally
      through a sale transaction and a sale is considered highly probable.
      Assets held for sale are stated at the lower of carrying amount and fair
      value less costs to sell.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(g) | Property, plant and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Property, plant and equipment are initially recorded at
      cost, and are subsequently carried at cost less any accumulated
      depreciation and any accumulated impairment losses. The cost of an item of
      property, plant and equipment includes expenditures that are directly
      attributable to the acquisition or construction of an asset. The cost of
      self-constructed assets includes the cost of materials and direct labour,
      site preparation costs, initial delivery and handling costs, installation
      and assembly costs, and any other costs directly attributable to bringing
      the assets to the location and condition necessary for the assets to be
      capable of operating in the manner intended by management. The cost of
      property, plant and equipment also includes, when applicable, the initial
      present value estimate of the costs of dismantling and removing the asset
      and restoring the site on which it is located at the end of its useful
      life, and any applicable borrowing costs. Purchased software that is
      integral to the functionality of the related equipment is capitalized as
      part of other equipment. Subsequent costs are included in an assets
      carrying amount or recognized as a separate asset, as appropriate, only
      when it is probable that future economic benefits are present and the cost
      of the item can be measured reliably. The costs of day-to-day servicing of
      property, plant and equipment are expensed as incurred in the consolidated
      statement of earnings and comprehensive income. For the purpose of
      impairment testing of property, plant and equipment, see note 3(j). Gains
      and losses on the disposal of an item of property, plant and equipment are
      determined by comparing the proceeds from disposal with the carrying
      amount of property, plant and equipment, and are recognized in the
      statement of earnings and comprehensive income.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Land is not depreciated. The cost of property, plant and
      equipment less its residual value, if any, is depreciated on a
      straight-line basis over the following estimated useful
  lives:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| | Asset                      |  | Useful life   | 
| | -------------------------- |  | ------------- | 
| | Buildings and improvements |  | 5 to 40 years | 
| | Manufacturing equipment    |  | 3 to 10 years | 
| | Other equipment            |  | 2 to 10 years | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.54

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES
      (continued):
|-----------------------------------------------------

|(g) | Property, plant and equipment
  (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Significant components of property, plant and equipment
      which are identified as having different useful lives are depreciated
      separately over their respective useful lives. Depreciation methods,
      useful lives and residual values, if applicable, are reviewed and
      adjusted, if appropriate, on a prospective basis at the end of each fiscal
      year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Assets not yet utilized in operations include
      expenditures incurred to date for plant expansions which are still in
      process and equipment not yet placed into service as at the reporting
      date. Depreciation on these assets commences when the assets are available
      for use.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Borrowing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Borrowing costs that are directly attributable to the
      acquisition or construction of a qualifying asset are capitalized as part
      of the cost of the asset. A qualifying asset is one that necessarily takes
      a substantial period of time to get ready for its intended use.
      Capitalization of borrowing costs ceases when the asset is completed and
      ready for its intended use. All other borrowing costs are recognized as
      financial expenses as incurred. The Company had no capitalized borrowing
      costs as at September 30, 2012, October 2, 2011 and October 4,
  2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(h) | Intangible assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Intangible assets are measured at cost less accumulated
      amortization and any accumulated impairment losses. Intangible assets
      include identifiable intangible assets acquired in a business combination,
      and consist of customer contracts and customer relationships, license
      agreements, non-compete agreements, and trademarks. Intangible assets also
      include computer software that is not an integral part of the related
      hardware. For the purpose of impairment testing of intangible assets, see
      note 3(j). Indefinite life intangible assets represent intangible assets
      which the Company controls with no contractual or legal expiration date,
      and therefore are not amortized as there is no foreseeable time limit to
      their useful economic life. An assessment of indefinite life intangible
      assets is performed annually to determine whether events and circumstances
      continue to support an indefinite useful life, and any change in the
      useful life assessment from indefinite to finite is accounted for as a
      change in accounting estimate on a prospective basis. Intangible assets
      with finite lives are amortized on a straight-line basis over the
      following estimated useful-lives:

| | Asset                                               |  | Useful life   | 
| | --------------------------------------------------- |  | ------------- | 
| | Customer contracts and customer
      relationships |  | 7 to 20 years | 
| | License agreements                                  |  | 7 years       | 
| | Computer software                                   |  | 4 to 7 years  | 
| | Non-compete agreements                              |  | 2 years       | 

Trademarks are not amortized as they
are considered to be indefinite life intangible assets.

| | The costs of information technology
projects that are directly attributable to the design and testing of
identifiable and unique software products, including internally developed
computer software are recognized as intangible assets when the following
criteria are met:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                              

Other development expenditures that do
not meet these criteria are recognized as an expense as incurred. Development
costs previously recognized as an expense are not recognized as an asset in a
subsequent period.

GILDAN 2012 REPORT TO SHAREHOLDERS P.55

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES
      (continued):
|-----------------------------------------------------

|(i) | Goodwill:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Goodwill is measured at cost less accumulated impairment
      losses, if any.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Goodwill arising on business combinations on or after
      October 4, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Goodwill is measured as the excess of the consideration
      transferred and the recognized amount of the non- controlling interest in
      the acquired business, if any, over the fair value of net identifiable
      assets acquired and liabilities assumed of an acquired business. For the
      purpose of impairment testing of goodwill, see note 3(j).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Goodwill arising on business combinations before
      October 4, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Goodwill recorded as at October 4, 2010 in connection
      with business combinations which occurred prior to October 4, 2010 is
      included in the consolidated statement of financial position on the basis
      of its deemed cost, which represents the amount recorded under previous
      Canadian GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(j) | Impairment of non-financial assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Non-financial assets that have an indefinite useful life
      such as goodwill and trademarks are not subject to amortization and are
      tested annually for impairment or more frequently if events or changes in
      circumstances indicate that the asset might be impaired. Assets that are
      subject to amortization are assessed at the end of each reporting period
      as to whether there is any indication of impairment, or whenever events or
      changes in circumstances indicate that the carrying amount may not be
      recoverable. An impairment loss is recognized for the amount by which the
      assets carrying amount exceeds its recoverable amount. The recoverable
      amount is the higher of an assets value in use and fair value less costs
      to sell. The recoverable amount is determined for an individual asset,
      unless the asset does not generate cash inflows that are largely
      independent of those from other assets or groups of assets, in which case
      assets are grouped at the lowest levels for which there are separately
      identifiable cash inflows (i.e. cash-generating units or CGUs).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In assessing value in use, the estimated future cash
      flows expected to be derived from the asset or CGU by the Company are
      discounted to their present value using a pre-tax discount rate that
      reflects current market assessments of the time value of money and the
      risks specific to the asset and or the CGU. In assessing fair value less
      costs to sell, the Company uses the best information available to reflect
      the amount that the Company could obtain, at the time of the impairment
      test, from the disposal of the asset or CGU in an arms length transaction
      between knowledgeable, willing parties, after deducting the estimated
      costs of disposal.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | For the purpose of testing goodwill for impairment,
      goodwill acquired in a business combination is allocated to a CGU or a
      group of CGUs that is expected to benefit from the synergies of the
      combination, regardless of whether other assets or liabilities of the
      acquired company are assigned to those CGUs. Impairment losses recognized
      are allocated first to reduce the carrying amount of any goodwill
      allocated to the CGU, and then to reduce the carrying amounts of the other
      assets in the CGU on a pro rata basis. Impairment losses are recognized in
      net earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Reversal of impairment losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | A goodwill impairment loss is not reversed. Impairment
      losses on non-financial assets other than goodwill recognized in prior
      periods are assessed at each reporting date for any indications that the
      loss has decreased or no longer exists. An impairment loss is reversed if
      there has been a change in the estimates used to determine the recoverable
      amount. An impairment loss is reversed only to the extent that the assets
      carrying amount does not exceed the carrying amount that would have been
      determined, net of depreciation or amortization, if no impairment loss had
      been recognized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

GILDAN 2012 REPORT TO SHAREHOLDERS P.56

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES
      (continued):
|-----------------------------------------------------

|(k) | Financial instruments:
|--- | ----------------------

Financial
assetsFinancial assets are classified into the following categories,
and depend on the purpose for which the financial assets were acquired.

| | (i)   | Financial assets at fair value through profit or
      loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       | A financial asset is classified at fair value through profit
      or loss (FVTPL) if it is classified as held for trading or is designated
      as such upon initial recognition. Derivatives are also categorized as held
      for trading unless they are designated as hedges. Upon initial recognition
      transaction costs are recognized in net earnings as incurred. Financial
      assets at fair value through profit or loss are measured at fair value,
      and changes therein are recognized in net earnings. Assets in this
      category are classified as current assets if expected to be settled within
      12 months; otherwise, they are classified as non-current. The Company
      currently has no financial assets at fair value through profit or
  loss.                                                                                                                                                         
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (ii)  | Held-to-maturity financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |       | A financial asset is classified as held-to maturity if the
      Company has the intent and ability to hold debt securities to maturity.
      Held-to-maturity financial assets are recognized initially at fair value
      plus any directly attributable transaction costs. Subsequent to initial
      recognition held-to-maturity financial assets are measured at amortized
      cost using the effective interest method, less any impairment losses. Any
      sale or reclassification of a more than insignificant amount of
      held-to-maturity investments not close to their maturity would result in
      the reclassification of all held-to-maturity investments as
      available-for-sale, and prevent the Company from classifying investment
      securities a held-to-maturity for the current and the following two fiscal
      years. The Company currently has no financial assets classified as
      held-to-maturity.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (iii) | Loans and receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |       | Loans and receivables are financial assets with fixed or
      determinable payments that are not quoted in an active market. Such assets
      are recognized initially at fair value plus any directly attributable
      transaction costs. Subsequent to initial recognition loans and receivables
      are measured at amortized cost using the effective interest method, less
      any impairment losses. The Company currently classifies its cash and cash
      equivalents, trade accounts receivable, certain other current assets, and
      long-term non-trade receivable as loans and receivables.                                                                                                                                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (iv)  | Available-for-sale financial
  assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |       | Available-for-sale financial assets are non-derivative
      financial assets that are designated as available-for-sale and that are
      not classified in any of the previous categories. Subsequent to initial
      recognition, they are measured at fair value and changes therein, other
      than impairment losses are recognized in other comprehensive income and
      presented within equity in accumulated other comprehensive income. When an
      investment is derecognized, the cumulative gain or loss in other
      comprehensive income is transferred to profit or loss. The Company
      currently has no financial assets classified as
  available-for-sale.                                                                                                                                                                                                                                                               
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |       | The Company derecognizes a financial asset when the
      contractual rights to the cash flows from the asset expire, or it
      transfers the rights to receive the contractual cash flows on the
      financial asset in a transaction in which substantially all the risks and
      rewards of ownership of the financial asset are
  transferred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Financial liabilities

| | (i) | Financial liabilities at fair value through profit
      or loss                                                                                                                                                                                                                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Financial liabilities at fair value through profit or
      loss are initially recognized at fair value and are re-measured at each
      reporting date with any changes therein recognized in net earnings. The
      Company currently has no financial liabilities at fair value through
      profit or loss.

GILDAN 2012 REPORT TO SHAREHOLDERS P.57

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES
      (continued):
|-----------------------------------------------------

|(k) | Financial instruments (continued):
|--- | ----------------------------------
|    |                                   
|    | (ii)                              
|    |                                   
|    |                                   
|    |                                   
|    |                                   
|    |                                   

| | Fair value of financial
instruments                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | Financial instruments measured at fair value use the
following fair value hierarchy to prioritize the inputs used in measuring fair
value:
| |                                                                                                                                           
| |                                                                                                                                           
| |                                                                                                                                           

| |     | Impairment of financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | The Company assesses at the end of each reporting period
      whether there is objective evidence that a financial asset or group of
      financial assets is impaired. A financial asset or a group of financial
      assets is impaired and impairment losses are incurred only if there is
      objective evidence of impairment as a result of one or more events that
      occurred after the initial recognition of the asset (a loss event) and
      that loss event (or events) has an impact on the estimated future cash
      flows of the financial asset or group of financial assets that can be
      reliably estimated. Evidence of impairment may include indications that
      the debtors or a group of debtors is experiencing significant financial
      difficulty, default or delinquency in interest or principal payments, the
      probability that they will enter bankruptcy or other financial
      reorganization, and where observable data indicate that there is a
      measurable decrease in the estimated future cash flows, such as changes in
      arrears or economic conditions that correlate with defaults. 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | If, in a subsequent period, the amount of the impairment
      loss decreases and the decrease can be related objectively to an event
      occurring after the impairment was recognized (such as an improvement in
      the debtors credit rating), the reversal of the previously recognized
      impairment loss is recognized in net earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (l) | Derivative financial instruments and hedging
      relationships:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | The Company enters into derivative financial instruments
      to hedge its market risk exposures. On initial designation of the hedge,
      the Company formally documents the relationship between the hedging
      instruments and hedged items, including the risk management objectives and
      strategy in undertaking the hedge transaction, together with the methods
      that will be used to assess the effectiveness of the hedging relationship.
      The Company makes an assessment, both at the inception of the hedge
      relationship as well as on an ongoing basis, whether the hedging
      instruments are expected to be highly effective in offsetting the
      changes in the fair value or cash flows of the respective hedged items
      during the period for which the hedge is designated, and whether the
      actual results of each hedge are within a range of 80-125 percent. For a
      cash flow hedge of a forecasted transaction, the transaction should be
      highly probable to occur and should present an exposure to variations in
      cash flows that could ultimately affect reported net earnings.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Derivatives are recognized initially at fair value, and
      attributable transaction costs are recognized in net earnings as incurred.
      Subsequent to initial recognition, derivatives are measured at fair value,
      and changes therein are accounted for as described
below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

GILDAN 2012 REPORT TO SHAREHOLDERS P.58

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES
      (continued):
|-----------------------------------------------------

|(l) | Derivative financial instruments and hedging
      relationships (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Cash flow hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | When a derivative is designated as the hedging instrument
      in a hedge of the variability in cash flows attributable to a particular
      risk associated with a recognized asset or liability or a highly probable
      forecasted transaction that could affect net earnings, the effective
      portion of changes in the fair value of the derivative is recognized in
      other comprehensive income and presented in accumulated other
      comprehensive income in equity. The intrinsic value of zero-cost collar
      options is designated as cash flow hedges. Consequently, gains and losses
      related to the time value of zero-cost collar options are immediately
      recognized in earnings in the same caption as the item being hedged. The
      amount recognized in other comprehensive income is removed and included in
      net earnings in the same period as the hedged cash flows affect net
      earnings under the same line item in the consolidated statement of
      earnings and comprehensive income as the hedged item. Any ineffective
      portion of changes in the fair value of the derivative is recognized
      immediately in net earnings. If the hedging instrument no longer meets the
      criteria for hedge accounting, expires or is sold, terminated, exercised,
      or the designation is revoked, then hedge accounting is discontinued
      prospectively. The cumulative gain or loss previously recognized in other
      comprehensive income remains in accumulated other comprehensive income
      until the forecasted transaction affects profit or loss. If the forecasted
      transaction is no longer expected to occur, then the balance in
      accumulated other comprehensive income is recognized immediately in net
      earnings.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | When the hedged item is a non-financial asset, the amount
      recognized in other comprehensive income is transferred to net earnings in
      the same period that the hedged item affects net earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Embedded derivatives                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Embedded derivatives are separated from the host contract
      and accounted for separately if the economic characteristics and risks of
      the host contract and the embedded derivative are not closely related, a
      separate instrument with the same terms as the embedded derivative would
      meet the definition of a derivative, and the combined instrument is not
      measured at fair value through profit or loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Other derivatives                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | When a derivative financial instrument is not designated
      in a qualifying hedge relationship, all changes in its fair value are
      recognized immediately in net earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(m) | Accounts payable and accrued
liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Accounts payable and accrued liabilities are recognized
      initially at fair value and subsequently measured at amortized cost using
      the effective interest method. Accounts payable and accrued liabilities
      are classified as current liabilities if payment is due within one year,
      otherwise, they are presented as non-current liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(n) | Long-term debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Long-term debt is recognized initially at fair value, and
      is subsequently carried at amortized cost. Initial facility fees are
      deferred and treated as an adjustment to the instrument's effective
      interest rate and recognized as an expense over the instrument's estimated
      life if it is probable that the facility will be drawn down. However, if
      it is not probable that a facility will be drawn down, then the fees are
      considered service fees and are deferred and recognized as an expense on a
      straight-line basis over the commitment period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company classifies its existing revolving long-term
      credit facility as a non-current liability on the basis that the Company
      has the discretion to refinance or rollover amounts drawn under the
      facility for at least twelve months following the reporting
date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(o) | Employee benefits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Short-term employee benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Short-term employee benefits include wages, salaries,
      compensated absences and bonuses. Short-term employee benefit obligations
      are measured on an undiscounted basis and are expensed as the related
      service is provided. A liability is recognized for the amount expected to
      be paid under short-term cash bonus or profit sharing plans if the Company
      has a present legal or constructive obligation to pay this amount as a
      result of past service provided by the employee, and the obligation can be
      estimated reliably. Short-term employee benefit obligations are included
      in accounts payable and accrued liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

GILDAN 2012 REPORT TO SHAREHOLDERS P.59

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES (continued):
|-----------------------------------------------

|(o) | Employee benefits (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Defined contribution plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company offers group defined contribution plans to
      eligible employees whereby the Company matches employees' contributions up
      to a fixed percentage of the employee's salary. Contributions by the
      Company to trustee-managed investment portfolios or employee associations
      are expensed as incurred. Benefits are also provided to employees through
      defined contribution plans administered by the governments in the
      countries in which the Company operates. The Companys contributions to
      these plans are recognized in the period when services are
  rendered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Defined benefit plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company also maintains a funded qualified defined
      benefit plan (Retirement Plan) covering certain employees of Gold Toe
      Moretz. The Retirement Plan has been frozen since January 1, 2007, and as
      such no additional employees became participants in the Retirement Plan
      and existing participants in the Retirement Plan ceased accruing any
      additional benefits after that date. The pension obligation is actuarially
      determined using the projected benefit method to determine plan
      obligations and related periodic costs. Assets of the Retirement Plan are
      invested in high quality money market funds and are recorded at fair
      value. Plan valuations require economic assumptions, including expected
      rates of return on plan assets, discount rates to value plan obligations,
      and participant demographic assumptions including mortality rates. Because
      the Retirement Plan is frozen, salary escalation is not considered in the
      actuarial valuation, and there are no current service costs
    incurred.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company also maintains a liability for statutory
      severance and pre-notice benefit obligations for active employees located
      in the Caribbean Basin and Central America which is payable to the
      employees in a lump sum payment upon termination of employment. The
      liability is based on managements best estimates of the ultimate costs to
      be incurred to settle the liability and is based on a number of
      assumptions and factors, including historical trends, actuarial
      assumptions and economic conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Liabilities related to defined benefit plans are included
      in employee benefit obligations in the consolidated statement of financial
      position. Actuarial gains and losses arising from experience adjustments
      and changes in actuarial assumptions are recognized directly to other
      comprehensive income in the period in which they arise, and are
      immediately transferred to retained earnings without reclassification to
      net earnings in a subsequent period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(p) | Provisions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Provisions are recognized when the Company has a present
      legal or constructive obligation as a result of past events, it is
      probable that an outflow of resources will be required to settle the
      obligation, and the amount has been reliably estimated. Provisions are not
      recognized for future operating losses. Provisions are measured at the
      present value of the expenditures expected to be required to settle the
      obligation using a pre-tax rate that reflects current market assessments
      of the time value of money and the risks specific to the obligation. The
      increase in the provision due to passage of time is recognized as
      financial expense.                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Decommissioning and site restoration
  costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company recognizes decommissioning and site
      restoration obligations for future removal and site restoration costs
      associated with the restoration of certain property, plant and equipment
      should it decide to discontinue some of its activities. A corresponding
      amount is added to the carrying value of the related asset and amortized
      over the remaining life of the underlying asset.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Onerous contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | A provision for onerous contracts is recognized if the
      unavoidable costs of meeting the obligations specified in a contractual
      arrangement exceed the economic benefits expected to be received from the
      contract. Provisions for onerous contracts are measured at the lower of
      the cost of fulfilling the contract and the expected cost of terminating
      the contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

GILDAN 2012 REPORT TO SHAREHOLDERS P.60

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES
      (continued):
|-----------------------------------------------------

|(q) | Share capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Common shares are classified as equity. Incremental costs
      directly attributable to the issue of common shares and stock options are
      recognized as a deduction from equity, net of any tax effects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | When the Company repurchases its own shares, the
      consideration paid, including any directly attributable incremental costs
      (net of income taxes) is deducted from equity attributable to the
      companys equity holders until the shares are cancelled or reissued. Where
      such common shares are subsequently reissued, any consideration received,
      net of any directly attributable incremental transaction costs and the
      related income tax effects, is included in equity attributable to the
      Companys equity holders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(r) | Dividends declared:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Dividends declared to the Companys shareholders are
      recognized as a liability in the consolidated statement of financial
      position in the period in which the dividends are approved by the
      Companys Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(s) | Revenue recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Revenue is recognized upon shipment of products to
      customers, since title passes upon shipment, and to the extent that the
      selling price is fixed or determinable. At the time of sale, estimates are
      made for customer price discounts and volume rebates based on the terms of
      existing programs. Sales are recorded net of these program costs and
      estimated sales returns, which are based on historical experience, current
      trends and other known factors, and exclude sales taxes. New programs
      which relate to prior sales are recognized at the time the new program is
      introduced.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(t) | Cost of sales and gross profit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Cost of sales includes all raw material costs,
      manufacturing conversion costs, including manufacturing depreciation
      expense, sourcing costs, inbound freight and inter-facility transportation
      costs, and outbound freight to customers. Cost of sales also includes the
      cost of purchased finished goods, costs relating to purchasing, receiving
      and inspection activities, manufacturing administration, third-party
      manufacturing services, sales-based royalty costs, insurance, inventory
      write-downs, and customs and duties. Gross profit is the result of sales
      less cost of sales. The Companys gross profit may not be comparable to
      this metric as reported by other companies, since some entities include
      warehousing and handling costs, and/or exclude depreciation expense,
      outbound freight to customers and royalty costs from cost of
  sales.                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(u) | Selling, general and administrative
    expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Selling, general and administrative (SG&A) expenses
      include warehousing and handling costs, selling and administrative
      personnel costs, co-op advertising and marketing expenses, costs of leased
      facilities and equipment, professional fees, non-manufacturing
      depreciation and amortization expense, and other general and
      administrative expenses. SG&A expenses also include bad debt expense
      and amortization of intangible assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(v) | Product introduction expenditures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Product introduction expenditures are one-time fees paid
      to retailers to allow the Companys products to be placed on store
      shelves. These fees are recognized as a reduction in revenue. If the
      Company receives a benefit over a period of time and certain other
      criteria are met, these fees are recorded as an asset and are amortized as
      a reduction of revenue over the term of the arrangement. The Company
      evaluates the recoverability of these assets on a quarterly
  basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(w) | Restructuring and acquisition-related
  costs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Restructuring and acquisition-related costs are expensed
      when incurred, or when a legal or constructive obligation exists.
      Restructuring and acquisition-related costs are comprised of costs
      directly related to the closure of business locations or the relocation of
      business activities, changes in management structure, as well as
      transaction and integration costs incurred pursuant to business
      acquisitions. Restructuring and acquisition-related costs include:
      severance and termination benefits, including the termination of employee
      benefit plans; gains or losses from the re-measurement and disposal of
      assets held for sale; facility exit and closure costs; costs incurred to
      eliminate redundant business activities pursuant to business acquisitions;
      legal, accounting and other professional fees (excluding costs of issuing
      debt or equity) directly incurred in connection with a business
      acquisition; purchase gains on business acquisitions; and the
      re-measurement of liabilities related to contingent consideration incurred
      in connection with a business acquisition.

GILDAN 2012 REPORT TO SHAREHOLDERS P.61

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES
      (continued):
|-----------------------------------------------------

|(x) | Cotton-based yarn procurements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | The Company contracts to buy cotton-based yarn with
      future delivery dates at fixed prices in order to reduce the effects of
      fluctuations in the prices of cotton used in the manufacture of its
      products. These contracts are not used for trading purposes and are not
      considered to be financial instruments. The Company commits to fixed
      prices on a percentage of its cotton-based yarn requirements up to
      eighteen months in the future. If the cost of committed prices for
      cotton-based yarn plus estimated costs to complete production exceed
      current selling prices, a loss is recognized for the excess as a charge to
      cost of sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(y) | Financial expenses (income):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Financial expenses (income) include: interest expense on
      borrowings, including realized gains and/or losses on interest rate swaps
      designated for hedge accounting; bank and other financial charges;
      interest income on funds invested; accretion of interest on discounted
      provisions; net foreign currency losses and/or gains; and losses and/or
      gains on financial derivatives that do not meet the criteria for effective
      hedge accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(z) | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Income tax expense is comprised of current and deferred
      income taxes, and is included in net earnings except to the extent that it
      relates to a business acquisition, or items recognized directly in equity
      or in other comprehensive income. Current tax is the expected tax payable
      or receivable on the taxable income or loss for the year, using tax rates
      enacted or substantively enacted at the reporting date, and any adjustment
      to tax payable in respect of previous years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Deferred income tax assets and liabilities are measured
      at the tax rates that are expected to be applied to temporary differences
      when they reverse, based on the laws that have been enacted or
      substantively enacted by the reporting date, for all temporary differences
      caused when the tax bases of assets and liabilities differ from those
      reported in the financial statements. The Company recognizes deferred
      income tax assets for unused tax losses, and deductible temporary
      differences only to the extent that, in managements opinion, it is
      probable that future taxable profit will be available against which the
      temporary differences can be utilized. Deferred tax assets are reviewed at
      each reporting date and are reduced to the extent that it is no longer
      probable that the related tax benefit will be realized. Deferred income
      tax is provided on temporary differences arising on the Companys
      investments in subsidiaries and its jointly-controlled entity, except for
      deferred income tax liabilities where the timing of the reversal of the
      temporary difference is controlled by the group and it is probable that
      the temporary difference will not reverse in the foreseeable future.
      Deferred tax is not recognized for the following temporary differences:
      the initial recognition of assets or liabilities in a transaction that is
      not a business combination and that affects neither accounting nor taxable
      profit or loss, and differences relating to investments in subsidiaries
      and jointly controlled entities to the extent that it is probable that
      they will not reverse in the foreseeable future. In addition, deferred tax
      is not recognized for taxable temporary differences arising on the initial
      recognition of goodwill.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Deferred income tax assets and liabilities are offset
      when there is a legally enforceable right to offset and when the deferred
      income taxes assets and liabilities relate to income taxes levied by the
      same taxation authority on either the same taxable entity or different
      taxable entities where there is an intention to settle the balances on a
      net basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | In determining the amount of current and deferred income
      taxes, the Company takes into account the impact of uncertain tax
      positions and whether additional taxes and interest may be due. Provisions
      for uncertain tax positions are measured at the best estimate of the
      amounts expected to be paid upon ultimate resolution. The Company
      periodically reviews and adjusts its estimates and assumptions of income
      tax assets and liabilities as circumstances warrant, such as changes to
      tax laws, administrative guidance, change in managements assessment of
      the technical merits of its positions due to new information, and the
      resolution of uncertainties through either the conclusion of tax audits or
      expiration of prescribed time limits within relevant
  statutes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

GILDAN 2012 REPORT TO SHAREHOLDERS P.62

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

3. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(aa) | Earnings per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | Basic earnings per share are computed by dividing net
      earnings by the weighted average number of common shares outstanding for
      the year. Diluted earnings per share are computed using the weighted
      average number of common shares outstanding for the period adjusted to
      include the dilutive impact of stock options and restricted share units.
      The number of additional shares is calculated by assuming that all common
      shares held in trust for the purpose of settling Non-treasury restricted
      share units have been delivered, all dilutive outstanding options are
      exercised and all dilutive outstanding Treasury restricted share units
      have vested, and that the proceeds from such exercises, as well as the
      amount of unrecognized share-based compensation which is considered to be
      assumed proceeds, are used to repurchase common shares at the average
      share price for the period. For Treasury restricted share units, only the
      unrecognized share-based compensation is considered assumed proceeds since
      there is no exercise price paid by the holder.

|**(bb)** | Share based payments:
|-------- | ---------------------

Stock options and Treasury
restricted share unitsStock options and Treasury restricted share units
are equity settled share based payments, which are measured at fair value at the
grant date. For stock options, the compensation cost is measured using the
Black-Scholes option pricing model, and is expensed over the award's vesting
period. For Treasury restricted share units, compensation cost is measured at
the fair value of the underlying common share, and is expensed over the award's
vesting period. Compensation expense is recognized in net earnings with a
corresponding increase in contributed surplus. Any consideration paid by plan
participants on the exercise of stock options is credited to share capital. Upon
the exercise of stock options and the vesting of Treasury restricted share
units, the corresponding amounts credited to contributed surplus are transferred
to share capital. Stock options and Treasury restricted share units that are dilutive and meet the non-market performance conditions as at the reporting date
are considered in the calculation of diluted earnings per share, as per note
3(aa) to these consolidated financial statements.

Non-Treasury restricted share units
expected to be settled in cashNon-Treasury restricted share units are
expected to be settled in cash, except to the extent that common shares have
been purchased on the open market and held in a trust for the purpose of
settling the Non-Treasury restricted share units in shares in lieu of cash.
Non-Treasury restricted share units expected to be settled in cash are accounted
for as cash settled awards, with the recognized compensation expense included in
accounts payable and accrued liabilities. Compensation expense is initially
measured at fair value at the grant date and is recognized in net earnings over
the vesting period. The liability is re-measured at fair value, based on the
market price of the Companys common shares, at each reporting date.
Re-measurements during the vesting period are recognised immediately to net
earnings to the extent that they relate to past services, and recognition is
amortized over the remaining vesting period to the extent that they relate to
future services. The cumulative compensation cost that will ultimately be
recognized is the fair value of the Company's shares at the settlement date.

Non-Treasury restricted share units
expected to be settled in common sharesNon-Treasury restricted share
units are expected to be settled in common shares only when common shares have
been purchased on the open market and held in a trust for the purpose of
settling a corresponding amount of non-Treasury restricted share units in common
shares in lieu of cash. At the time common shares are purchased on the open
market and designated for future settlement of a corresponding amount of
non-Treasury restricted share units, any accumulated accrued compensation
expense previously credited to accounts payable and accrued liabilities for such
non-Treasury restricted share units is transferred to contributed surplus, and
compensation expense continues to be recognized over the remaining vesting
period, based on the purchase cost of the common shares that are held in trust,
with a corresponding increase to contributed surplus. In addition, the common
shares purchased by the trust are considered as being temporarily held in
treasury, as described in note 15(e) to these consolidated financial statements.
Upon delivery of the common shares for settlement of vesting non-Treasury
restricted share units, the corresponding amounts in contributed surplus are
transferred to share capital.

GILDAN 2012 REPORT TO SHAREHOLDERS P.63

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES (continued):
|-----------------------------------------------

|**(bb)** | Share based payments (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Estimates for forfeitures and performance
      conditions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | The measurement of compensation expense for stock
      options, Treasury restricted share units and non-Treasury restricted share
      units is net of estimated forfeitures. For the portion of Treasury
      restricted share units and Non- Treasury restricted share units that are
      issuable based on non-market performance conditions, the amount recognized
      as an expense is adjusted to reflect the number of awards for which the
      related service and performance conditions are expected to be met, such
      that the amount ultimately recognized as an expense is based on the number
      of awards that do meet the related service and non-market performance
      conditions at the vesting date.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Deferred share unit plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         | The Company has a deferred share unit plan for
      independent members of the Companys Board of Directors, who receive a
      portion of their compensation in the form of deferred share units
      (DSUs). These DSUs are cash settled awards, and are initially recognized
      in net earnings based on fair value at the grant date. The DSU obligation
      is included in accounts payable and accrued liabilities and is re-measured
      at fair value, based on the market price of the Companys common shares,
      at each reporting date.                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Employee share purchase plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | For employee share purchase plans, the Company's
      contribution, on the employee's behalf, is recognized as compensation
      expense with an offset to share capital, and consideration paid by
      employees on purchase of common shares is also recorded as an increase to
      share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                

|(cc) | Leases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | Leases in which a significant portion of the risks and
      rewards of ownership are not assumed by the Company are classified as
      operating leases. Payments made under operating leases (net of any
      incentives received from the lessor) are charged to net earnings on a
      straight-line basis over the lease term.                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     | Leases of property, plant and equipment where the Company
      has substantially all of the risks and rewards of ownership are classified
      as finance leases. Finance leases are capitalized at the leases
      commencement at the lower of the fair value of the leased property and the
      present value of the minimum lease payments. The property, plant and
      equipment acquired under finance leases are depreciated over the shorter
      of the useful life of the asset and the lease term.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     | Determining whether an arrangement contains a
      lease                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | At inception of an arrangement where the Company receives
      the right to use an asset, the Company determines whether such an
      arrangement is or contains a lease. A specific asset is the subject of a
      lease if fulfillment of the arrangement is dependent on the use of that
      specified asset. An arrangement conveys the right to use the asset if the
      arrangement conveys to the Company the right to control the use of the
      underlying asset.                                   

|**(dd)** | Use of estimates and judgments:                                                                                                                                                                                                                                                                                              
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         | The preparation of financial statements in conformity
      with IFRS requires management to make estimates and assumptions that
      affect the application of accounting policies and the reported amounts of
      assets, liabilities, income and expenses. Actual results may differ from
      these estimates.       
|         |                                                                                                                                                                                                                                                                                                                              
|         | Estimates and underlying assumptions are reviewed on an
      ongoing basis. Revisions to accounting estimates are recognized in the
      period in which the estimates are revised and in any future periods
      affected. The Company has not made any significant changes to its
      estimates in the past two years.

GILDAN 2012 REPORT TO SHAREHOLDERS P.64

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. SIGNIFICANT ACCOUNTING POLICIES (continued):
|-----------------------------------------------

|**(dd)** | Use of estimates and judgments (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Critical judgments in applying accounting
      policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | The following are critical judgements that management has
      made in the process of applying accounting policies and that have the most
      significant effect on the amounts recognized in the consolidated financial
      statements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Determination of Cash Generating Units
      (CGUs)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | The identification of CGUs and grouping of assets into
      the respective CGUs is based on currently available information about
      actual utilization experience and expected future business plans.
      Management has taken into consideration various factors in identifying its
      CGUs including how the Company manages and monitors its operations, which
      is essentially based on operating segments that are organized by the major
      customer markets they serve. As such, the Company has identified its CGUs
      for purposes of testing the recoverability and impairment of non-financial
      assets to be the same as the segments used for financial reporting
      purposes, which are the Printwear and Branded Apparel operating segments.                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         | The Companys income tax provisions and income tax assets
      and liabilities are based on interpretations of applicable tax laws,
      including income tax treaties between various countries in which the
      Company operates as well as underlying rules and regulations with respect
      to transfer pricing. These interpretations involve judgments and estimates
      and may be challenged through government taxation audits that the Company
      is regularly subject to. New information may become available that causes
      the Company to change its judgment regarding the adequacy of existing
      income tax assets and liabilities; such changes will impact net earnings
      in the period that such a determination is made.                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Key sources of estimation
      uncertainty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Key sources of estimation uncertainty that have a
      significant risk of resulting in a material adjustment to the carrying
      amount of assets and liabilities within the next financial year are as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Allowance for doubtful accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | The Company makes an assessment of whether accounts
      receivable are collectable, which takes into account the credit-worthiness
      of each customer in order to estimate an appropriate allowance for
      doubtful accounts. Furthermore, these estimates must be continuously
      evaluated and updated. The Company is not able to predict changes in the
      financial condition of its customers, and if circumstances related to its
      customers financial condition deteriorate, the estimates of the
      recoverability of trade accounts receivable could be materially affected
      and the Company may be required to record additional allowances.
      Alternatively, if the Company provides more allowances than needed, a
      reversal of a portion of such allowances in future periods may be required
      based on actual collection experience.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Inventory valuation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | The Company regularly reviews inventory quantities on
      hand and records a provision for those inventories no longer deemed to be
      fully recoverable. The cost of inventories may no longer be recoverable if
      those inventories are slow moving, damaged, if they have become obsolete,
      or if their selling prices or estimated forecast of product demand
      decline. If actual market conditions are less favorable than previously
      projected, or if liquidation of the inventory no longer deemed to be fully
      recoverable is more difficult than anticipated, additional provisions may
      be required.                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | Business combinations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | Business combinations are accounted for in
      accordance with the acquisition method. On the date that control is
      obtained, the identifiable assets, liabilities and contingent liabilities
      of the acquired company are measured at their fair value. Depending on the
      complexity of determining these valuations, the Company uses appropriate
      valuation techniques which are generally based on a forecast of the total
      expected future net discounted cash flows. These valuations are linked
      closely to the assumptions made by management regarding the future
      performance of the related assets and the discount rate applied.                                                                                                                                                                                                             

GILDAN 2012 REPORT TO SHAREHOLDERS P.65

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (continued):
|-- | ----------------------------------------------

|**(dd)** | Use of estimates and judgments (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | Recoverability and impairment of
      non-financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         | The calculation of value in use for purposes of measuring
      the recoverable amount of non-financial asset involves the use of
      significant assumptions and estimates with respect to a variety of
      factors, including expected sales, gross margins, SG&A expenses,
      capital expenditures, cash flows and the selection of an appropriate
      discount rate, all of which are subject to inherent uncertainties and
      subjectivity. The assumptions are based on annual business plans and other
      forecasted results as well as discount rates which are used to reflect
      market based estimates of the risks associated with the projected cash
      flows, based on the best information available as of the date of the
      impairment test. Changes in circumstances, such as technological advances,
      adverse changes in third party licensing arrangements, changes to the
      Companys business strategy, and changes in economic conditions can result
      in actual useful lives and future cash flows differing significantly from
      estimates and could result in increased charges for amortization or
      impairment. Revisions to the estimated useful lives of finite life
      non-financial assets or future cash flows constitute a change in
      accounting estimate and are applied prospectively. There can be no
      assurance that the estimates and assumptions used in the impairment tests
      will prove to be accurate predictions of the future. If the future
      adversely differs from managements best estimate of key economic
      assumptions, and if associated cash flows materially decrease, the Company
      may be required to record material impairment charges related to its
      non-financial assets.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | Measurement of the estimate of expected
      expenditures for decommissioning and site restoration costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | The measurement of the provision for decommissioning and
      site restoration costs requires assumptions to be made including expected
      timing of the event which would result in the outflow of resources, the
      range of possible methods of decommissioning and site restoration, and the
      expected costs that would be incurred to settle any decommissioning and
      site restoration liabilities. The Company has measured the provision using
      the present value of the expected expenditures which requires assumptions
      on the discount rate to use. Revisions to any of the assumptions and
      estimates used by management may result in changes to the expected
      expenditures to settle the liability which would require adjustments to
      the provision which may have an impact on the operating results of the
      Company in the period the change occurs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         | The Company recognizes deferred income tax assets for
      unused tax losses, and deductible temporary differences only to the extent
      that, in managements opinion, it is probable that future taxable profit
      will be available against which available tax losses and temporary
      differences can be utilized. The Companys projections of future taxable
      profit involve the use of significant assumptions and estimates with
      respect to a variety of factors, including future sales and operating
      expenses. There can be no assurance that the estimates and assumptions
      used in our projections of future taxable income will prove to be accurate
      predictions of the future, and in the event that our assessment of the
      recoverability of these deferred tax assets changes in the future, a
      material reduction in the carrying value of these deferred tax assets
      could be required, with a corresponding charge to net earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|4. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
      NOT YET APPLIED:
|----------------------------------------------------------------------

A number of new accounting standards, and amendments to
accounting standards and interpretations, are not yet effective for the year
ending September 30, 2012, and have not been applied in preparing these audited
annual consolidated financial statements. These include:

Financial instrumentsIn October 2010, the IASB
released IFRS 9, Financial Instruments, which is the first part of a three-part
project to replace IAS 39, Financial Instruments: Recognition and Measurement.
This first part only covers classification and measurement of financial assets
and financial liabilities, with impairment of financial assets and hedge
accounting being addressed in the other two parts.

IFRS 9 uses a single approach to determine whether a financial
asset is measured at amortized cost or fair value, replacing the multiple rules
in IAS 39. The approach in IFRS 9 is based on how an entity manages its
financial instruments and the contractual cash flow characteristics of the
financial assets. Most of the requirements in IAS 39 for classification and
measurement of financial liabilities were carried forward in IFRS 9. However,
requirements for measuring a financial liability at fair value have changed, as
the portion of the changes in fair value related to the entitys own credit risk
must be presented in other comprehensive income rather than in net earnings.
IFRS 9 will be effective for the Companys fiscal year beginning on October 5,
2015, with earlier application permitted. The Company has not yet assessed the
impact of the adoption of this standard on its consolidated financial
statements.

GILDAN 2012 REPORT TO SHAREHOLDERS P.66

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|4.NEWACCOUNTING STANDARDS AND
      INTERPRETATIONS NOT YET APPLIED (continued):
|--------------------------------------------------------------------------------

ConsolidationIn May 2011, the IASB released IFRS 10,
Consolidated Financial Statements, which replaces SIC-12, Consolidation -Special
Purpose Entities, and parts of IAS 27, Consolidated and Separate Financial
Statements. The new standard builds on existing principles by identifying the
concept of control as the determining factor in whether an entity should be
included in a companys consolidated financial statements. The standard provides
additional guidance to assist in the determination of control where it is
difficult to assess. IFRS 10 will be effective for the Companys fiscal year
beginning on September 30, 2013, with earlier application permitted. The Company
has not yet assessed the impact of the adoption of this standard on its
consolidated financial statements.

Joint arrangementsIn May 2011, the IASB released
IFRS 11, Joint Arrangements, which supersedes IAS 31, Interests in Joint
Ventures, and SIC-13, Jointly Controlled Entities - Non-monetary Contributions
by Venturers. IFRS 11 focuses on the rights and obligations of a joint
arrangement, rather than its legal form as is currently the case under IAS 31.
The standard addresses inconsistencies in the reporting of joint arrangements by
requiring the equity method to account for interests in joint ventures. IFRS 11
will be effective for the Companys fiscal year beginning on September 30, 2013,
with earlier application permitted. The Company has not yet assessed the impact
of the adoption of this standard on its consolidated financial statements.

Disclosure of interests in other entitiesIn May
2011, the IASB released IFRS 12, Disclosure of Interests in Other Entities. IFRS
12 is a new and comprehensive standard on disclosure requirements for all forms
of interests in other entities, including subsidiaries, joint arrangements,
associates, and unconsolidated structured entities. The standard requires an
entity to disclose information regarding the nature and risks associated with
its interests in other entities and the effects of those interests on its
financial position, financial performance and cash flows. IFRS 12 will be
effective for the Companys fiscal year beginning on September 30, 2013, with
earlier application permitted. The Company has not yet assessed the impact of
the adoption of this standard on its consolidated financial statements.

Fair value measurementIn May 2011, the IASB released
IFRS 13, Fair value measurement. IFRS 13 will improve consistency and reduce
complexity by providing a precise definition of fair value and a single source
of fair value measurement and disclosure requirements for use across IFRS. The
standard will be effective for the Companys fiscal year beginning on September
30, 2013, with earlier application permitted. The Company has not yet assessed
the impact of the adoption of this standard on its consolidated financial
statements.

Financial statement presentationIn June 2011, the
IASB amended IAS 1, Presentation of Financial Statements. The principal change
resulting from the amendments to IAS 1 is a requirement to group together items
within other comprehensive income that may be reclassified to the statement of
income. The amendments also reaffirm existing requirements that items in other
comprehensive income and net income should be presented as either a single
statement or two consecutive statements. The amendments to IAS 1 will be
effective for the Companys fiscal year beginning on October 1, 2012. As the
amendments only require changes in the presentation of items in other
comprehensive income, the Company does not expect the amendments to the standard
to have a material impact on its consolidated financial statements.

Employee benefitsIn June 2011, the IASB amended IAS
19, Employee Benefits. Amongst other changes, the amendments require entities to
compute the financing cost component of defined benefit plans by applying the
discount rate used to measure post-employment benefit obligations to the net
post-employment benefit obligations (usually, the present value of defined
benefit obligations less the fair value of plan assets). Furthermore, the
amendments to IAS 19 enhance the disclosure requirements for defined benefit
plans, providing additional information about the characteristics of defined
benefit plans and the risks that entities are exposed to through participation
in those plans. The amendment to IAS 19 will be effective for the Companys
fiscal years beginning on September 30, 2013, with earlier application
permitted. The Company has not yet assessed the impact of the adoption of the
amendments on its consolidated financial statements.

GILDAN 2012 REPORT TO SHAREHOLDERS P.67

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|5. BUSINESS ACQUISITIONS:
|-------------------------

Anvil Holdings, Inc.

On May 9, 2012, the Company acquired 100% of the common shares
of Anvil Holdings, Inc. (Anvil) for cash consideration of $87.4 million, net
of cash acquired. Anvil is a supplier of high-quality basic T-shirts and sport
shirts. The acquisition of Anvil further enhances the Companys leadership
position in the U.S. printwear market, and also positions the Company with
potential growth opportunities as a supply chain partner to leading consumer
brands with rigorous criteria for product quality and social responsibility. The
acquisition is also expected to generate cost savings from integration
synergies. The Company financed the acquisition by the utilization of its
revolving long-term credit facility.

The Company accounted for this acquisition using the
acquisition method in accordance with IFRS 3, Business Combinations, and the
results of Anvil have been consolidated with those of the Company from the date
of acquisition. The Company has determined the fair value of the assets acquired
and liabilities assumed based on managements best estimate of their fair values
and taking into account all relevant information available at that time.

The following table summarizes the amounts recognized for the
assets acquired and liabilities assumed at the date of acquisition:

|Assets acquired:                                            |   |         |  
|----------------------------------------------------------- | - | ------- | -
|Trade accounts receivable                                   | $ | 31,491  |  
|Income taxes receivable                                     |   | 2,253   |  
|Inventories                                                 |   | 59,005  |  
|Prepaid expenses and
      deposits                         |   | 1,796   |  
|Other current assets                                        |   | 501     |  
|Property, plant and
      equipment                         |   | 14,753  |  
|Intangible assets (i)                                       |   | 9,700   |  
|Deferred income taxes                                       |   | 5,066   |  
|Other assets                                                |   | 1,714   |  
|                                                            |   | 126,279 |  
|                                                            |   |         |  
|Liabilities assumed:                                        |   |         |  
|Accounts payable and accrued
      liabilities              |   | (26,276 | )
|Employee benefit
      obligations                          |   | (1,451  | )
|Provisions                                                  |   | (4,500  | )
|                                                            |   | (32,227 | )
|                                                            |   |         |  
|Net identifiable assets acquired                            |   | 94,052  |  
|Purchase gain on
      business acquisition                 |   | (6,679  | )
|Consideration transferred (excluding cash acquired of $627) | $ | 87,373  |  

|(i) | The intangible assets acquired are comprised of customer
      relationships in the amount of $5.0 million, which are being amortized on
      a straight line basis over their estimated useful lives of seven years,
      and trademarks in the amount of $4.7 million, which are not being
      amortized as they are considered to be indefinite life intangible
      assets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of acquired trade accounts receivable was $31.5
million. Gross contractual amounts receivable were $32.9 million and the best
estimate at the date of acquisition of the contractual cash flows not expected
to be collected amounted to $1.4 million.

The excess of the net assets acquired over the consideration
transferred represents a purchase gain on business acquisition of approximately
$6.7 million. Excluded from the purchase gain are $1.2 million of
acquisition-related transaction costs and $10.2 million of charges relating to a
restructuring plan pursuant to the acquisition of Anvil. These charges were
identified during the acquisition process, but were not recognized as
liabilities assumed in the acquisition accounting in accordance with IFRS. The
purchase gain in connection with this acquisition is not taxable. The purchase
gain, acquisition-related transaction costs and charges relating to the
restructuring plan have been included in restructuring and acquisition-related
costs in the consolidated statements of earnings and comprehensive income.

GILDAN 2012 REPORT TO SHAREHOLDERS P.68

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|5. BUSINESS ACQUISITIONS
  (continued):
|---------------------------------------

Anvil Holdings, Inc. (continued)

The consolidated results of the Company for fiscal 2012 include
net sales of $86.1 million and net earnings of $2.1 million relating to Anvils
results of operation since the date of acquisition, excluding the purchase gain
on business acquisition of $6.7 million and acquisition-related transaction
costs of $1.2 million. Anvils net earnings before the after-tax impact of
restructuring and acquisition-related costs since the date of acquisition to
September 30, 2012 amounted to $9.0 million.

If the acquisition of Anvil is accounted for on a pro forma
basis as if it had occurred at the beginning of the Companys fiscal year, the
Companys consolidated net sales and net earnings for the year ended September
30, 2012 would have been $2,081.5 million and $138.0 million, respectively.
These pro forma figures have been estimated based on the results of Anvils
operations prior to being purchased by the Company, adjusted to reflect the fair
value adjustments, which arose on the date of acquisition, as if the acquisition
occurred on October 3, 2011, and should not be viewed as indicative of the
Companys future results.

Gold Toe Moretz Holdings Corp.

On April 15, 2011, the Company acquired 100% of the common
shares of Gold Toe Moretz Holdings Corp. (Gold Toe Moretz) for consideration
transferred of $347.7 million, net of cash acquired, including contingent
consideration of approximately $5.3 million. Gold Toe Moretz is a leading
supplier of high-quality branded athletic, casual and dress socks for national
chains, mass-market retailers, price clubs, department stores and specialty
sporting goods stores in the United States. The acquisition of Gold Toe Moretz
provided the Company with enhanced brand management expertise which is being
utilized to further the development of the Gildan® brand. In addition to the
introduction of leading consumer brands, the acquisition significantly expanded
and diversified the Companys channels of distribution in the U.S. retail
market.

The Company financed the acquisition by using approximately
$100 million of cash on hand and approximately $250 million drawn on the
Companys revolving long-term credit facility.

The Company accounted for this acquisition using the
acquisition method in accordance with IFRS 3, Business Combinations, and the
results of Gold Toe Moretz have been consolidated with those of the Company from
the date of acquisition. The Company has determined the fair value of the assets
acquired and liabilities assumed based on managements best estimate of their
fair values and taking into account all relevant information available at that
time.

Acquisition-related transaction costs of $7.3 million have been
included in restructuring and acquisition-related costs in the consolidated
statements of earnings and comprehensive income. The fair value of acquired
trade accounts receivable was $28.2 million. Gross contractual amounts
receivable were $28.5 million and the best estimate at the date of acquisition
of the contractual cash flows not expected to be collected amounted to $0.3
million.

The contingent consideration at the date of acquisition was
comprised of up to 150,000 common shares which were issued in the form of
treasury restricted share units (Treasury RSUs) contingent on specified future
events. The contingent consideration is classified as a financial liability and
is included in accounts payable and accrued liabilities. The contingent
consideration was initially measured at fair value, and is re-measured at fair
value at each reporting date through net earnings in restructuring and
acquisition-related costs. Fair value has been estimated based on the Companys
share price at the reporting date and the best estimate of the number of
Treasury RSUs expected to vest. During fiscal 2012, certain specified future
events were confirmed resulting in 120,000 Treasury RSUs with a fair value of
$3.4 million being reclassified from accounts payable and accrued liabilities to
contributed surplus with no further remeasurements in the fair value because
there is no longer any variability in the number of common shares required to
settle the liability. The balance of the contingent consideration payable as at
September 30, 2012 is $1.0 million (October 2, 2011 - $3.9 million) which
reflects the fair value of the remaining 30,000 Treasury RSUs expected to vest.
The re-measurement of the contingent consideration resulted in a charge to net
earnings and comprehensive income for fiscal 2012 of $0.5 million (2011 - credit
of $1.5 million), and is included in restructuring and acquisition-related costs
(see note 19).

GILDAN 2012 REPORT TO SHAREHOLDERS P.69

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|5. BUSINESS ACQUISITIONS
  (continued):
|---------------------------------------

Gold Toe Moretz Holdings Corp. (continued)

The following table summarizes the amounts recognized for the
assets acquired and liabilities assumed at the date of acquisition:

|Assets acquired:                                              |   |         |  
|------------------------------------------------------------- | - | ------- | -
|Trade accounts
      receivable                               | $ | 28,150  |  
|Income taxes receivable                                       |   | 208     |  
|Inventories                                                   |   | 57,549  |  
|Prepaid expenses and deposits                                 |   | 1,410   |  
|Other current assets                                          |   | 122     |  
|Property, plant and equipment                                 |   | 3,523   |  
|Intangible assets (i)                                         |   | 204,700 |  
|Other assets                                                  |   | 495     |  
|                                                              |   | 296,157 |  
|                                                              |   |         |  
|Liabilities assumed:                                          |   |         |  
|Accounts payable and accrued
      liabilities                |   | (31,969 | )
|Employee benefit
      obligations                            |   | (17,068 | )
|Deferred income taxes                                         |   | (31,178 | )
|                                                              |   | (80,215 | )
|                                                              |   |         |  
|Net identifiable assets acquired                              |   | 215,942 |  
|Goodwill                                                      |   | 131,736 |  
|Consideration transferred (excluding cash acquired of $3,576) | $ | 347,678 |  
|                                                              |   |         |  
|Consideration transferred:                                    |   |         |  
|Cash paid at closing, net of cash
      acquired of $3,576    | $ | 342,368 |  
|Contingent consideration                                      |   | 5,310   |  
|                                                              | $ | 347,678 |  

Goodwill recorded in connection with this acquisition is not
deductible for tax purposes.

|(i) | The intangible assets below, with the exception of the
      trademarks, are being amortized on a straight line basis over their
      estimated useful lives. The trademarks are not being amortized as they are
      considered to be indefinite life intangible
assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Trademarks             |  | Indefinite life |  | $ | 94,000  | 
| | ---------------------- |  | --------------- |  | - | ------- | 
| | License agreements     |  | 7 years         |  |   | 51,000  | 
| | Customer relationships |  | 20 years        |  |   | 58,000  | 
| | Non-compete agreements |  | 2 years         |  |   | 1,700   | 
| |                        |  |                 |  | $ | 204,700 | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.70

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|6. CASH AND CASH
EQUIVALENTS:
|-----------------------------

|              |   | September 30, |  |   | October
      2, |  |   | October
      4, | 
|------------- | - | ------------- |  | - | ---------------- |  | - | ---------------- | 
|              |   | 2012          |  |   | 2011             |  |   | 2010             | 
|              |   |               |  |   |                  |  |   |                  | 
|Bank balances | $ | 68,748        |  | $ | 80,474           |  | $ | 188,680          | 
|Term deposits |   | 1,662         |  |   | 1,551            |  |   | 62,163           | 
|              | $ | 70,410        |  | $ | 82,025           |  | $ | 250,843          | 

|7. TRADE ACCOUNTS
RECEIVABLE:
|-----------------------------

|                                      |   | September 30, |   |   | October
      2, |   |   | October
      4, |  
|------------------------------------- | - | ------------- | - | - | ---------------- | - | - | ---------------- | -
|                                      |   | 2012          |   |   | 2011             |   |   | 2010             |  
|                                      |   |               |   |   |                  |   |   |                  |  
|Trade accounts receivable             | $ | 265,090       |   | $ | 195,700          |   | $ | 152,653          |  
|Allowance for
      doubtful accounts |   | (4,495        | ) |   | (4,106           | ) |   | (6,969           | )
|                                      | $ | 260,595       |   | $ | 191,594          |   | $ | 145,684          |  

|The movement in the allowance for doubtful accounts in
      respect of trade receivables was as follows:
|---------------------------------------------------------------------------------------------------------

|                                                     |   | 2012   |   |   | 2011   |  
|---------------------------------------------------- | - | ------ | - | - | ------ | -
|                                                     |   |        |   |   |        |  
|Balance, beginning of year                           | $ | (4,106 | ) | $ | (6,969 | )
|Bad debt recovery (expense)                          |   | 401    |   |   | (632   | )
|Write-off of trade accounts receivable               |   | 648    |   |   | 3,757  |  
|Increase due to
      business acquisitions (note 5) |   | (1,438 | ) |   | (262   | )
|Balance, end of year                                 | $ | (4,495 | ) | $ | (4,106 | )

|8. INVENTORIES:
|---------------

|                                          |   | September 30, |  |   | October
      2, |  |   | October
      4, | 
|----------------------------------------- | - | ------------- |  | - | ---------------- |  | - | ---------------- | 
|                                          |   | 2012          |  |   | 2011             |  |   | 2010             | 
|                                          |   |               |  |   |                  |  |   |                  | 
|Raw materials and spare parts inventories | $ | 61,841        |  | $ | 66,914           |  | $ | 50,862           | 
|Work in process                           |   | 37,358        |  |   | 31,710           |  |   | 37,410           | 
|Finished goods                            |   | 453,869       |  |   | 469,687          |  |   | 241,246          | 
|                                          | $ | 553,068       |  | $ | 568,311          |  | $ | 329,518          | 

The amount of inventories recognized as an expense and included
in cost of sales was $1,517.8 million for fiscal 2012 (2011 - $1,262.7 million),
which included an expense of $4.2 million (2011 - $6.2 million) related to the
write-down of inventory to net realizable value.

|9. PROPERTY, PLANT AND
  EQUIPMENT:
|-----------------------------------

|                         |   |        |  |   |               |  |   |               |  |   |           |  |   | Assets
      not yet |  |   |         | 
|------------------------ | - | ------ |  | - | ------------- |  | - | ------------- |  | - | --------- |  | - | -------------------- |  | - | ------- | 
|                         |   |        |  |   | Buildings and |  |   | Manufacturing |  |   | Other     |  |   | utilized in          |  |   |         | 
|                         |   | Land   |  |   | improvements  |  |   | equipment     |  |   | equipment |  |   | operations           |  |   | Total   | 
|                         |   |        |  |   |               |  |   |               |  |   |           |  |   |                      |  |   |         | 
|Net carrying amount      |   |        |  |   |               |  |   |               |  |   |           |  |   |                      |  |   |         | 
|At September 30, 2012    | $ | 38,936 |  | $ | 165,864       |  | $ | 289,418       |  | $ | 46,450    |  | $ | 11,769               |  | $ | 552,437 | 
|At October 2, 2011       | $ | 35,113 |  | $ | 141,649       |  | $ | 273,190       |  | $ | 52,825    |  | $ | 47,547               |  | $ | 550,324 | 
|At
      October 4, 2010 | $ | 34,487 |  | $ | 122,005       |  | $ | 227,143       |  | $ | 55,059    |  | $ | 44,319               |  | $ | 483,013 | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.71

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|9. PROPERTY, PLANT AND EQUIPMENT
    (continued):
|-------------------------------------------------

|                                          |   |        |   |   |               |   |   |               |   |   |           |   |   | Assets
      not yet |   |   |         |  
|----------------------------------------- | - | ------ | - | - | ------------- | - | - | ------------- | - | - | --------- | - | - | -------------------- | - | - | ------- | -
|                                          |   |        |   |   | Buildings and |   |   | Manufacturing |   |   | Other     |   |   | utilized in          |   |   |         |  
|2012                                      |   | Land   |   |   | improvements  |   |   | equipment     |   |   | equipment |   |   | operations           |   |   | Total   |  
|                                          |   |        |   |   |               |   |   |               |   |   |           |   |   |                      |   |   |         |  
|Cost                                      |   |        |   |   |               |   |   |               |   |   |           |   |   |                      |   |   |         |  
|Balance, October 2, 2011                  | $ | 35,113 |   | $ | 194,530       |   | $ | 464,886       |   | $ | 91,853    |   | $ | 47,547               |   | $ | 833,929 |  
|Additions                                 |   | 3,620  |   |   | 17,066        |   |   | 35,891        |   |   | 4,689     |   |   | 8,755                |   |   | 70,021  |  
|Additions through business acquisitions   |   | 100    |   |   | 2,703         |   |   | 7,310         |   |   | 1,626     |   |   | 3,014                |   |   | 14,753  |  
|Transfers from or to assets held for sale |   | 114    |   |   | (212          | ) |   | -             |   |   | -         |   |   | -                    |   |   | (98     | )
|Transfers                                 |   | -      |   |   | 17,337        |   |   | 30,210        |   |   | -         |   |   | (47,547              | ) |   | -       |  
|Disposals                                 |   | (11    | ) |   | (392          | ) |   | (5,956        | ) |   | (1,544    | ) |   | -                    |   |   | (7,903  | )
|Balance, September 30, 2012               | $ | 38,936 |   | $ | 231,032       |   | $ | 532,341       |   | $ | 96,624    |   | $ | 11,769               |   | $ | 910,702 |  
|                                          |   |        |   |   |               |   |   |               |   |   |           |   |   |                      |   |   |         |  
|Depreciation                              |   |        |   |   |               |   |   |               |   |   |           |   |   |                      |   |   |         |  
|Balance, October 2, 2011                  | $ | -      |   | $ | 52,881        |   | $ | 191,696       |   | $ | 39,028    |   | $ | -                    |   | $ | 283,605 |  
|Depreciation expense                      |   | -      |   |   | 12,494        |   |   | 55,763        |   |   | 12,560    |   |   | -                    |   |   | 80,817  |  
|Transfers from or to assets held for sale |   | -      |   |   | (137          | ) |   | -             |   |   | -         |   |   | -                    |   |   | (137    | )
|Disposals                                 |   | -      |   |   | (70           | ) |   | (4,536        | ) |   | (1,414    | ) |   | -                    |   |   | (6,020  | )
|Balance, September
      30, 2012         | $ | -      |   | $ | 65,168        |   | $ | 242,923       |   | $ | 50,174    |   | $ | -                    |   | $ | 358,265 |  

|                                          |   |        |   |   |               |   |   |               |   |   |           |   |   | Assets
      not yet |   |   |         |  
|----------------------------------------- | - | ------ | - | - | ------------- | - | - | ------------- | - | - | --------- | - | - | -------------------- | - | - | ------- | -
|                                          |   |        |   |   | Buildings and |   |   | Manufacturing |   |   | Other     |   |   | utilized in          |   |   |         |  
|2011                                      |   | Land   |   |   | improvements  |   |   | equipment     |   |   | equipment |   |   | operations           |   |   | Total   |  
|                                          |   |        |   |   |               |   |   |               |   |   |           |   |   |                      |   |   |         |  
|Cost                                      |   |        |   |   |               |   |   |               |   |   |           |   |   |                      |   |   |         |  
|Balance, October 4, 2010                  | $ | 34,487 |   | $ | 168,747       |   | $ | 386,846       |   | $ | 85,966    |   | $ | 44,319               |   | $ | 720,365 |  
|Additions                                 |   | 1,825  |   |   | 15,221        |   |   | 74,374        |   |   | 20,017    |   |   | 47,078               |   |   | 158,515 |  
|Additions through business acquisitions   |   | 140    |   |   | 1,040         |   |   | -             |   |   | 1,874     |   |   | 469                  |   |   | 3,523   |  
|Transfers from or to assets held for sale |   | (1,339 | ) |   | (15,228       | ) |   | (6,199        | ) |   | (1,640    | ) |   | -                    |   |   | (24,406 | )
|Transfers                                 |   | -      |   |   | 24,750        |   |   | 14,279        |   |   | 5,290     |   |   | (44,319              | ) |   | -       |  
|Disposals                                 |   | -      |   |   | -             |   |   | (4,414        | ) |   | (19,654   | ) |   | -                    |   |   | (24,068 | )
|Balance, October
      2, 2011            | $ | 35,113 |   | $ | 194,530       |   | $ | 464,886       |   | $ | 91,853    |   | $ | 47,547               |   | $ | 833,929 |  
|                                          |   |        |   |   |               |   |   |               |   |   |           |   |   |                      |   |   |         |  
|Depreciation                              |   |        |   |   |               |   |   |               |   |   |           |   |   |                      |   |   |         |  
|Balance, October 4, 2010                  | $ | -      |   | $ | 46,742        |   | $ | 159,703       |   | $ | 30,907    |   | $ | -                    |   | $ | 237,352 |  
|Depreciation expense                      |   | -      |   |   | 10,743        |   |   | 40,233        |   |   | 13,192    |   |   | -                    |   |   | 64,168  |  
|Transfers from or to assets held for sale |   | -      |   |   | (4,604        | ) |   | (6,189        | ) |   | (1,454    | ) |   | -                    |   |   | (12,247 | )
|Disposals                                 |   | -      |   |   | -             |   |   | (2,051        | ) |   | (3,617    | ) |   | -                    |   |   | (5,668  | )
|Balance, October 2, 2011                  | $ | -      |   | $ | 52,881        |   | $ | 191,696       |   | $ | 39,028    |   | $ | -                    |   | $ | 283,605 |  

Assets not yet utilized in operations include expenditures
incurred to date for plant expansions which are still in process and equipment
not yet placed into service as at the end of the reporting period.

As at September 30, 2012, there were contractual purchase
obligations outstanding of approximately $38.3 million for the acquisition of
property, plant and equipment compared to $54.9 million as of October 2,
2011.

GILDAN 2012 REPORT TO SHAREHOLDERS P.72

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|10.  INTANGIBLE ASSETS AND
  GOODWILL:
|--------------------------------------

Intangible assets

|                         |   | Customer      |  |   |            |  |   |            |  |   |          |  |   |            |  |   |         | 
|------------------------ | - | ------------- |  | - | ---------- |  | - | ---------- |  | - | -------- |  | - | ---------- |  | - | ------- | 
|                         |   | contracts and |  |   |            |  |   |            |  |   |          |  |   | Non-       |  |   |         | 
|                         |   | customer      |  |   |            |  |   | License    |  |   | Computer |  |   | compete    |  |   |         | 
|                         |   | relationships |  |   | Trademarks |  |   | agreements |  |   | software |  |   | agreements |  |   | Total   | 
|                         |   |               |  |   |            |  |   |            |  |   |          |  |   |            |  |   |         | 
|Net carrying amount      |   |               |  |   |            |  |   |            |  |   |          |  |   |            |  |   |         | 
|At September 30, 2012    | $ | 110,567       |  | $ | 102,045    |  | $ | 39,913     |  | $ | 6,996    |  | $ | 460        |  | $ | 259,981 | 
|At October 2, 2011       | $ | 112,266       |  | $ | 94,000     |  | $ | 47,516     |  | $ | 6,561    |  | $ | 1,310      |  | $ | 261,653 | 
|At
      October 4, 2010 | $ | 59,050        |  | $ | -          |  | $ | -          |  | $ | 7,761    |  | $ | -          |  | $ | 66,811  | 

|                                        |   | Customer      |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|--------------------------------------- | - | ------------- |  | - | ---------- |  | - | ---------- |  | - | -------- | - | - | ---------- |  | - | ------- | -
|                                        |   | contracts and |  |   |            |  |   |            |  |   |          |   |   | Non-       |  |   |         |  
|                                        |   | customer      |  |   |            |  |   | License    |  |   | Computer |   |   | compete    |  |   |         |  
|2012                                    |   | relationships |  |   | Trademarks |  |   | agreements |  |   | software |   |   | agreements |  |   | Total   |  
|                                        |   |               |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|Cost                                    |   |               |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|Balance, October 2, 2011                | $ | 128,866       |  | $ | 94,000     |  | $ | 51,000     |  | $ | 26,038   |   | $ | 1,700      |  | $ | 301,604 |  
|Additions                               |   | -             |  |   | 3,345      |  |   | -          |  |   | 2,094    |   |   | -          |  |   | 5,439   |  
|Additions through business acquisitions |   | 5,000         |  |   | 4,700      |  |   | -          |  |   | -        |   |   | -          |  |   | 9,700   |  
|Disposals                               |   | -             |  |   | -          |  |   | -          |  |   | (27      | ) |   | -          |  |   | (27     | )
|Balance, September
      30, 2012       | $ | 133,866       |  | $ | 102,045    |  | $ | 51,000     |  | $ | 28,105   |   | $ | 1,700      |  | $ | 316,716 |  
|                                        |   |               |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|Amortization                            |   |               |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|Balance, October 2, 2011                | $ | 16,600        |  | $ | -          |  | $ | 3,484      |  | $ | 19,477   |   | $ | 390        |  | $ | 39,951  |  
|Amortization for the year               |   | 6,699         |  |   | -          |  |   | 7,603      |  |   | 1,659    |   |   | 850        |  |   | 16,811  |  
|Disposals                               |   | -             |  |   | -          |  |   | -          |  |   | (27      | ) |   | -          |  |   | (27     | )
|Balance, September
      30, 2012       | $ | 23,299        |  | $ | -          |  | $ | 11,087     |  | $ | 21,109   |   | $ | 1,240      |  | $ | 56,735  |  

|                                        |   | Customer      |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|--------------------------------------- | - | ------------- |  | - | ---------- |  | - | ---------- |  | - | -------- | - | - | ---------- |  | - | ------- | -
|                                        |   | contracts and |  |   |            |  |   |            |  |   |          |   |   | Non-       |  |   |         |  
|                                        |   | customer      |  |   |            |  |   | License    |  |   | Computer |   |   | compete    |  |   |         |  
|2011                                    |   | relationships |  |   | Trademarks |  |   | agreements |  |   | software |   |   | agreements |  |   | Total   |  
|                                        |   |               |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|Cost                                    |   |               |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|Balance, October 4, 2010                | $ | 70,866        |  | $ | -          |  | $ | -          |  | $ | 26,453   |   | $ | -          |  | $ | 97,319  |  
|Additions                               |   | -             |  |   | -          |  |   | -          |  |   | 4,776    |   |   | -          |  |   | 4,776   |  
|Additions through business acquisitions |   | 58,000        |  |   | 94,000     |  |   | 51,000     |  |   | -        |   |   | 1,700      |  |   | 204,700 |  
|Disposals                               |   | -             |  |   | -          |  |   | -          |  |   | (5,191   | ) |   | -          |  |   | (5,191  | )
|Balance, October
      2, 2011          | $ | 128,866       |  | $ | 94,000     |  | $ | 51,000     |  | $ | 26,038   |   | $ | 1,700      |  | $ | 301,604 |  
|                                        |   |               |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|Amortization                            |   |               |  |   |            |  |   |            |  |   |          |   |   |            |  |   |         |  
|Balance, October 4, 2010                | $ | 11,816        |  | $ | -          |  | $ | -          |  | $ | 18,692   |   | $ | -          |  | $ | 30,508  |  
|Amortization for the year               |   | 4,784         |  |   | -          |  |   | 3,484      |  |   | 4,733    |   |   | 390        |  |   | 13,391  |  
|Disposals                               |   | -             |  |   | -          |  |   | -          |  |   | (3,948   | ) |   | -          |  |   | (3,948  | )
|Balance, October
      2, 2011          | $ | 16,600        |  | $ | -          |  | $ | 3,484      |  | $ | 19,477   |   | $ | 390        |  | $ | 39,951  |  

GILDAN 2012 REPORT TO SHAREHOLDERS P.73

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|10. INTANGIBLE ASSETS AND GOODWILL
      (continued):
|-----------------------------------------------------

Goodwill

|                                 |   | 2012    |  |   | 2011    | 
|-------------------------------- | - | ------- |  | - | ------- | 
|                                 |   |         |  |   |         | 
|Balance, beginning of period     | $ | 141,933 |  | $ | 10,197  | 
|Goodwill acquired
      (note 5) |   | -       |  |   | 131,736 | 
|Balance, end of period           | $ | 141,933 |  | $ | 141,933 | 

Recoverability of cash-generating units

Goodwill acquired through business acquisitions and trademarks
with indefinite useful lives have been allocated to CGUs that are expected to
benefit from the synergies of the acquisition, as follows:

|                |   | September 30, |  |   | October
      2, |  |   | October
      4, | 
|--------------- | - | ------------- |  | - | ---------------- |  | - | ---------------- | 
|                |   | 2012          |  |   | 2011             |  |   | 2010             | 
|                |   |               |  |   |                  |  |   |                  | 
|Branded Apparel |   |               |  |   |                  |  |   |                  | 
|Goodwill        | $ | 138,445       |  | $ | 138,445          |  | $ | 6,709            | 
|Trademarks      |   | 97,345        |  |   | 94,000           |  |   | -                | 
|                |   | 235,790       |  |   | 232,445          |  |   | 6,709            | 
|                |   |               |  |   |                  |  |   |                  | 
|Printwear       |   |               |  |   |                  |  |   |                  | 
|Goodwill        |   | 3,488         |  |   | 3,488            |  |   | 3,488            | 
|Trademarks      |   | 4,700         |  |   | -                |  |   | -                | 
|                | $ | 8,188         |  | $ | 3,488            |  | $ | 3,488            | 

In assessing whether goodwill and indefinite life intangible
assets are impaired, the carrying amount of the CGUs (including goodwill and
indefinite life intangible assets) are compared to their recoverable amount. The
recoverable amounts of CGUs are based on the higher of the value in use and fair
value less costs to sell. The Company performed the annual impairment review for
goodwill and indefinite life intangible assets as at September 30, 2012, and the
estimated recoverable amounts exceeded the carrying amounts of the CGUs and
there was no impairment identified.

Recoverable amount  Branded ApparelThe Company
determined the recoverable amount of the Branded Apparel CGU based on a value in
use calculation using cash flow projections, which take into account financial
budgets and forecasts approved by senior management covering a five-year period
with a terminal value calculated by discounting the final year in perpetuity.
The key assumptions for the value in use calculation include estimated sales
volumes, selling prices and input costs, as well as discount rates which are
based on estimates of the risks associated with the projected cash flows based
on the best information available as of the date of the impairment test. The
pre-tax discount rate applied to cash flow projections is 15.2% . The growth
rate used to calculate the terminal value is based on growth rates reflecting
inflation ranging from 1% to 2% and do not exceed the long-term historical
growth rate and industry average growth rate. The Company determined that no
reasonably possible change in the assumptions would have resulted in any
impairment of goodwill or indefinite life intangible assets.

GILDAN 2012 REPORT TO SHAREHOLDERS P.74

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|11. BANKING FACILITY:
|---------------------

The Company's subsidiary in Bangladesh, Shahriyar Fabric
Industries Limited, has a banking facility limited to a maximum aggregate amount
of $23.8 million (BDT 1,950,000,000). The banking facility bears interest at a
variable LIBOR-based rate plus a spread ranging from 250 to 400 basis points,
and any borrowings are due on demand. There were no amounts drawn under the line
of credit at September 30, 2012, October 2, 2011 and October 4, 2010.

|12. LONG-TERM DEBT:
|-------------------

The Company has a committed revolving long-term credit facility
of $800 million, on an unsecured basis. Amounts drawn under the facility during
fiscal 2012 bore interest at a variable bankers acceptance or U.S. LIBOR-based
interest rate plus a spread ranging from 125 to 200 basis points. As at
September 30, 2012, $181.0 million (October 2, 2011 - $209.0 million; October 4,
2010 - nil) was drawn under this facility bearing an effective interest rate for
the period of 2.2%, including the impact of interest rate swaps. In addition, an
amount of $6.0 million (October 2, 2011 -$5.8 million; October 4, 2010 - $12.7
million) has been committed against this facility to cover various letters of
credit as described in note 25. The revolving long-term credit facility requires
the Company to comply with certain covenants including maintenance of a net debt
to trailing twelve months EBITDA ratio below 3.0:1, although the credit
agreement provides that this limit may be exceeded in the short term under
certain circumstances, as well as an interest coverage ratio of at least 3.5:1.
EBITDA is defined under the facility as net earnings before interest, income
taxes, depreciation and amortization, with adjustments for certain non-recurring
items. As at September 30, 2012, the Company was in compliance with these
covenants.

In November 2012, the Company amended its revolving long-term
credit facility to extend the maturity date from June 2016 to January 2018. The
amended agreement provides for an annual extension clause, subject to the
approval of the lenders. It also provides for a reduction in drawn pricing when
the net debt to EBITDA ratio is below 1.0:1, and reduced undrawn pricing.

|13. EMPLOYEE BENEFIT
  OBLIGATIONS:
|-----------------------------------

|                               |   | September 30, |  |   | October
      2, |  |   | October
      4, | 
|------------------------------ | - | ------------- |  | - | ---------------- |  | - | ---------------- | 
|                               |   | 2012          |  |   | 2011             |  |   | 2010             | 
|                               |   |               |  |   |                  |  |   |                  | 
|Defined benefit pension plan   | $ | 5,871         |  | $ | 6,419            |  | $ | 1,233            | 
|Statutory severance obligation |   | 12,246        |  |   | 12,586           |  |   | 10,231           | 
|Defined contribution plan      |   | 1,495         |  |   | 1,241            |  |   | 715              | 
|                               | $ | 19,612        |  | $ | 20,246           |  | $ | 12,179           | 

|(a) | Defined benefit plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company has a funded qualified defined benefit
      pension plan (Retirement Plan) covering certain employees of Gold Toe
      Moretz. At the time of the acquisition of Gold Toe Moretz in April 2011,
      the Retirement Plan was in a net deficit position of $17.1 million.
      Managements intention was to fully fund the deficit, and subsequently
      liquidate and wind-up the Retirement Plan, and steps taken in this regard
      since the date of acquisition have included funding contributions of $19
      million in fiscal 2011 and the de-risking of the Retirement Plan through
      settlement payments totaling $8.3 million for fiscal 2012 (2011 - $39
      million for the period from April 15, 2011 to October 2, 2011). An
      actuarial valuation was performed at September 30, 2012, October 2, 2011
      and at the date of acquisition. The last valuation for funding purposes
      was performed on January 1, 2012, and the next valuation for funding
      purposes is expected to be performed on January 1, 2013. The Company has
      not made funding contributions in fiscal 2012, but expects to contribute
      approximately $6.5 million to the Retirement Plan in fiscal 2013 followed
      by the termination and wind-up of the Retirement Plan shortly
      thereafter.

GILDAN 2012 REPORT TO SHAREHOLDERS P.75

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

13. EMPLOYEE BENEFIT OBLIGATIONS (continued):

|(a) | Defined benefit plan
(continued):
|--- | ---------------------------------

The funded status of the Companys
Retirement Plan was as follows:

| |                                                                                       |   | 2012   |   |   | 2011    |  
| | ------------------------------------------------------------------------------------- | - | ------ | - | - | ------- | -
| |                                                                                       |   |        |   |   |         |  
| | Benefit obligation, beginning of
      year(1)                                        | $ | 18,983 |   | $ | 51,249  |  
| | Interest cost                                                                         |   | 595    |   |   | 1,051   |  
| | Actuarial (gain) loss                                                                 |   | (765   | ) |   | 3,390   |  
| | Settlement (gain) charge                                                              |   | (725   | ) |   | 4,176   |  
| | Benefits paid                                                                         |   | (180   | ) |   | (1,879  | )
| | Plan settlements                                                                      |   | (8,337 | ) |   | (39,004 | )
| | Benefit obligation, end of year                                                       | $ | 9,571  |   | $ | 18,983  |  
| |                                                                                       |   |        |   |   |         |  
| | Fair value of plan assets, beginning of
      year(1)                                 | $ | 12,564 |   | $ | 34,181  |  
| | Employer contributions                                                                |   | -      |   |   | 19,000  |  
| | Plan settlements                                                                      |   | (8,337 | ) |   | (39,005 | )
| | Expected return on plan assets                                                        |   | 273    |   |   | 543     |  
| | Actuarial loss                                                                        |   | (620   | ) |   | (276    | )
| | Benefits paid                                                                         |   | (180   | ) |   | (1,879  | )
| | Fair value of plan assets, end of year                                                | $ | 3,700  |   | $ | 12,564  |  
| |                                                                                       |   |        |   |   |         |  
| | Funded status and plan deficit / defined benefit pension
      liability, end of year | $ | 5,871  |   | $ | 6,419   |  
| | (1) As at April 15, 2011 for fiscal
2011                                              |  

The plan assets are invested entirely
in high quality money market funds. The expected rate of return on plan assets
of 3.5% is based on published capital market assumptions for high quality money
market funds. The actual loss on plan assets for fiscal 2012 was $0.3 million
(2011 - actual gain of $0.3 million).

The net periodic pension (gain) expense
of the Companys Retirement Plan for the years ended September 30, 2012 and
October 2, 2011 includes the following components:

| |                                                                                                           |   | 2012 |   |   | 2011  |  
| | --------------------------------------------------------------------------------------------------------- | - | ---- | - | - | ----- | -
| |                                                                                                           |   |      |   |   |       |  
| | Interest cost                                                                                             | $ | 595  |   | $ | 1,051 |  
| | Expected return on plan assets                                                                            |   | (273 | ) |   | (543  | )
| | Settlement (gain) charge                                                                                  |   | (725 | ) |   | 4,176 |  
| | Net periodic
      pension (gain) expense - included in restructuring and acquisition-related
      costs | $ | (403 | ) | $ | 4,684 |  

Weighted-average assumptions to
determine benefit obligations and net periodic benefit cost:

| |                               |  | 2012  |  |  | 2011  | 
| | ----------------------------- |  | ----- |  |  | ----- | 
| |                               |  |       |  |  |       | 
| | Benefit obligation:           |  |       |  |  |       | 
| | Discount rate                 |  | 3.40% |  |  | 4.42% | 
| |                               |  |       |  |  |       | 
| | Net periodic benefit cost:    |  |       |  |  |       | 
| | Discount rate                 |  | 4.37% |  |  | 5.00% | 
| | Rate of return on plan assets |  | 3.50% |  |  | 3.50% | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.76

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|13. EMPLOYEE BENEFIT OBLIGATIONS
    (continued):
|-------------------------------------------------

|(b) | Statutory severance:
|--- | --------------------

| |                                       |   | 2012    |   |   | 2011   |  
| | ------------------------------------- | - | ------- | - | - | ------ | -
| |                                       |   |         |   |   |        |  
| | Benefit obligation, beginning of year | $ | 12,586  |   | $ | 10,231 |  
| | Service cost                          |   | 7,691   |   |   | 8,088  |  
| | Interest cost                         |   | 3,093   |   |   | 2,517  |  
| | Actuarial (gain) loss                 |   | (178    | ) |   | 1,643  |  
| | Benefits paid                         |   | (10,946 | ) |   | (9,893 | )
| | Benefit
      obligation, end of year | $ | 12,246  |   | $ | 12,586 |  

|    | A discount rate of approximately 12% was used to
      calculate the accumulated benefit obligation of statutory
  severance.                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                               
|(c) | Defined contribution plan:                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                               
|    | During fiscal 2012, defined contribution expenses were
      $2.0 million (2011 - $2.1 million).                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                               
|(d) | Actuarial losses recognized in other comprehensive
      income:                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                               
|    | The cumulative amount of actuarial losses recognized in
      other comprehensive income as at September 30, 2012 was $3.6 million
      (October 2, 2011 - $3.9 million) which have been reclassified to retained
      earnings in the period in which they were
recognized.

|14. PROVISIONS:
|---------------

|                                           |   | 2012   | 
|------------------------------------------ | - | ------ | 
|                                           |   |        | 
|Balance, beginning of year                 | $ | 8,226  | 
|Assumed in a business acquisition (note 5) |   | 4,500  | 
|Accretion of interest                      |   | 316    | 
|Balance, end of
      year                 | $ | 13,042 | 

Provisions include estimated future costs of decommissioning
and site restoration for certain assets located at the Companys textile and
sock facilities and a distribution centre in the U.S. for which the timing of
settlement is uncertain, but has been estimated to be in excess of twenty years.

|15. EQUITY:
|-----------

|(a) | Shareholder rights plan:                                                                                                                                                                                                                                                               
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                        
|    | The Company has a shareholder rights plan which provides
      the Board of Directors and the shareholders with additional time to assess
      any unsolicited take-over bid for the Company and, where appropriate,
      pursue other alternatives for maximizing shareholder value.
|    |                                                                                                                                                                                                                                                                                        
|(b) | Accumulated other comprehensive income:                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                        
|    | Accumulated other comprehensive income includes the
      changes in the fair value of the effective portion of qualifying cash flow
      hedging instruments outstanding at the end of the
period.                                                                                   

GILDAN 2012 REPORT TO SHAREHOLDERS P.77

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|15. EQUITY
(continued):
|-----------------------

|(c) | Share capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Authorized:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Common shares, authorized without limit as to number and
      without par value. First preferred shares, without limit as to number and
      without par value, issuable in series and non-voting. Second preferred
      shares, without limit as to number and without par value, issuable in
      series and non-voting. As at September 30, 2012 and October 2, 2011 none
      of the first and second preferred shares were issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Issued:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | As at September 30, 2012, there were 121,386,090 common
      shares (October 2, 2011 - 121,330,544) issued and outstanding, which are
      net of 210,400 common shares (October 2, 2011 - 79,108) that have been
      purchased and are held in trust as described in note 15(e).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(d) | Normal course issuer bid:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | On December 2, 2011 the TSX approved the renewal of the
      Companys normal course issuer bid to purchase up to one million common
      shares, representing approximately 0.8% of its issued and outstanding
      common shares, in accordance with the requirements of the TSX. Common
      shares purchased under the NCIB are cancelled. During fiscal 2012, there
      were no repurchases under the NCIB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | During fiscal 2011, the Company repurchased and cancelled
      a total of 0.4 million common shares for a total cost of $10.5 million. Of
      the total cost, $0.3 million was charged to share capital and $10.2
      million was charged to retained earnings as there was no amount of
      contributed surplus attributable to these common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(e) | Common shares purchased as settlement for non-Treasury
      RSUs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In September 2011, the Company established a trust for
      the purpose of settling the vesting of non-Treasury RSUs. For non-Treasury RSUs
      that are to be settled in common shares
      in lieu of cash, the Company directs the trustee to purchase common shares of the
      Company on the open market to be held in trust for and on behalf of the
      holders of non-Treasury RSUs until they are delivered for settlement, when
      the non-Treasury RSUs vest. At the time the common shares are purchased,
      the amounts previously credited to accounts payable and accrued
      liabilities for the non-Treasury RSUs initially expected to be settled in
      cash are transferred to contributed surplus. For accounting purposes, the
      common shares are considered as held in treasury, and recorded as a
      temporary reduction of outstanding common shares and share capital. Upon
      delivery of the common shares for settlement of the non-Treasury RSUs, the
      number of common shares outstanding is increased, and the amount in
      contributed surplus is transferred to share capital. The common shares
      purchased as settlement for non-Treasury RSUs were as
  follows:

| |                            |  |        |   |   |        |   |   | 2012    |  |  |        |  |   |        |  |   | 2011    | 
| | -------------------------- |  | ------ | - | - | ------ | - | - | ------- |  |  | ------ |  | - | ------ |  | - | ------- | 
| |                            |  |        |   |   |        |   |   | Average |  |  |        |  |   |        |  |   | Average | 
| |                            |  | Shares |   |   | Amount |   |   | cost    |  |  | Shares |  |   | Amount |  |   | Cost    | 
| |                            |  |        |   |   |        |   |   |         |  |  |        |  |   |        |  |   |         | 
| | Balance, beginning of year |  | 79     |   | $ | 2,152  |   | $ | 27.24   |  |  | -      |  | $ | -      |  | $ | -       | 
| | Distributed                |  | (79    | ) |   | (2,152 | ) |   | 27.24   |  |  | -      |  |   | -      |  |   | -       | 
| | Purchased                  |  | 210    |   |   | 5,990  |   |   | 28.52   |  |  | 79     |  |   | 2,152  |  |   | 27.24   | 
| | Balance, end of
      year |  | 210    |   | $ | 5,990  |   | $ | 28.52   |  |  | 79     |  | $ | 2,152  |  | $ | 27.24   | 

Subsequent to year end, the Company
distributed 205,536 common shares with an average cost of $28.52 per share as
settlement for the vesting of the equivalent number of non-Treasury RSUs.

|16. FINANCIAL
INSTRUMENTS:
|--------------------------

Disclosures relating to the nature and extent of the Companys
exposure to risks arising from financial instruments, including credit risk,
liquidity risk, foreign currency risk and interest rate risk, as well as risks
arising from commodity prices, and how the Company manages those risks, are
included in the section entitled Financial Risk Management of the Managements
Discussion and Analysis of the Companys operations, performance and financial
position as at September 30, 2012. Accordingly, these disclosures are
incorporated into these consolidated financial statements by cross-reference.

GILDAN 2012 REPORT TO SHAREHOLDERS P.78

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|16. FINANCIAL INSTRUMENTS
  (continued):
|----------------------------------------

|(a) | Financial instruments  carrying amounts and fair
      values:                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                   
|    | The carrying amounts and fair values of financial assets
      and liabilities included in the consolidated statements of financial
      position are as follows:

| |                                                                                                  |   | September 30, |  |   | October
      2, |  |   | October
      4, | 
| | ------------------------------------------------------------------------------------------------ | - | ------------- |  | - | ---------------- |  | - | ---------------- | 
| |                                                                                                  |   | 2012          |  |   | 2011             |  |   | 2010             | 
| |                                                                                                  |   |               |  |   |                  |  |   |                  | 
| | Financial assets                                                                                 |   |               |  |   |                  |  |   |                  | 
| | Loans and receivables:                                                                           |   |               |  |   |                  |  |   |                  | 
| | Cash and cash equivalents                                                                        | $ | 70,410        |  | $ | 82,025           |  | $ | 250,843          | 
| | Trade accounts receivable                                                                        |   | 260,595       |  |   | 191,594          |  |   | 145,684          | 
| | Other current assets                                                                             |   | 8,561         |  |   | 5,929            |  |   | 7,571            | 
| | Long-term non-trade receivable included in other
      non-current assets                        |   | 509           |  |   | 1,120            |  |   | 953              | 
| | Restricted cash related to the
      acquisition of Prewett included in other non-current assets |   | -             |  |   | -                |  |   | 5,788            | 
| | Derivative financial instruments designated as
      effective hedging instruments               |   | 133           |  |   | 3,299            |  |   | 1,099            | 
| |                                                                                                  |   |               |  |   |                  |  |   |                  | 
| | Financial liabilities                                                                            |   |               |  |   |                  |  |   |                  | 
| | Other financial liabilities:                                                                     |   |               |  |   |                  |  |   |                  | 
| | Accounts payable and accrued liabilities                                                         | $ | 247,622       |  | $ | 290,103          |  | $ | 176,707          | 
| | Long-term debt - bearing interest at
      variable rates                                        |   | 181,000       |  |   | 209,000          |  |   | -                | 
| | Derivative financial instruments designated as
      effective hedging instruments               |   | 7,870         |  |   | 4,007            |  |   | 3,088            | 
| | Contingent consideration                                                                         |   | 950           |  |   | 3,850            |  |   | -                | 

|    | The Company has determined that the fair value of its
      short-term financial assets and liabilities approximates their respective
      carrying amounts as at the reporting dates because of the short-term
      maturity of those instruments. The fair values of the long-term receivable
      and the restricted cash included in other assets, and the Companys
      interest-bearing financial liabilities also approximate their respective
      carrying amounts. The fair values of cash and cash equivalents and
      derivative financial instruments were measured using Level 2 inputs in the
      fair value hierarchy. In determining the fair value of financial assets
      and financial liabilities, including derivative financial instruments, the
      Company takes into account its own credit risk and the credit risk of the
      counterparty.                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(b) | Derivative financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | During fiscal 2012 and fiscal 2011, the Company entered
      into forward foreign exchange contracts and zero-cost collar options in
      order to reduce the exposure of forecasted cash flows in currencies other
      than the U.S. dollar. The forward foreign exchange contracts and the
      intrinsic value of zero-cost collar options were designated as cash flow
      hedges and qualified for hedge accounting. The forward foreign exchange
      contracts outstanding as at September 30, 2012 consisted primarily of
      contracts to reduce the exposure to fluctuations in Euros, Canadian
      dollars, Pounds sterling, Australian dollars and Mexican pesos, against
      the U.S. dollar. For fiscal 2012 and fiscal 2011, the derivatives
      designated as cash flow hedges were considered to be fully effective and
      no ineffectiveness has been recognized in net
earnings.

GILDAN 2012 REPORT TO SHAREHOLDERS P.79

---



| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|16. FINANCIAL INSTRUMENTS
  (continued):
|----------------------------------------

|(b) | Derivative financial instruments
    (continued):                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                              
|    | The following table summarizes the Companys commitments
      to buy and sell foreign currencies as at September 30,
  2012:

Carrying and fair value
    
    
    MaturityNotional
    
    
    
    
    
    
    
    
    
    
    
    Accountsforeign
    
    
    
    
    
    
    
    
    
    
    
    payablecurrency
    
    
    Average
    
    
    Notional
    
    
    Other
    
    
    andamount
    
    
    exchange
    
    
    U.S. $
    
    
    current
    
    
    accrued
    
    
    0 to 12September 30, 2012
    
    equivalent
    
    
    rate
    
    
    equivalent
    
    
    assets
    
    
    liabilities
    
    
    monthsForward foreign exchange
      contracts designated as cash flow hedges:Sell EUR/Buy USD
    
    34,000
    
    
    1.2553
    
    $
    42,679
    
    $
    20
    
    $
    (1,326
    )
    $
    (1,306
    )Sell CAD/Buy USD
    
    27,500
    
    
    1.0089
    
    
    27,744
    
    
    52
    
    
    (224
    )
    
    (172
    )Sell GBP/Buy USD
    
    16,400
    
    
    1.5899
    
    
    26,074
    
    
    -
    
    
    (523
    )
    
    (523
    )Sell AUD/Buy USD
    
    8,400
    
    
    1.0325
    
    
    8,673
    
    
    45
    
    
    -
    
    
    45Sell
      MXN/Buy USD
    
    36,000
    
    
    0.0770
    
    
    2,771
    
    
    16
    
    
    -
    
    
    16$
    107,941
    
    $
    133
    
    $
    (2,073
    )
    $
    (1,940
    )


During fiscal 2011, the Company entered
into a series of interest rate swap contracts to fix the variable interest rates
on the designated interest payments of a portion of the borrowings under the
revolving long-term credit facility. As at September 30, 2012, the interest rate
swap contracts were designated as cash flow hedges and qualified for hedge
accounting. The following table summarizes the outstanding interest rate swap
contracts as at September 30, 2012:

Notional
    
    
    
    
    
    
    
    
    
    
    
    
    
    Carrying
      and fair valueamount of
    
    
    
    
    
    
    
    Fixed
    
    
    Floating
    
    
    Accounts payableborrowings
    
    Maturity date
    
    
    Pay /
      Receive
    
    
    rate
    
    
    rate
    
    
    and
      accrued liabilities$
      125,000
    
    June 3, 2016
    
    
    Pay fixed rate / 
    Receive floating rate
    
    
    1.08% to 1.88%
    
    
    1-month U.S. LIBOR
    
    $
    (5,797
    )


|(c) | Financial expenses,
net:
|--- | ------------------------

| |                                                                                    |   | 2012   |  |   | 2011   |  
| | ---------------------------------------------------------------------------------- | - | ------ |  | - | ------ | -
| |                                                                                    |   |        |  |   |        |  
| | Interest expense on financial liabilities
      recorded at amortized cost         | $ | 7,315  |  | $ | 3,238  |  
| | Bank and other financial charges                                                   |   | 3,676  |  |   | 2,216  |  
| | Interest accretion on discounted provision                                         |   | 324    |  |   | 275    |  
| | Foreign exchange loss (gain) (i)                                                   |   | 283    |  |   | (1,098 | )
| | Derivative loss on financial instruments not designated for
      hedge accounting |   | -      |  |   | 1,511  |  
| |                                                                                    | $ | 11,598 |  | $ | 6,142  |  

| | (i) | Foreign exchange loss (gain)
| | --- | ----------------------------

| |                                                                |   | 2012 |  |   | 2011   |  
| | -------------------------------------------------------------- | - | ---- |  | - | ------ | -
| |                                                                |   |      |  |   |        |  
| | Loss (gain) relating to financial assets
      and liabilities | $ | 238  |  | $ | (1,104 | )
| | Other foreign
      exchange loss                              |   | 45   |  |   | 6      |  
| |                                                                | $ | 283  |  | $ | (1,098 | )

GILDAN 2012 REPORT TO SHAREHOLDERS P.80

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|16. FINANCIAL INSTRUMENTS (continued):
|--------------------------------------

|(d) | Other comprehensive income
  (loss):
|--- | ------------------------------------

| |                                                                                              |   | 2012   |   |   | 2011   |  
| | -------------------------------------------------------------------------------------------- | - | ------ | - | - | ------ | -
| |                                                                                              |   |        |   |   |        |  
| | Net loss on derivatives designated as cash
      flow hedges                                 | $ | (4,955 | ) | $ | (4,448 | )
| | Income taxes                                                                                 |   | 50     |   |   | 45     |  
| |                                                                                              |   |        |   |   |        |  
| | Amounts reclassified from other comprehensive income to net
      earnings, and included in: |   |        |   |   |        |  
| | Net sales                                                                                    |   | (2,993 | ) |   | 5,177  |  
| | Selling, general and administrative
      expenses                                           |   | (563   | ) |   | (1,045 | )
| | Financial expenses, net                                                                      |   | 2,029  |   |   | 1,360  |  
| | Income taxes                                                                                 |   | 33     |   |   | (55    | )
| | Cash flow hedges (loss) income                                                               |   | (6,399 | ) |   | 1,034  |  
| |                                                                                              |   |        |   |   |        |  
| | Actuarial gain (loss) on employee benefit
      obligations                                  |   | 323    |   |   | (5,309 | )
| | Income taxes                                                                                 |   | -      |   |   | 1,357  |  
| |                                                                                              |   |        |   |   |        |  
| | Other
      comprehensive loss                                                               | $ | (6,076 | ) | $ | (2,918 | )

As at September 30, 2012, approximately
$3.0 million of net losses presented in accumulated other comprehensive income
are expected to be reclassified to net earnings within the next twelve
months.

|17. | SHARE-BASED
COMPENSATION:
|--- | -------------------------

|(a) | Employee share purchase plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company has employee share purchase plans which allow
      eligible employees to authorize payroll deductions of up to 10% of their
      salary to purchase from Treasury, common shares of the Company at a price
      of 90% of the then current share price as defined in the plans. Employees
      purchasing shares under the plans subsequent to January 1, 2008 must hold
      the shares for a minimum of two years. The Company has reserved 2,500,000
      common shares for issuance under the plans. As at September 30, 2012, a
      total of 295,493 shares (October 2, 2011 - 266,925) were issued under
      these plans. Included as compensation costs in selling, general and
      administrative expenses is $0.1 million (2011 - $0.1 million) relating to
      the employee share purchase plans.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | Stock options and restricted share
units:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Companys Long-Term Incentive Plan (the "LTIP")
      includes stock options and restricted share units. The LTIP allows the
      Board of Directors to grant stock options, dilutive restricted share units
      ("Treasury RSUs") and non- dilutive restricted share units ("non-Treasury
      RSUs") to officers and other key employees of the Company and its
      subsidiaries. On February 2, 2006, the shareholders of the Company
      approved an amendment to the LTIP to fix at 6,000,316 the number of common
      shares that are issuable pursuant to the exercise of stock options and the
      vesting of Treasury RSUs. As at September 30, 2012, 2,306,592 common
      shares remained authorized for future issuance under this plan.                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The exercise price payable for each common share covered
      by a stock option is determined by the Board of Directors at the date of
      the grant, but may not be less than the closing price of the common shares
      of the Company on the trading day immediately preceding the effective date
      of the grant. Stock options granted since fiscal 2007 vest equally
      beginning on the second, third, fourth and fifth anniversary of the grant
      date, with the exception of a special one-time award of 409,711 options
      which cliff vest on the fifth anniversary of the grant date, and expire no
      more than seven or ten years after the date of the grant. All stock
      options granted prior to fiscal 2007 have fully
vested.                                                            

GILDAN 2012 REPORT TO SHAREHOLDERS P.81

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|17. SHARE-BASED COMPENSATION
  (continued):
|-------------------------------------------

|(b) | Stock options and restricted share units
      (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Holders of Treasury RSUs, non-Treasury RSUs and deferred
      share units are entitled to dividends declared by the Company which are
      recognized in the form of additional equity awards equivalent in value to
      the dividends paid on common shares. The vesting conditions of the
      additional equity awards are subject to the same performance objectives
      and other terms and conditions as the underlying equity awards. The
      additional awards related to outstanding Treasury RSUs and non-Treasury
      RSUs expected to be settled in common shares are credited to contributed
      surplus when the dividends are declared, whereas the additional awards
      related to outstanding non- Treasury RSUs expected to be settled in cash
      and deferred share units are credited to accounts payable and accrued
      liabilities.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Outstanding stock options were as
  follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                                               |  |        |   |   | Weighted
      average | 
| | --------------------------------------------- |  | ------ | - | - | ---------------------- | 
| |                                               |  |        |   |   | exercise price         | 
| |                                               |  | Number |   |   | (CA$)                  | 
| |                                               |  |        |   |   |                        | 
| | Stock options outstanding, October 4, 2010    |  | 1,299  |   | $ | 19.57                  | 
| | Changes in outstanding stock options:         |  |        |   |   |                        | 
| | Granted                                       |  | 69     |   |   | 28.64                  | 
| | Exercised                                     |  | (379   | ) |   | 8.72                   | 
| | Forfeited                                     |  | (28    | ) |   | 26.88                  | 
| | Stock options outstanding, October 2, 2011    |  | 961    |   |   | 24.28                  | 
| | Changes in outstanding stock options:         |  |        |   |   |                        | 
| | Granted                                       |  | 190    |   |   | 27.20                  | 
| | Exercised                                     |  | (56    | ) |   | 14.09                  | 
| | Forfeited                                     |  | (41    | ) |   | 28.50                  | 
| | Stock options outstanding, September 30, 2012 |  | 1,054  |   | $ | 25.18                  | 

As at September 30, 2012, 246,006
outstanding options were exercisable at the weighted average exercise price of
CA$28.58 (October 2, 2011 - 244,296 options at CA$27.25) . For stock options
exercised during fiscal 2012, the weighted average share price at the date of
exercise was CA$25.09 (2011 - CA$32.22) . Based on the Black-Scholes option
pricing model, the grant date weighted average fair value of options granted
during the twelve months ended September 30, 2012 was $11.42 (October 2, 2011 -
$13.36) . Expected volatilities are based on the historical volatility of
Gildans share price. The risk-free rate used is equal to the yield available on
Government of Canada bonds at the date of grant with a term equal to the
expected life of the options.

| |                         |   | 2012       |  |   | 2011       | 
| | ----------------------- | - | ---------- |  | - | ---------- | 
| |                         |   |            |  |   |            | 
| | Exercise price          | $ | 27.20      |  | $ | 28.64      | 
| | Risk-free interest rate |   | 1.31%      |  |   | 2.01%      | 
| | Expected volatility     |   | 52.75%     |  |   | 52.37%     | 
| | Expected life           |   | 5.25 years |  |   | 5.25 years | 
| | Expected dividend yield |   | 1%         |  |   | -          | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.82

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|17. SHARE-BASED COMPENSATION
  (continued):
|-------------------------------------------

|(b) | Stock options and restricted share units
      (continued):                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                       
|    | The following table summarizes information about stock
      options issued and outstanding and exercisable at September 30,
    2012:

| |                             |  | Options issued and outstanding |  |  | Options exercisable    | 
| | --------------------------- |  | ------------------------------ |  |  | ---------------------- | 
| |                             |  |                                |  |  | Remaining              | 
| | Exercise prices
      (CA$) |  | Number                         |  |  | contractual life (yrs) | 
| |                             |  |                                |  |  |                        | 
| | $ 20.12                     |  | 81                             |  |  | 4                      | 
| | $ 22.13                     |  | 410                            |  |  | 7                      | 
| | $ 23.49                     |  | 149                            |  |  | 3                      | 
| | $ 27.17                     |  | 95                             |  |  | 1                      | 
| | $ 27.20                     |  | 178                            |  |  | 6                      | 
| | $ 28.64                     |  | 60                             |  |  | 5                      | 
| | $
      39.39               |  | 81                             |  |  | 2                      | 
| |                             |  | 1,054                          |  |  |                        | 

A Treasury RSU represents the right of
an individual to receive one common share on the vesting date without any
monetary consideration being paid to the Company. With limited exceptions, all
Treasury RSUs awarded to date vest within a five-year vesting period. The
vesting of at least 50% of each Treasury RSU grant is contingent on the
achievement of performance conditions that are primarily based on the Companys
average return on assets performance for the period as compared to the
S&P/TSX Capped Consumer Discretionary Index, excluding income trusts, or as
determined by the Board of Directors.

Outstanding Treasury RSUs were as
follows:

| |                                                                  |  |        |   |   | Weighted
      average    | 
| | ---------------------------------------------------------------- |  | ------ | - | - | ------------------------- | 
| |                                                                  |  | Number |   |   | fair
      value per unit | 
| |                                                                  |  |        |   |   |                           | 
| | Treasury RSUs outstanding, October 4, 2010                       |  | 748    |   | $ | 19.93                     | 
| | Changes in outstanding Treasury RSUs:                            |  |        |   |   |                           | 
| | Granted                                                          |  | 62     |   |   | 35.40                     | 
| | Granted for dividends declared                                   |  | 6      |   |   | 29.93                     | 
| | Settled through the
      issuance of common shares              |  | (26    | ) |   | 22.68                     | 
| | Forfeited                                                        |  | (29    | ) |   | 25.78                     | 
| | Treasury RSUs granted as contingent
      consideration (note 5) |  | 150    |   |   | 35.40                     | 
| | Treasury RSUs outstanding, October 2, 2011                       |  | 911    |   |   | 23.34                     | 
| | Changes in outstanding Treasury RSUs:                            |  |        |   |   |                           | 
| | Granted                                                          |  | 68     |   |   | 26.60                     | 
| | Granted for dividends
      declared                             |  | 10     |   |   | 25.10                     | 
| | Settled through the issuance of common
      shares              |  | (102   | ) |   | 27.32                     | 
| | Forfeited                                                        |  | (3     | ) |   | 27.61                     | 
| | Treasury RSUs
      outstanding, September 30, 2012              |  | 884    |   | $ | 23.13                     | 

As at September 30, 2012 and October 2,
2011, none of the awarded and outstanding Treasury RSUs were vested.

GILDAN 2012 REPORT TO SHAREHOLDERS P.83

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|17.  SHARE-BASED COMPENSATION
      (continued):
|------------------------------------------------

|(b) | Stock options and restricted share units
      (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The compensation expense included in selling, general and
      administrative expenses and cost of sales, in respect of the options and
      Treasury RSUs, for fiscal 2012 was $4.6 million (2011 - $4.9 million). The
      counterpart has been recorded as contributed surplus. When the underlying
      shares are issued to the employees, the amounts previously credited to
      contributed surplus are transferred to share capital. As described in note
      5, the compensation expense excludes the value of 150,000 Treasury RSUs
      granted in connection with the acquisition of Gold Toe Moretz as they are
      considered contingent consideration.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Outstanding non-Treasury RSUs were as
  follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| |                                                      |  | Number |  
| | ---------------------------------------------------- |  | ------ | -
| |                                                      |  |        |  
| | Non-Treasury RSUs outstanding, October 4,
      2010 |  | 313    |  
| | Changes in outstanding non-Treasury RSUs:            |  |        |  
| | Granted                                              |  | 151    |  
| | Granted for dividends declared                       |  | 3      |  
| | Settled                                              |  | (29    | )
| | Forfeited                                            |  | (42    | )
| | Non-Treasury RSUs outstanding, October 2,
      2011 |  | 396    |  
| | Changes in outstanding non-Treasury RSUs:            |  |        |  
| | Granted                                              |  | 247    |  
| | Granted for dividends declared                       |  | 7      |  
| | Settled                                              |  | (94    | )
| | Forfeited                                            |  | (27    | )
| | Non-Treasury RSUs outstanding, September 30, 2012    |  | 529    |  

|    | Non-Treasury RSUs have the same features as Treasury
      RSUs, except that their vesting period is a maximum of three years and
      they can be settled in cash based on the Companys share price on the
      vesting date, or through the delivery of common shares purchased on the
      open market. The settlement amount for non-Treasury RSUs expected to be
      settled in cash is based on the Company's five-day average share price at
      the vesting date. Beginning in fiscal 2010, 100% of non-Treasury RSUs
      awarded to executive officers have vesting conditions that are dependent
      upon the financial performance of the Company relative to a benchmark
      group of Canadian publicly listed companies. In addition, up to two times
      the actual number of non-Treasury RSUs awarded to executive officers can
      vest if exceptional financial performance is achieved. As at September 30,
      2012 and October 2, 2011, none of the outstanding non-Treasury RSUs were
      vested.                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The compensation expense included in selling, general and
      administrative expenses and cost of sales, in respect of the non-Treasury
      RSUs, for fiscal 2012 was $6.1 million (2011 - $3.7 million). As at
      September 30, 2012, 318,923 non-Treasury RSUs (October 2, 2011  317,377)
      were expected to be settled in cash, for which a recognized amount of $4.3
      million (October 2, 2011 - $3.9 million) is included in accounts payable
      and accrued liabilities, based on a fair value per non-Treasury RSU of
      $31.68.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(c) | Deferred share unit plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company has a deferred share unit plan for
      independent members of the Companys Board of Directors who must receive
      at least 50% of their annual board retainers in the form of deferred share
      units ("DSUs"). The value of these DSUs is based on the Companys share
      price at the time of payment of the retainers or fees. DSUs granted under
      the plan will be redeemable and the value thereof payable in cash only
      after the director ceases to act as a director of the Company. As at
      September 30, 2012, there were 110,322 (October 2, 2011 - 78,416; October
      4, 2010 - 53,602) DSUs outstanding at a value of $3.5 million (October 2,
      2011 - $2.0 million; October 4, 2010 - $1.5 million). This amount is
      included in accounts payable and accrued liabilities. The DSU obligation
      is adjusted each quarter based on the market value of the Companys common
      shares. The Company includes the cost of the DSU plan in selling, general
      and administrative expenses.

GILDAN 2012 REPORT TO SHAREHOLDERS P.84

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|17. SHARE-BASED COMPENSATION
  (continued):
|-------------------------------------------

|(c) | Deferred share unit plan (continued):         
|--- | ----------------------------------------------
|    |                                               
|    | Changes in outstanding DSUs were as
  follows:

| |                                            |  | Number | 
| | ------------------------------------------ |  | ------ | 
| |                                            |  |        | 
| | DSUs outstanding, October 4, 2010          |  | 54     | 
| | Granted                                    |  | 24     | 
| | DSUs outstanding, October 2, 2011          |  | 78     | 
| | Granted                                    |  | 31     | 
| | Granted for dividends declared             |  | 1      | 
| | DSUs outstanding,
      September 30, 2012 |  | 110    | 

|18. SUPPLEMENTARY INFORMATION RELATING TO THE
      NATURE OF EXPENSES:
|-----------------------------------------------------------------------

|(a) | Selling, general and administrative
    expenses:
|--- | -------------------------------------------------

| |                         |   | 2012    |  |   | 2011    | 
| | ----------------------- | - | ------- |  | - | ------- | 
| |                         |   |         |  |   |         | 
| | Selling expenses        | $ | 75,206  |  | $ | 50,397  | 
| | Administrative expenses |   | 89,601  |  |   | 93,132  | 
| | Distribution expenses   |   | 61,228  |  |   | 55,329  | 
| |                         | $ | 226,035 |  | $ | 198,858 | 

|(b) | Employee benefit
expenses:
|--- | --------------------------

| |                              |   | 2012    |  |   | 2011    | 
| | ---------------------------- | - | ------- |  | - | ------- | 
| |                              |   |         |  |   |         | 
| | Short-term employee benefits | $ | 254,994 |  | $ | 239,958 | 
| | Share-based payments         |   | 10,970  |  |   | 8,689   | 
| | Post-employment benefits     |   | 21,344  |  |   | 20,055  | 
| |                              | $ | 287,308 |  | $ | 268,702 | 

|(c) | Lease expense:                                                                                                                                                                                                 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                
|    | During the year ended September 30, 2012 an amount of
      $14.0 million was recognized in the statement of earnings and
      comprehensive income relating to operating leases (2011 - $10.2
      million).

GILDAN 2012 REPORT TO SHAREHOLDERS P.85

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|19. RESTRUCTURING AND ACQUISITION-RELATED COSTS,
      AND ASSETS HELD FOR SALE:
|--------------------------------------------------------------------------------

Restructuring and acquisition-related costs are presented in
the following table, and are comprised of costs directly related to the closure
of business locations or the relocation of business activities, changes in
management structure, as well as transaction, exit and integration costs
incurred pursuant to business acquisitions.

|                                                                                                    |   |              |   |   | Business       |   |   |        |  
|--------------------------------------------------------------------------------------------------- | - | ------------ | - | - | -------------- | - | - | ------ | -
|                                                                                                    |   |              |   |   | acquisitions   |   |   |        |  
|                                                                                                    |   | Facility     |   |   | and changes in |   |   |        |  
|                                                                                                    |   | closures and |   |   | management     |   |   |        |  
|2012                                                                                                |   | relocations  |   |   | structure      |   |   | Total  |  
|                                                                                                    |   |              |   |   |                |   |   |        |  
|Gain on disposal of assets held for sale                                                            | $ | (130         | ) | $ | -              |   | $ | (130   | )
|Impairment and write-down of assets held for sale                                                   |   | 4,981        |   |   | -              |   |   | 4,981  |  
|Employee termination and benefit costs                                                              |   | 533          |   |   | 7,324          |   |   | 7,857  |  
|Net pension recovery                                                                                |   | -            |   |   | (403           | ) |   | (403   | )
|Exit, relocation and other costs                                                                    |   | 616          |   |   | 6,971          |   |   | 7,587  |  
|Re-measurement of contingent consideration in connection
      with a business acquisition (note 5) |   | -            |   |   | 532            |   |   | 532    |  
|Purchase gain on business acquisition (note
      5)                                                |   | -            |   |   | (6,679         | ) |   | (6,679 | )
|Acquisition-related transaction costs                                                               |   | -            |   |   | 1,217          |   |   | 1,217  |  
|                                                                                                    | $ | 6,000        |   | $ | 8,962          |   | $ | 14,962 |  

|                                                                                                    |   |              |  |   | Business       |   |   |        |  
|--------------------------------------------------------------------------------------------------- | - | ------------ |  | - | -------------- | - | - | ------ | -
|                                                                                                    |   |              |  |   | acquisitions   |   |   |        |  
|                                                                                                    |   | Facility     |  |   | and changes in |   |   |        |  
|                                                                                                    |   | closures and |  |   | management     |   |   |        |  
|2011                                                                                                |   | relocations  |  |   | structure      |   |   | Total  |  
|                                                                                                    |   |              |  |   |                |   |   |        |  
|Loss on disposal of assets held for sale                                                            | $ | 634          |  | $ | -              |   | $ | 634    |  
|Impairment and write-down of assets held for sale                                                   |   | 1,722        |  |   | -              |   |   | 1,722  |  
|Employee termination and benefit costs                                                              |   | 2,764        |  |   | 123            |   |   | 2,887  |  
|Net pension expense                                                                                 |   | -            |  |   | 4,684          |   |   | 4,684  |  
|Exit, relocation and other costs                                                                    |   | 1,898        |  |   | 540            |   |   | 2,438  |  
|Re-measurement of contingent consideration in connection
      with a business acquisition (note 5) |   | -            |  |   | (1,460         | ) |   | (1,460 | )
|Acquisition-related transaction costs                                                               |   | -            |  |   | 7,272          |   |   | 7,272  |  
|                                                                                                    | $ | 7,018        |  | $ | 11,159         |   | $ | 18,177 |  

Facility closure and relocation costs incurred in fiscal 2012
and fiscal 2011 relate primarily to the closure, between fiscal 2009 and fiscal
2011, of the following facilities that are currently included in assets held for
sale:

- The closure of the Companys U.S. sock knitting and finishing operations
  in Fort Payne, Alabama in connection with the consolidation of its sock
  manufacturing operations in Honduras; and
- The consolidation of the Companys distribution centre in Martinsville,
  Virginia and Fort Payne, Alabama into its primary distribution centre
  servicing Branded Apparel customers in Charleston, South Carolina.

Acquisition-related costs incurred in fiscal 2012 and fiscal
2011 relate primarily to costs incurred, net of a purchase gain on business
acquisition, pursuant to the acquisition of Anvil in fiscal 2012 and Gold Toe
Moretz in fiscal 2011 as described in note 5.

Net pension recovery of $0.4 million in fiscal 2012 (2011  net
pension expense of $4.7 million) relates to Gold Toe Moretzs defined benefit
pension plan which was incurred primarily as a result of the Companys plan to
liquidate and wind-up the Retirement Plan as described in note 13(a).

GILDAN 2012 REPORT TO SHAREHOLDERS P.86

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|19. RESTRUCTURING AND ACQUISITION-RELATED COSTS,
      AND ASSETS HELD FOR SALE (continued):
|--------------------------------------------------------------------------------------------

Assets held for sale of $8.0 million as at September 30, 2012
(October 2, 2011 - $13.1 million; October 4, 2010 - $3.2 million) include
property, plant and equipment primarily relating to closed facilities. The
Company expects to incur additional carrying costs relating to the closed
facilities, which will be accounted for as restructuring charges as incurred
until all assets related to the closures are disposed. Any gains or losses on
the disposal of the assets held for sale relating to closed facilities will also
be accounted for as restructuring charges as incurred.

|20. INCOME TAXES:
|-----------------

The income tax provision differs from the amount computed by
applying the combined Canadian federal and provincial tax rates to earnings
before income taxes. The reasons for the difference and the related tax effects
are as follows:

|                                                                                      |   | 2012    |   |   | 2011    |  
|------------------------------------------------------------------------------------- | - | ------- | - | - | ------- | -
|                                                                                      |   |         |   |   |         |  
|Earnings before income taxes                                                          | $ | 144,127 |   | $ | 214,933 |  
|Applicable tax
      rate                                                             |   | 27.2%   |   |   | 28.8%   |  
|Income taxes at applicable statutory rate                                             |   | 39,246  |   |   | 61,901  |  
|(Decrease) increase in income taxes resulting from:                                   |   |         |   |   |         |  
|Effect of different tax
      rates on earnings of foreign subsidiaries               |   | (51,640 | ) |   | (83,276 | )
|Income tax (recovery) charge for prior
      taxation years                           |   | 974     |   |   | (413    | )
|Non-recognition of
      tax benefits related to tax losses and temporary differences |   | 5,910   |   |   | 2,572   |  
|Effect of non-deductible expenses and other                                           |   | 1,173   |   |   | (7      | )
|Total income tax recovery                                                             | $ | (4,337  | ) | $ | (19,223 | )
|Average effective
      tax rate (recovery)                                           |   | (3.0%   | ) |   | (8.9%   | )

The Companys applicable statutory tax rate is the Canadian
combined rate applicable in the jurisdictions in which the Company operates. The
decrease is mainly due to the reduction of the Canadian Federal income tax rate
applicable to the Company effective January 1, 2012 from 16.5% to 15%.

The details of income tax expense (recovery) are as
follows:

|                                                                                      |   | 2012    |   |   | 2011    |  
|------------------------------------------------------------------------------------- | - | ------- | - | - | ------- | -
|                                                                                      |   |         |   |   |         |  
|Current income taxes                                                                  | $ | 6,005   |   | $ | 3,376   |  
|                                                                                      |   |         |   |   |         |  
|Deferred income taxes:                                                                |   |         |   |   |         |  
|Origination and reversal of temporary
      differences                               |   | (16,286 | ) |   | (25,334 | )
|Non-recognition of
      tax benefits related to tax losses and temporary differences |   | 5,910   |   |   | 2,572   |  
|Effect of substantively enacted income tax rates changes                              |   | 34      |   |   | 163     |  
|                                                                                      |   | (10,342 | ) |   | (22,599 | )
|                                                                                      | $ | (4,337  | ) | $ | (19,223 | )

GILDAN 2012 REPORT TO SHAREHOLDERS P.87

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|20. INCOME TAXES
(continued):
|-----------------------------

Significant components of the Companyメs deferred income tax
assets and liabilities relate to the following temporary differences and unused
tax losses:

|                                           |   | September 30, |   |   | October
      2, |   |   | October
      4, |  
|------------------------------------------ | - | ------------- | - | - | ---------------- | - | - | ---------------- | -
|                                           |   | 2012          |   |   | 2011             |   |   | 2010             |  
|                                           |   |               |   |   |                  |   |   |                  |  
|Deferred tax assets:                       |   |               |   |   |                  |   |   |                  |  
|Non-capital losses                         | $ | 66,386        |   | $ | 67,142           |   | $ | 13,655           |  
|Non-deductible reserves
      and accruals |   | 27,405        |   |   | 15,236           |   |   | 5,215            |  
|Other items                                |   | 9,357         |   |   | 4,067            |   |   | 3,179            |  
|                                           | $ | 103,148       |   | $ | 86,445           |   | $ | 22,049           |  
|Unrecognized deferred tax assets           |   | (12,053       | ) |   | (3,123           | ) |   | (1,179           | )
|Deferred tax assets                        | $ | 91,095        |   | $ | 83,322           |   | $ | 20,870           |  
|                                           |   |               |   |   |                  |   |   |                  |  
|Deferred tax liabilities:                  |   |               |   |   |                  |   |   |                  |  
|Property, plant and equipment              | $ | (189          | ) | $ | (3,871           | ) | $ | (5,890           | )
|Intangible assets                          |   | (87,535       | ) |   | (91,428          | ) |   | (19,751          | )
|Deferred tax
      liabilities             | $ | (87,724       | ) | $ | (95,299          | ) | $ | (25,641          | )
|                                           |   |               |   |   |                  |   |   |                  |  
|                                           | $ | 3,371         |   | $ | (11,977          | ) | $ | (4,771           | )

The details of changes to deferred income tax assets and
liabilities were as follows:

|                                         |   | 2012    |   |   | 2011    |  
|---------------------------------------- | - | ------- | - | - | ------- | -
|                                         |   |         |   |   |         |  
|Balance, beginning of year, net          | $ | (11,977 | ) | $ | (4,771  | )
|Recognized in the statement of earnings: |   |         |   |   |         |  
|Non-capital losses                       |   | (859    | ) |   | 21,851  |  
|Non-deductible reserves and accruals     |   | 152     |   |   | 725     |  
|Property, plant and
      equipment      |   | 5,939   |   |   | 779     |  
|Intangible assets                        |   | 7,337   |   |   | 3,828   |  
|Other items                              |   | 3,683   |   |   | (2,640  | )
|Unrecognized deferred tax assets         |   | (5,910  | ) |   | (1,944  | )
|                                         |   | 10,342  |   |   | 22,599  |  
|Business acquisitions                    |   | 5,066   |   |   | (31,178 | )
|Other                                    |   | (60     | ) |   | 1,373   |  
|Balance, end of
      year, net          | $ | 3,371   |   | $ | (11,977 | )

As at September 30, 2012, the Company has tax credits, capital
and non-capital loss carryforwards and other taxable temporary differences
available to reduce future taxable income for tax purposes representing a tax
benefit of approximately $12.1 million, for which no deferred tax asset has been
recognized (October 2, 2011 - $3.1 million; October 4, 2010 - $1.2 million). The
tax credits and capital and non-capital loss carryforwards expire between 2019
and 2032. The utilization of the recognized deferred tax asset is supported by
projections of future profitability of the Company.

The Company has not recognized a deferred income tax liability
for the undistributed profits of our subsidiaries, as the Company currently has
no intention to repatriate these profits. If expectations or intentions change
in the future, the Company may be subject to an additional tax liability upon
distribution of these earnings in the form of dividend or otherwise. As at
September 30, 2012, a deferred income tax liability of approximately $28 million would
result from the recognition of the taxable temporary differences of
approximately $123 million.

GILDAN 2012 REPORT TO SHAREHOLDERS P.88

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|21. EARNINGS PER SHARE:
|-----------------------

Reconciliation between basic and diluted earnings per share is
as follows:

|                                                                                           |   | 2012    |  |   | 2011    | 
|------------------------------------------------------------------------------------------ | - | ------- |  | - | ------- | 
|                                                                                           |   |         |  |   |         | 
|Net earnings - basic and diluted                                                           | $ | 148,464 |  | $ | 234,156 | 
|                                                                                           |   |         |  |   |         | 
|Basic earnings per share:                                                                  |   |         |  |   |         | 
|Basic weighted average number of common shares outstanding                                 |   | 121,488 |  |   | 121,526 | 
|Basic earnings per share                                                                   | $ | 1.22    |  | $ | 1.93    | 
|                                                                                           |   |         |  |   |         | 
|Diluted earnings per share:                                                                |   |         |  |   |         | 
|Basic weighted average number of common
      shares outstanding                           |   | 121,488 |  |   | 121,526 | 
|Plus dilutive impact of stock options,
      Treasury RSUs and common shares held in trust |   | 580     |  |   | 757     | 
|Diluted weighted average number of
      common shares outstanding                         |   | 122,068 |  |   | 122,283 | 
|Diluted earnings per share                                                                 | $ | 1.22    |  | $ | 1.91    | 

Excluded from the above calculation for the year ended
September 30, 2012 are 823,687 stock options (2011 -155,848) and 62,000 Treasury
RSUs (2011 - nil) which were deemed to be anti-dilutive.

|22.  DEPRECIATION AND
  AMORTIZATION:
|-------------------------------------

|                                                                                                                                                       |   | 2012   |   |   | 2011   |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ | - | ------ | - | - | ------ | -
|                                                                                                                                                       |   |        |   |   |        |  
|Depreciation of property, plant and
      equipment                                                                                                    | $ | 80,625 |   | $ | 64,168 |  
|Adjustment for the
      variation of depreciation of property, plant and equipment included in
      inventories at the beginning and end of the year |   | (2,863 | ) |   | (3,423 | )
|Depreciation of property, plant and
      equipment included in net earnings                                                                           |   | 77,762 |   |   | 60,745 |  
|Amortization of intangible assets (excluding software)                                                                                                 |   | 15,152 |   |   | 8,658  |  
|Amortization of software                                                                                                                               |   | 1,659  |   |   | 4,733  |  
|Depreciation and
      amortization included in net earnings                                                                                           | $ | 94,573 |   | $ | 74,136 |  

Depreciation and amortization expense for fiscal 2012 includes
an impairment charge of $6.0 million, which consists primarily of a charge of
$3.9 million related to the retirement, before the end of the previously
estimated useful lives, of certain machinery and equipment in connection with
the ramp-down of the Companys Rio Nance 1 textile facility in Honduras.

GILDAN 2012 REPORT TO SHAREHOLDERS P.89

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|23. SUPPLEMENTAL CASH FLOW
  DISCLOSURE:
|----------------------------------------

|(a) | Adjustments to reconcile net earnings to cash flows
      from operating activities:
|--- | ------------------------------------------------------------------------------------

| |                                                                                                                    |   | 2012    |   |   | 2011    |  
| | ------------------------------------------------------------------------------------------------------------------ | - | ------- | - | - | ------- | -
| |                                                                                                                    |   |         |   |   |         |  
| | Depreciation and amortization (note 22)                                                                            | $ | 94,573  |   | $ | 74,136  |  
| | Purchase gain on business acquisition (note 5)                                                                     |   | (6,679  | ) |   | -       |  
| | Loss (gain) on re-measurement of contingent
      consideration in connection with a business acquisition (note 5) |   | 532     |   |   | (1,460  | )
| | Restructuring charges related to assets held for sale and
      property, plant and equipment (note 19)            |   | 4,851   |   |   | 2,356   |  
| | Loss on disposal of property, plant and
      equipment                                                            |   | 1,619   |   |   | 1,877   |  
| | Loss on disposal of corporate asset (i)                                                                            |   | -       |   |   | 3,693   |  
| | Share-based compensation costs                                                                                     |   | 4,606   |   |   | 4,899   |  
| | Deferred income taxes                                                                                              |   | (10,342 | ) |   | (22,599 | )
| | Equity earnings in investment in joint
      venture                                                               |   | (597    | ) |   | (504    | )
| | Unrealized net loss on foreign exchange and financial
      derivatives                                            |   | 160     |   |   | 255     |  
| | Other non-current assets                                                                                           |   | 6,634   |   |   | (701    | )
| | Employee benefit obligations                                                                                       |   | (1,452  | ) |   | (14,310 | )
| | Provisions                                                                                                         |   | 316     |   |   | 275     |  
| |                                                                                                                    | $ | 94,221  |   | $ | 47,917  |  

| | (i) | During fiscal 2011, the Company purchased a corporate
      aircraft under a finance lease pursuant to an early purchase option for
      approximately $16.9 million. Immediately following the purchase, the
      Company sold the corporate aircraft to an unrelated third party for
      proceeds of $13.2 million, resulting in a loss of $3.7 million which is
      included in selling, general and administrative expenses. The Company has
      leased a new corporate aircraft which is being accounted for as an
      operating lease.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Non-cash transactions:
|--- | ----------------------

| |                                                                                                                                                                             |   | 2012   |   |   | 2011  | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------ | - | - | ----- | 
| |                                                                                                                                                                             |   |        |   |   |       | 
| | Variance of non-cash transactions:                                                                                                                                          |   |        |   |   |       | 
| | Additions to property, plant and equipment
      included in accounts payable and accrued liabilities                                                                       | $ | (1,295 | ) | $ | 2,927 | 
| | Proceeds on disposal of property, plant and
      equipment in other non-current assets                                                                                     |   | -      |   |   | 427   | 
| |                                                                                                                                                                             |   |        |   |   |       | 
| | Non-cash ascribed value credited to
      contributed surplus for dividends attributed to Treasury RSUs                                                                     | $ | 252    |   | $ | 191   | 
| | Non-cash ascribed value credited to share capital from
      shares issued or distributed pursuant to vesting of restricted share units and exercise of stock
      options |   | 5,166  |   |   | 807   | 
| | Shares issued for lease termination costs incurred in a
      business acquisition                                                                                          |   | -      |   |   | 1,065 | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.90

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|24. RELATED PARTY
TRANSACTIONS:
|-------------------------------

|(a) | Joint ventures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company has transactions with CanAm. These
      transactions are based on arms length terms and are measured at the
      exchange amount, which is the amount of consideration established and
      agreed to by the related parties. All outstanding balances are to be
      settled in cash within twelve months of the reporting date. None of the
      balances are secured. The following is a summary of the related party
      transactions and balances owed:

| |                                                  |   | 2012    |  |   | 2011    | 
| | ------------------------------------------------ | - | ------- |  | - | ------- | 
| |                                                  |   |         |  |   |         | 
| | Transactions:                                    |   |         |  |   |         | 
| | Yarn purchases                                   | $ | 126,126 |  | $ | 142,601 | 
| | Yarn sales                                       |   | 1,304   |  |   | 1,188   | 
| | Dividend received                                |   | 1,509   |  |   | -       | 
| |                                                  |   |         |  |   |         | 
| | Balances outstanding:                            |   |         |  |   |         | 
| | Other non-current
      assets (loan receivable) |   | -       |  |   | 3,895   | 
| | Accounts payable and accrued liabilities         |   | 2,027   |  |   | 3,270   | 

The Company has no contingent
liabilities or capital commitments with the joint venture. On October 29, 2012,
the Company acquired the remaining 50% ownership interest of CanAm as described
in note 28 to these consolidated financial statements.

The following table illustrates the
Companys proportionate share of summarized financial information of CanAm as at
and for the years then ended:

| |                                                                     |   | September 30, |   |   | October
      2, |   |   | October
      4, |  
| | ------------------------------------------------------------------- | - | ------------- | - | - | ---------------- | - | - | ---------------- | -
| |                                                                     |   | 2012          |   |   | 2011             |   |   | 2010             |  
| |                                                                     |   |               |   |   |                  |   |   |                  |  
| | Share of the joint venture's statement of
      financial position: |   |               |   |   |                  |   |   |                  |  
| | Current assets                                                      | $ | 6,449         |   | $ | 8,973            |   | $ | 8,075            |  
| | Non-current assets                                                  |   | 6,878         |   |   | 8,130            |   |   | 7,680            |  
| | Current liabilities                                                 |   | (2,044        | ) |   | (5,477           | ) |   | (2,132           | )
| | Non-current liabilities                                             |   | -             |   |   | -                |   |   | (2,386           | )
| | Equity                                                              | $ | 11,283        |   | $ | 11,626           |   | $ | 11,237           |  
| |                                                                     |   |               |   |   |                  |   |   |                  |  
| |                                                                     |   |               |   |   | 2012             |   |   | 2011             |  
| |                                                                     |   |               |   |   |                  |   |   |                  |  
| | Share of the joint venture's income and expenses:                   |   |               |   |   |                  |   |   |                  |  
| | Income                                                              |   |               |   | $ | 62,260           |   | $ | 70,994           |  
| | Expenses                                                            |   |               |   |   | 61,094           |   |   | 70,605           |  
| |                                                                     |   |               |   | $ | 1,166            |   | $ | 389              |  

|(b) | Key management personnel compensation:                                                                                                                                                                                                                                                                                                                                                                                          
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Key management personnel includes those individuals that
      have authority and responsibility for planning, directing and controlling
      the activities of the Company, directly or indirectly, and is comprised of
      the members of the executive management team and the Board of Directors.
      The amount for compensation expense recognized in net earnings for key
      management personnel was as follows:

| |                              |   | 2012   |  |   | 2011   | 
| | ---------------------------- | - | ------ |  | - | ------ | 
| | Short-term employee benefits | $ | 3,263  |  | $ | 6,415  | 
| | Post-employment benefits     |   | 131    |  |   | 194    | 
| | Share-based payments         |   | 6,976  |  |   | 5,000  | 
| |                              | $ | 10,370 |  | $ | 11,609 | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.91

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|24. RELATED PARTY TRANSACTIONS
  (continued):
|---------------------------------------------

|(c) | Other:                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company leases warehouse and office space from an
      officer of a subsidiary of the Company under operating leases. The
      payments made on these leases were in accordance with the terms of the
      lease agreements established and agreed to by the related parties, which
      amounted to $0.9 million for fiscal 2012 (2011 - $0.6 million). There were
      no amounts owing as at September 30, 2012 and October 2, 2011.

|25. COMMITMENTS, GUARANTEES AND CONTINGENT
      LIABILITIES:
|-------------------------------------------------------------

|(a) | Security class actions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In June 2008, the Company and certain of its senior
      officers were named as defendants in a number of class action lawsuits
      filed in the United States District Court for the Southern District of New
      York, which were subsequently consolidated, alleging claims under the U.S.
      securities laws, as well as in class action lawsuits filed in the Ontario
      Superior Court of Justice and in the Quebec Superior Court. Each of these
      U.S. and Canadian lawsuits alleged, among other things, that the
      defendants misrepresented the Companys financial condition and its
      financial prospects in its earnings guidance concerning the 2008 fiscal
      year, which guidance was subsequently revised on April 29, 2008.                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In August 2010, the Company entered into an agreement to
      settle all claims raised in these class action lawsuits and final court
      approval of the settlement was obtained from each of the courts in
      February and March 2011. Consequently, all of the actions have been
      dismissed. The settlement agreement provided for a total settlement amount
      of $22.5 million, which was entirely funded by the Companys insurers.
      Therefore no provision has been recorded in the consolidated financial
      statements and no amounts have been disbursed by the Company in respect of
      the settlement.                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b) | Claims and litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | On October 12, 2012, Russell Brands, LLC, an affiliate of
      Fruit of the Loom, filed a lawsuit against the Company in the United
      States District Court of the Western District of Kentucky at Bowling
      Green, alleging trademark infringement and unfair competition and seeking
      injunctive relief and unspecified money damages. The litigation concerns
      labelling errors on certain inventory products shipped by Gildan to one of
      its customers. Upon being made aware of the error, the Company took
      immediate action to retrieve the disputed products. The Company believes
      that the value of the products in dispute is immaterial.                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company is a party to other claims and litigation
      arising in the normal course of operations. The Company does not expect
      the resolution of these matters to have a material adverse effect on the
      financial position or results of operations of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(c) | Guarantees:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Company, and some of its subsidiaries, have granted
      corporate guarantees, irrevocable standby letters of credit and surety
      bonds, to third parties to indemnify them in the event the Company and
      some of its subsidiaries do not perform their contractual obligations. As
      at September 30, 2012, the maximum potential liability under these
      guarantees was $16.5 million (October 2, 2011 - $15.1 million; October 4,
      2010 - $21.8 million), of which $6.9 million was for surety bonds and $9.6
      million was for corporate guarantees and standby letters of credit
      (October 2, 2011 - $5.0 million and $10.1 million; October 4, 2010 - $5.1
      million and $16.7 million, respectively). The surety bonds are
      automatically renewed on an annual basis, the corporate guarantees and
      standby letters of credit mature at various dates in fiscal
2013.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | As at September 30, 2012, the Company has recorded no
      liability with respect to these guarantees, as the Company does not expect
      to make any payments for the aforementioned items.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

GILDAN 2012 REPORT TO SHAREHOLDERS P.92

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|26. CAPITAL DISCLOSURES:
|------------------------

The Companys objective in managing capital is to ensure
sufficient liquidity to pursue its organic growth strategy and undertake
selective acquisitions, while at the same time taking a conservative approach
towards financial leverage and management of financial risk.

The Companys capital is composed of net debt and shareholders
equity. Net debt consists of interest-bearing debt less cash and cash
equivalents. The Companys primary uses of capital are to finance working
capital requirements, capital expenditures, payment of dividends, and business
acquisitions. The Company currently funds these requirements out of its
internally-generated cash flows and the periodic use of its revolving long-term
bank credit facility. The Company used its revolving long-term credit facility
to finance the acquisition of Gold Toe Moretz in fiscal 2011 and to finance the
acquisition of Anvil in fiscal 2012.

In November 2012, the Company amended its revolving long-term
credit facility to extend the maturity date from June 2016 to January 2018. The
amended agreement provides for an annual extension clause, subject to the
approval of the lenders. It also provides for reduced drawn pricing when the net
debt to EBITDA ratio is below 1.0:1, and reduced undrawn pricing.

The primary measure used by the Company to monitor its
financial leverage is its ratio of net debt to earnings before financial
expenses/income, taxes, depreciation and amortization, and restructuring and
acquisition-related costs (EBITDA), which it aims to maintain at less than a
maximum of 3.0:1. Net debt is defined as long-term debt less cash and cash
equivalents. As at September 30, 2012 and October 2, 2011 the Companys net debt
to EBITDA ratio was below 1.0:1.

In order to maintain or adjust its capital structure, the
Company, upon approval from its Board of Directors, may issue or repay long-term
debt, issue shares, repurchase shares, pay dividends or undertake other
activities as deemed appropriate under the specific circumstances.

During fiscal 2012, the Company paid an aggregate of $36.6
million of dividends (2011 - $27.5 million) representing a quarterly dividend of
$0.075 per share. On November 28, 2012 the Board of Directors declared a
quarterly dividend of $0.09 per share for an expected aggregate payment of $10.9
million which will be paid on January 7, 2013 on all of the issued and
outstanding common shares of the Company, rateably and proportionately to the
holders of record on December 13, 2012. This dividend is an eligible dividend
for the purposes of the Income Tax Act (Canada) and any other applicable
provincial legislation pertaining to eligible dividends.

The Board of Directors will consider several factors when
deciding to declare quarterly cash dividends, including the Companys present
and future earnings, cash flows, capital requirements and present and/or future
regulatory and legal restrictions. There can be no assurance as to the
declaration of future quarterly cash dividends. Although the Companys revolving
long-term credit facility requires compliance with lending covenants in order to
pay dividends, these covenants are not currently, and are not expected to be, a
constraint to the payment of dividends under the Companys dividend policy.

The Company is not subject to any capital requirements imposed
by a regulator.

|27. SEGMENT INFORMATION:
|------------------------

During the first quarter of fiscal 2012, the Company began
managing and reporting its business as two operating segments, Printwear and
Branded Apparel, each of which is a reportable segment for financial reporting
purposes. Each segment has its own management that is accountable and
responsible for the segments operations, results and financial performance.
These segments are principally organized by the major customer markets they
serve. The Company previously managed and reported its operations under one
reportable business segment, being high-volume, basic, frequently replenished,
non-fashion apparel. The following summary describes the operations of each of
the Companys operating segments:

Printwear: The Printwear segment, headquartered in Barbados,
designs, manufactures, sources, and distributes globally undecorated activewear
products primarily to wholesale distributors and decorators in over 30 countries
across North America, Europe and the Asia-Pacific region.

Branded Apparel: The Branded Apparel segment, headquartered in
Charleston, South Carolina, designs, manufactures, sources, and distributes
socks, underwear and activewear products primarily to U.S. retailers.

GILDAN 2012 REPORT TO SHAREHOLDERS P.93

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|27. SEGMENT INFORMATION
  (continued):
|--------------------------------------

Following the acquisition of Anvil as described in note 5, the
Printwear segment includes the results of operations of Anvils printwear
business, while the Branded Apparel segment includes Anvils operations related
to the manufacture and distribution of activewear products for leading consumer
brands, including major sportswear and family entertainment brands.

The chief operating decision-maker assesses segment performance
based on segment operating income which is defined as operating income before
corporate head office expenses, restructuring and acquisition-related costs, and
amortization of intangible assets. The accounting policies of the segments are
the same as those described in note 3 of these consolidated financial
statements.

The segment disclosures below include comparative financial
information for the year ended October 2, 2011, which have been presented on the
same reportable segment basis as fiscal 2012. Certain comparative figures for
entity-wide net sales disclosures have been reclassified to conform with the
current years presentation.

|                                                                                                                         |   | 2012      |   |   | 2011      |  
|------------------------------------------------------------------------------------------------------------------------ | - | --------- | - | - | --------- | -
|                                                                                                                         |   |           |   |   |           |  
|Segmented net sales:                                                                                                     |   |           |   |   |           |  
|Printwear                                                                                                                | $ | 1,334,252 |   | $ | 1,327,682 |  
|Branded Apparel                                                                                                          |   | 614,001   |   |   | 398,030   |  
|Total net sales                                                                                                          | $ | 1,948,253 |   | $ | 1,725,712 |  
|                                                                                                                         |   |           |   |   |           |  
|Segment operating income (loss):                                                                                         |   |           |   |   |           |  
|Printwear                                                                                                                | $ | 209,426   |   | $ | 330,220   |  
|Branded Apparel                                                                                                          |   | 32,827    |   |   | (16,180   | )
|Total segment operating income                                                                                           | $ | 242,253   |   | $ | 314,040   |  
|                                                                                                                         |   |           |   |   |           |  
|Reconciliation to consolidated earnings
      before income taxes:                                                       |   |           |   |   |           |  
|Total segment operating income                                                                                           | $ | 242,253   |   | $ | 314,040   |  
|Amortization of
      intangible assets, excluding software                                                              |   | (15,152   | ) |   | (8,658    | )
|Corporate expenses                                                                                                       |   | (57,011   | ) |   | (66,634   | )
|Restructuring and
      acquisition-related costs                                                                        |   | (14,962   | ) |   | (18,177   | )
|Financial expenses, net                                                                                                  |   | (11,598   | ) |   | (6,142    | )
|Equity earnings in investment in joint
      venture                                                                     |   | 597       |   |   | 504       |  
|Earnings before
      income taxes                                                                                       | $ | 144,127   |   | $ | 214,933   |  
|                                                                                                                         |   |           |   |   |           |  
|Additions to property, plant and equipment and intangible
      assets (including additions from business acquisitions): |   |           |   |   |           |  
|Printwear                                                                                                                | $ | 73,205    |   | $ | 119,664   |  
|Branded Apparel                                                                                                          |   | 21,929    |   |   | 246,077   |  
|Corporate                                                                                                                |   | 4,779     |   |   | 5,773     |  
|                                                                                                                         | $ | 99,913    |   | $ | 371,514   |  
|                                                                                                                         |   |           |   |   |           |  
|Depreciation of property, plant and equipment:                                                                           |   |           |   |   |           |  
|Printwear                                                                                                                | $ | 54,473    |   | $ | 37,885    |  
|Branded Apparel                                                                                                          |   | 21,195    |   |   | 19,841    |  
|Corporate                                                                                                                |   | 2,094     |   |   | 3,019     |  
|                                                                                                                         | $ | 77,762    |   | $ | 60,745    |  

GILDAN 2012 REPORT TO SHAREHOLDERS P.94

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|27. SEGMENT INFORMATION
  (continued):
|--------------------------------------

The reconciliation of total assets to segmented assets is as
follows:

|                                   |   | September 30, |  |   | October
      2, |  |   | October
      4, | 
|---------------------------------- | - | ------------- |  | - | ---------------- |  | - | ---------------- | 
|                                   |   | 2012          |  |   | 2011             |  |   | 2010             | 
|                                   |   |               |  |   |                  |  |   |                  | 
|Segmented assets (i):              |   |               |  |   |                  |  |   |                  | 
|Printwear                          | $ | 886,209       |  | $ | 884,755          |  | $ | 637,728          | 
|Branded Apparel                    |   | 887,510       |  |   | 833,481          |  |   | 387,256          | 
|Total segmented assets             |   | 1,773,719     |  |   | 1,718,236        |  |   | 1,024,984        | 
|Unallocated assets:                |   |               |  |   |                  |  |   |                  | 
|Cash and cash equivalents          |   | 70,410        |  |   | 82,025           |  |   | 250,843          | 
|Income taxes receivable            |   | 353           |  |   | 515              |  |   | -                | 
|Assets held for sale               |   | 8,029         |  |   | 13,142           |  |   | 3,246            | 
|Investment in joint
      venture  |   | 12,126        |  |   | 13,038           |  |   | 12,533           | 
|Deferred income taxes              |   | 3,371         |  |   | -                |  |   | -                | 
|Other - primarily corporate assets |   | 28,429        |  |   | 31,543           |  |   | 42,897           | 
|Consolidated
      assets          | $ | 1,896,437     |  | $ | 1,858,499        |  | $ | 1,334,503        | 

(i) Segmented assets include the net carrying amounts of
intangible assets and goodwill.

Property, plant and equipment, intangible assets, and goodwill,
were allocated to geographic areas as follows:

|                |   | September 30, |  |   | October 2, |  |   | October 4, | 
|--------------- | - | ------------- |  | - | ---------- |  | - | ---------- | 
|                |   | 2012          |  |   | 2011       |  |   | 2010       | 
|                |   |               |  |   |            |  |   |            | 
|United States   | $ | 450,581       |  | $ | 461,654    |  | $ | 132,488    | 
|Canada          |   | 15,101        |  |   | 13,620     |  |   | 31,874     | 
|Honduras        |   | 350,856       |  |   | 334,976    |  |   | 245,434    | 
|Caribbean Basin |   | 109,056       |  |   | 116,909    |  |   | 120,960    | 
|Bangladesh      |   | 17,289        |  |   | 15,879     |  |   | 15,612     | 
|Other           |   | 11,468        |  |   | 10,872     |  |   | 13,653     | 
|                | $ | 954,351       |  | $ | 953,910    |  | $ | 560,021    | 

Net sales by major product group:

|                         |   | 2012      |  |   | 2011      | 
|------------------------ | - | --------- |  | - | --------- | 
|                         |   |           |  |   |           | 
|Activewear and underwear | $ | 1,472,510 |  | $ | 1,405,707 | 
|Socks                    |   | 475,743   |  |   | 320,005   | 
|                         | $ | 1,948,253 |  | $ | 1,725,712 | 

Net sales were derived from customers located in the following
geographic areas:

|                 |   | 2012      |  |   | 2011      | 
|---------------- | - | --------- |  | - | --------- | 
|                 |   |           |  |   |           | 
|United States    | $ | 1,738,564 |  | $ | 1,539,994 | 
|Canada           |   | 67,752    |  |   | 63,424    | 
|Europe and other |   | 141,937   |  |   | 122,294   | 
|                 | $ | 1,948,253 |  | $ | 1,725,712 | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.95

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|27. SEGMENT INFORMATION
  (continued):
|--------------------------------------

The Company has two customers accounting for at least 10% of
total net sales.

|           |  | 2012  |  |  | 2011  | 
|---------- |  | ----- |  |  | ----- | 
|           |  |       |  |  |       | 
|Customer A |  | 14.8% |  |  | 19.4% | 
|Customer B |  | 12.0% |  |  | 12.1% | 

|28. EVENTS AFTER THE REPORTING
  PERIOD:
|----------------------------------------

On October 29, 2012, the Company acquired the remaining 50%

interest of CanAm, its jointly-controlled entity, for cash
consideration of $2.5 million, net of cash acquired of $8.8 million. The
strategic rationale
of the acquisition of the remaining 50% interest, combined with the Companys
plans to modernize and expand CanAms two yarn-spinning facilities, is to
support the Companys projected sales growth and also to continue to pursue the
Companys business model of investing in global low-cost manufacturing
technology and in product technology which will provide consistent superior
product quality. The acquisition will be financed by the utilization of the
Companys revolving long-term bank credit facility. The Company will account for
this acquisition using the acquisition method in accordance with IFRS 3,
Business Combinations, and the results of CanAm will be consolidated with those
of the Company from the date of acquisition. The Company has not yet completed
the accounting for the business acquisition including the determination of the
fair values of the identifiable net assets acquired.

GILDAN 2012 REPORT TO SHAREHOLDERS P.96

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF
IFRS:
|--------------------------------

As stated in note 2(a), these are the Companys first audited
annual consolidated financial statements prepared in accordance with IFRS.

The Company has applied the accounting policies set out in note
3 in the preparation of the consolidated financial statements for the year ended
September 30, 2012, the comparative information presented in the consolidated
financial statements related to the year ended October 2, 2011 and the opening
IFRS consolidated statement of financial position as at October 4, 2010 (the
Companys transition date).

This note provides a reconciliation, with explanatory notes, of
the adjustments made by the Company in recasting the following financial
information previously prepared in accordance with previous Canadian GAAP:

- Consolidated statements of financial position as at October 2, 2011 and
  October 4, 2010; and
- Consolidated statement of earnings and comprehensive income for the year
  ended October 2, 2011.

IFRS 1 Exemptions

IFRS 1, First Time Adoption of International Financial
Reporting Standards, requires first time adopters to retrospectively apply all
effective IFRS standards as of its first annual financial statements, which for
the Company is September 30, 2012. However, IFRS 1 also provides first-time
adopters certain optional exemptions and mandatory exceptions from full
retrospective application. The following outlines the optional exemptions and
mandatory exception that the Company has applied at the transition date:

Optional exemptions:

Foreign exchange cumulative translation adjustments- The exemption permits the balance of any cumulative translation
adjustment (CTA) to be eliminated by an adjustment to opening retained
earnings at the transition date. As a result, the Company eliminated its CTA
balance of $26.2 million which was included in accumulated other comprehensive
income through an adjustment to retained earnings at the transition date.

Decommissioning and restoration liabilities- The
exemption permits the Company not to apply IFRIC 1, Changes in Existing
Decommissioning, Restoration and Similar Liabilities, retrospectively to
calculate the opening depreciated cost of the asset relating to decommissioning
and site restoration costs under IFRS, but rather to use a simplified approach
based on the discounted value of the liability at the transition date.

Business combinations- The exemption permits the
Company not to apply IFRS 3, Business Combinations, to business combinations
occurring prior to the transition date.

Share-based payment transactions- The exemption
permits the Company to apply IFRS 2, Share-based Payment, only to equity
instruments that were granted after November 7, 2002, which have not yet vested
at the transition date.

Borrowing costs- The exemption permits the
capitalization of borrowing costs to be limited to qualifying assets for which
commencement date for capitalization is on or after the date of transition.

Mandatory exceptions:

Estimates Hindsight is not used to create or
revise estimates. The estimates previously made by the Company under Canadian
GAAP were not revised for the application of IFRS except where necessary to
reflect differences in accounting standards.

GILDAN 2012 REPORT TO SHAREHOLDERS P.97

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

Reconciliation of financial position and equity at October 2,
2011 from Canadian GAAP to IFRS:

|                                                               |   |               |  |   | IFRS adjustments |   |   |             |   |  |      | 
|-------------------------------------------------------------- | - | ------------- |  | - | ---------------- | - | - | ----------- | - |  | ---- | 
|                                                               |   |               |  |   | CanAm            |   |   | Other       |   |  |      | 
|                                                               |   | Canadian GAAP |  |   | Adjustments      |   |   | Adjustments |   |  |      | 
|                                                               |   |               |  |   | Note 1           |   |   |             |   |  | Note | 
|Current assets:                                                |   |               |  |   |                  |   |   |             |   |  |      | 
|Cash and cash equivalents                                      | $ | 88,802        |  | $ | (6,777           | ) | $ | -           |   |  |      | 
|Trade accounts
      receivable                                |   | 191,594       |  |   | -                |   |   | -           |   |  |      | 
|Income taxes receivable                                        |   | 515           |  |   | -                |   |   | -           |   |  |      | 
|Inventories                                                    |   | 575,594       |  |   | (7,283           | ) |   | -           |   |  |      | 
|Prepaid expenses and deposits                                  |   | 10,966        |  |   | (139             | ) |   | -           |   |  |      | 
|Assets held for sale                                           |   | -             |  |   | -                |   |   | 13,142      |   |  | 3    | 
|Deferred income taxes                                          |   | 11,666        |  |   | -                |   |   | (11,666     | ) |  | 4    | 
|Other current assets                                           |   | 9,307         |  |   | (79              | ) |   | -           |   |  |      | 
|Total current assets                                           |   | 888,444       |  |   | (14,278          | ) |   | 1,476       |   |  |      | 
|Property, plant and equipment                                  |   | 565,398       |  |   | (16,155          | ) |   | 4,528       |   |  | 5    | 
|                                                               |   |               |  |   |                  |   |   | (3,447      | ) |  | 6    | 
|Investment in joint venture                                    |   | -             |  |   | 13,038           |   |   | -           |   |  |      | 
|Assets held for sale                                           |   | 13,142        |  |   | -                |   |   | (13,142     | ) |  | 3    | 
|Intangible assets                                              |   | 256,467       |  |   | -                |   |   | 5,186       |   |  | 7    | 
|Goodwill                                                       |   | 153,219       |  |   | -                |   |   | (5,815      | ) |  | 9    | 
|                                                               |   |               |  |   |                  |   |   | 3,345       |   |  | 9    | 
|                                                               |   |               |  |   |                  |   |   | (5,839      | ) |  | 12   | 
|                                                               |   |               |  |   |                  |   |   | (2,977      | ) |  | 13   | 
|Other assets                                                   |   | 13,051        |  |   | 3,887            |   |   | (1,029      | ) |  | 8    | 
|Total assets                                                   | $ | 1,889,721     |  | $ | (13,508          | ) | $ | (17,714     | ) |  |      | 
|Current liabilities:                                           |   |               |  |   |                  |   |   |             |   |  |      | 
|Accounts payable and
      accrued liabilities                 | $ | 315,269       |  | $ | (3,359           | ) | $ | 3,850       |   |  | 9    | 
|                                                               |   |               |  |   |                  |   |   | (13,827     | ) |  | 10   | 
|                                                               |   |               |  |   |                  |   |   | (3,973      | ) |  | 14   | 
|Total current liabilities                                      |   | 315,269       |  |   | (3,359           | ) |   | (13,950     | ) |  |      | 
|Long-term debt                                                 |   | 209,000       |  |   | -                |   |   | -           |   |  |      | 
|Deferred income taxes                                          |   | 26,575        |  |   | -                |   |   | (11,666     | ) |  | 4    | 
|                                                               |   |               |  |   |                  |   |   | (2,097      | ) |  | 8    | 
|                                                               |   |               |  |   |                  |   |   | (1,425      | ) |  | 9    | 
|                                                               |   |               |  |   |                  |   |   | 452         |   |  | 13   | 
|                                                               |   |               |  |   |                  |   |   | (1,357      | ) |  | 14   | 
|                                                               |   |               |  |   |                  |   |   | (373        | ) |  | 6    | 
|                                                               |   |               |  |   |                  |   |   | 1,868       |   |  | 7    | 
|Employee benefit obligations                                   |   | -             |  |   | -                |   |   | 13,827      |   |  | 10   | 
|                                                               |   |               |  |   |                  |   |   | (1,220      | ) |  | 13   | 
|                                                               |   |               |  |   |                  |   |   | 7,639       |   |  | 14   | 
|Provisions                                                     |   | -             |  |   | -                |   |   | 8,226       |   |  | 5    | 
|Non-controlling interest in consolidated
      joint venture   |   | 11,562        |  |   | (11,562          | ) |   | -           |   |  |      | 
|Total liabilities                                              |   | 562,406       |  |   | (14,921          | ) |   | (76         | ) |  |      | 
|Equity                                                         |   |               |  |   |                  |   |   |             |   |  |      | 
|Share capital                                                  |   | 100,436       |  |   | -                |   |   | -           |   |  |      | 
|Contributed surplus                                            |   | 16,526        |  |   | -                |   |   | -           |   |  |      | 
|Retained earnings                                              |   | 1,184,781     |  |   | 1,413            |   |   | 26,248      |   |  | 11   | 
|                                                               |   |               |  |   |                  |   |   | (2,309      | ) |  | 14   | 
|                                                               |   |               |  |   |                  |   |   | (1,643      | ) |  | 15   | 
|                                                               |   |               |  |   |                  |   |   | (13,686     | ) |  |      | 
|Accumulated other comprehensive income                         |   | 25,572        |  |   | -                |   |   | (26,248     | ) |  | 11   | 
|Total equity attributable to shareholders
      of the Company |   | 1,327,315     |  |   | 1,413            |   |   | (17,638     | ) |  |      | 
|Total liabilities and equity                                   | $ | 1,889,721     |  | $ | (13,508          | ) | $ | (17,714     | ) |  |      | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.98

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

Reconciliation of financial position and equity at October 4,
2010 from Canadian GAAP to IFRS:

|                                                             |   |               |  |   | IFRS adjustments |   |   |             |   |  |      | 
|------------------------------------------------------------ | - | ------------- |  | - | ---------------- | - | - | ----------- | - |  | ---- | 
|                                                             |   |               |  |   | CanAm            |   |   | Other       |   |  |      | 
|                                                             |   | Canadian GAAP |  |   | Adjustments      |   |   | Adjustments |   |  |      | 
|                                                             |   |               |  |   | Note 1           |   |   |             |   |  | Note | 
|Current assets:                                              |   |               |  |   |                  |   |   |             |   |  |      | 
|Cash and cash equivalents                                    | $ | 258,442       |  | $ | (7,599           | ) | $ | -           |   |  |      | 
|Trade accounts
      receivable                              |   | 145,684       |  |   | -                |   |   | -           |   |  |      | 
|Inventories                                                  |   | 332,542       |  |   | (3,024           | ) |   | -           |   |  |      | 
|Prepaid expenses and
      deposits                          |   | 9,584         |  |   | (245             | ) |   | (491        | ) |  | 2    | 
|Assets held for sale                                         |   | -             |  |   | -                |   |   | 3,246       |   |  | 3    | 
|Deferred income taxes                                        |   | 6,340         |  |   | -                |   |   | (6,340      | ) |  | 4    | 
|Other current assets                                         |   | 9,079         |  |   | (409             | ) |   | -           |   |  |      | 
|Total current assets                                         |   | 761,671       |  |   | (11,277          | ) |   | (3,585      | ) |  |      | 
|Property, plant and equipment                                |   | 479,292       |  |   | (15,731          | ) |   | 16,998      |   |  | 2    | 
|                                                             |   |               |  |   |                  |   |   | 4,808       |   |  | 5    | 
|                                                             |   |               |  |   |                  |   |   | (2,354      | ) |  | 6    | 
|Investment in joint venture                                  |   | -             |  |   | 12,533           |   |   | -           |   |  |      | 
|Assets held for sale                                         |   | 3,246         |  |   | -                |   |   | (3,246      | ) |  | 3    | 
|Intangible assets                                            |   | 61,321        |  |   | -                |   |   | 5,490       |   |  | 7    | 
|Goodwill                                                     |   | 10,197        |  |   | -                |   |   | -           |   |  |      | 
|Other assets                                                 |   | 11,805        |  |   | 4,364            |   |   | (1,029      | ) |  | 8    | 
|Total assets                                                 | $ | 1,327,532     |  | $ | (10,111          | ) | $ | 17,082      |   |  |      | 
|Current liabilities:                                         |   |               |  |   |                  |   |   |             |   |  |      | 
|Accounts payable and accrued
      liabilities               | $ | 186,205       |  | $ | (46              | ) | $ | 5,815       |   |  | 9    | 
|                                                             |   |               |  |   |                  |   |   | (12,179     | ) |  | 10   | 
|Income taxes payable                                         |   | 5,024         |  |   | -                |   |   | -           |   |  |      | 
|Current portion of
      long-term debt                      |   | -             |  |   | -                |   |   | 16,879      |   |  | 2    | 
|Total current liabilities                                    |   | 191,229       |  |   | (46              | ) |   | 10,515      |   |  |      | 
|Deferred income taxes                                        |   | 10,816        |  |   | -                |   |   | (1,366      | ) |  | 8    | 
|                                                             |   |               |  |   |                  |   |   | (6,340      | ) |  | 4    | 
|                                                             |   |               |  |   |                  |   |   | (315        | ) |  | 6    | 
|                                                             |   |               |  |   |                  |   |   | 1,976       |   |  | 7    | 
|Employee benefit obligations                                 |   | -             |  |   | -                |   |   | 12,179      |   |  | 10   | 
|Provisions                                                   |   | -             |  |   | -                |   |   | 7,951       |   |  | 5    | 
|Non-controlling interest in consolidated
      joint venture |   | 11,058        |  |   | (11,058          | ) |   | -           |   |  |      | 
|Total liabilities                                            |   | 213,103       |  |   | (11,104          | ) |   | 24,600      |   |  |      | 
|Equity                                                       |   |               |  |   |                  |   |   |             |   |  |      | 
|Share capital                                                |   | 97,036        |  |   | -                |   |   | -           |   |  |      | 
|Contributed surplus                                          |   | 10,091        |  |   | -                |   |   | -           |   |  |      | 
|Retained earnings                                            |   | 982,764       |  |   | 993              |   |   | (372        | ) |  | 2    | 
|                                                             |   |               |  |   |                  |   |   | (3,143      | ) |  | 5    | 
|                                                             |   |               |  |   |                  |   |   | (2,039      | ) |  | 6    | 
|                                                             |   |               |  |   |                  |   |   | 3,514       |   |  | 7    | 
|                                                             |   |               |  |   |                  |   |   | 337         |   |  | 8    | 
|                                                             |   |               |  |   |                  |   |   | (5,815      | ) |  | 9    | 
|                                                             |   |               |  |   |                  |   |   | 26,248      |   |  | 11   | 
|Accumulated other
      comprehensive income                 |   | 24,538        |  |   | -                |   |   | (26,248     | ) |  | 11   | 
|Total equity attributable to shareholders of the Company     |   | 1,114,429     |  |   | 993              |   |   | (7,518      | ) |  |      | 
|Total liabilities and equity                                 | $ | 1,327,532     |  | $ | (10,111          | ) | $ | 17,082      |   |  |      | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.99

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29.  FIRST TIME ADOPTION OF IFRS
      (continued):
|---------------------------------------------------

Reconciliation of comprehensive income for the year ended
October 2, 2011 from Canadian GAAP to IFRS:

|                                                              |   |           |   |   | IFRS adjustments |   |   |             |   |  |      | 
|------------------------------------------------------------- | - | --------- | - | - | ---------------- | - | - | ----------- | - |  | ---- | 
|                                                              |   | Canadian  |   |   | CanAm            |   |   | Other       |   |  |      | 
|                                                              |   | GAAP      |   |   | Adjustments      |   |   | Adjustments |   |  |      | 
|                                                              |   |           |   |   | Note 1           |   |   |             |   |  | Note | 
|                                                              |   |           |   |   |                  |   |   |             |   |  |      | 
|Net sales                                                     | $ | 1,726,041 |   | $ | (329             | ) | $ | -           |   |  |      | 
|Cost of sales                                                 |   | 1,288,293 |   |   | 316              |   |   | 280         |   |  | 5    | 
|                                                              |   |           |   |   |                  |   |   | 860         |   |  | 6    | 
|                                                              |   |           |   |   |                  |   |   | (1,643      | ) |  | 15   | 
|Gross profit                                                  |   | 437,748   |   |   | (645             | ) |   | 503         |   |  |      | 
|                                                              |   |           |   |   |                  |   |   |             |   |  |      | 
|Selling, general and administrative
      expenses            |   | 199,132   |   |   | 9                |   |   | 304         |   |  | 7    | 
|                                                              |   |           |   |   |                  |   |   | (820        | ) |  | 2    | 
|                                                              |   |           |   |   |                  |   |   | 233         |   |  | 6    | 
|Restructuring and acquisition-related costs                   |   | 8,465     |   |   | -                |   |   | 7,666       |   |  | 12   | 
|                                                              |   |           |   |   |                  |   |   | (1,460      | ) |  | 9    | 
|                                                              |   |           |   |   |                  |   |   | 3,506       |   |  | 13   | 
|Operating income                                              |   | 230,151   |   |   | (654             | ) |   | (8,926      | ) |  |      | 
|                                                              |   |           |   |   |                  |   |   |             |   |  |      | 
|Financial expenses, net                                       |   | 5,485     |   |   | (66              | ) |   | 448         |   |  | 2    | 
|                                                              |   |           |   |   |                  |   |   | 275         |   |  | 5    | 
|Non-controlling interest in consolidated
      joint venture  |   | 504       |   |   | (504             | ) |   | -           |   |  |      | 
|Equity (earnings) loss in investment in joint venture         |   | -         |   |   | (504             | ) |   | -           |   |  |      | 
|Earnings before income taxes                                  |   | 224,162   |   |   | 420              |   |   | (9,649      | ) |  |      | 
|                                                              |   |           |   |   |                  |   |   |             |   |  |      | 
|Income tax recovery                                           |   | (15,742   | ) |   | -                |   |   | (731        | ) |  | 8    | 
|                                                              |   |           |   |   |                  |   |   | (58         | ) |  | 6    | 
|                                                              |   |           |   |   |                  |   |   | (108        | ) |  | 7    | 
|                                                              |   |           |   |   |                  |   |   | 540         |   |  | 9    | 
|                                                              |   |           |   |   |                  |   |   | (1,827      | ) |  | 12   | 
|                                                              |   |           |   |   |                  |   |   | (1,297      | ) |  | 13   | 
|Net earnings                                                  |   | 239,904   |   |   | 420              |   |   | (6,168      | ) |  |      | 
|                                                              |   |           |   |   |                  |   |   |             |   |  |      | 
|Other comprehensive income, net of related
      income taxes |   | 1,034     |   |   | -                |   |   | (2,309      | ) |  | 14   | 
|                                                              |   |           |   |   |                  |   |   | (1,643      | ) |  | 15   | 
|Comprehensive income                                          | $ | 240,938   |   | $ | 420              |   | $ | (10,120     | ) |  |      | 
|                                                              |   |           |   |   |                  |   |   |             |   |  |      | 
|Earnings per share:                                           |   |           |   |   |                  |   |   |             |   |  |      | 
|Basic EPS                                                     | $ | 1.97      |   |   |                  |   |   |             |   |  |      | 
|Basic weighted average number
      of shares outstanding     |   | 121,526   |   |   |                  |   |   |             |   |  |      | 
|                                                              |   |           |   |   |                  |   |   |             |   |  |      | 
|Diluted EPS                                                   | $ | 1.96      |   |   |                  |   |   |             |   |  |      | 
|Diluted weighted average number of shares
      outstanding   |   | 122,283   |   |   |                  |   |   |             |   |  |      | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.100

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS:

|1) | Investment in joint
venture
|-- | ---------------------------

Under Canadian GAAP, the Company consolidated the accounts of
its yarn-spinning joint venture CanAm. Under IFRS, CanAm is considered a jointly
controlled entity over which the Company has joint control. Consequently, the
Company no longer consolidates CanAm and accounts for the investment using the
equity method as at October 4, 2010, which is the opening IFRS statement of
financial position date.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:Under IFRS, the Companys net
investment in CanAm is presented as a long-term asset on one line in the
consolidated statement of financial position, for an amount equal to the
Companys initial investment and its cumulative share of undistributed earnings.

|                                                           |   | October 2, 2011 |   |   | October 4, 2010 |  
|---------------------------------------------------------- | - | --------------- | - | - | --------------- | -
|                                                           |   |                 |   |   |                 |  
|Increase in investment in joint venture                    | $ | 13,038          |   | $ | 12,533          |  
|Decrease in assets (excluding investment in joint venture) |   | (26,546         | ) |   | (22,644         | )
|Decrease in total liabilities and equity                   |   | (13,508         | ) |   | (10,111         | )

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:Consolidated net earnings and comprehensive income are not
significantly affected by this change. Non-material adjustments to certain
components of net earnings have been made as the Companys share of CanAms net
earnings are presented in a separate caption in the statement of earnings,
appearing below the gross profit subtotal as opposed to presenting the results
of CanAm on each line of the statement of earnings and comprehensive income.

|2) | Corporate aircraft lease
|-- | ------------------------

A previous lease of a corporate aircraft, which was accounted
for as an operating lease under Canadian GAAP, met the criteria for a finance
lease under IFRS at the transition date primarily due to the fact that the
Company had given notice to the lessor in fiscal 2010 to exercise an early
purchase option. Accordingly, this lease was recognized on the statement of
financial position as a finance lease.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:The impact of reclassifying
the corporate aircraft lease, previously classified as an operating lease,
resulted in an increase in property, plant and equipment, an increase in current
liabilities, and a decrease to prepaid expenses and deposits as at October 4,
2010. During the second quarter of fiscal 2011, the Company completed the
purchase of the corporate aircraft and immediately sold it to an external,
unrelated party. There was no impact on net earnings in the accounting for the
disposal of the corporate aircraft between Canadian GAAP and IFRS, therefore,
there was no adjustment required at October 2, 2011 for the difference which
existed at October 4, 2010.

|                                                    |   | October 2, 2011 |  |   | October 4, 2010 |  
|--------------------------------------------------- | - | --------------- |  | - | --------------- | -
|                                                    |   |                 |  |   |                 |  
|Decrease in prepaid expenses and deposits           | $ | -               |  | $ | (491            | )
|Increase in property, plant and equipment           |   | -               |  |   | 16,998          |  
|Increase in current portion of long-term
      debt |   | -               |  |   | 16,879          |  
|Decrease in equity                                  |   | -               |  |   | (372            | )

GILDAN 2012 REPORT TO SHAREHOLDERS P.101

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS (continued):
|--------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|2) | Corporate aircraft lease
  (continued)
|-- | --------------------------------------

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:The impact of the difference in lease classification was a
decrease in selling, general and administrative expenses (SG&A) due to the
reversal of rent expense, partially offset by the depreciation incurred on the
asset that was reclassified as a finance lease. Conversely, financial expenses
increased due to the interest accretion on the debt related to the finance
lease.

|                                 |   | Twelve months ended |  
|-------------------------------- | - | ------------------- | -
|                                 |   | October 2, 2011     |  
|                                 |   |                     |  
|Decrease in SG&A                 | $ | (820                | )
|Increase in financial expenses   |   | 448                 |  
|Increase in comprehensive income |   | 372                 |  

During the second quarter of fiscal 2011, the Company entered
into a new lease for a corporate aircraft which was being accounted for as an
operating lease under Canadian GAAP and which is also being accounted for as an
operating lease under IFRS.

|3) | Assets held for sale
|-- | --------------------

Under Canadian GAAP, assets held for sale were classified as
non-current assets. Under IFRS, assets held for sale are classified as current
assets.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:This difference has resulted
in an adjustment of $13.1 million as at October 2, 2011 and $3.2 million as at
October 4, 2010 to reclassify assets held for sale from non-current to current
assets.

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:There is no impact on net earnings and comprehensive
income.

|4) | Classification of deferred income
  taxes
|-- | -----------------------------------------

Under Canadian GAAP, deferred income taxes are classified as
current and non-current based on the classification of the underlying assets or
liabilities to which they relate or, if there is no underlying recognized asset
or liability, based on the expected reversal of the temporary difference. Under
IFRS, deferred income taxes are classified as non-current. Also under IFRS
deferred income tax assets and deferred income tax liabilities are offset if the
taxable entity has a legally enforceable right to offset current income tax
liabilities and current income tax assets, and the deferred income tax assets
and liabilities relate to income taxes levied by the same taxation authority on
the same taxable entity.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:This difference has resulted
in an adjustment of $11.7 million as at October 2, 2011 and $6.3 million as at
October 4, 2010 to reclassify deferred income tax assets from current to
non-current. The reclassification of deferred income tax assets has been offset
against non-current deferred tax liabilities.

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:There is no impact on net earnings and comprehensive income.

GILDAN 2012 REPORT TO SHAREHOLDERS P.102

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|5) | Decommissioning and site restoration
  costs
|-- | --------------------------------------------

Under Canadian GAAP, asset retirement obligations, which are
referred to as liabilities for decommissioning and site restoration costs under
IFRS, were not required to be recognized when the timing and/or method of
settlement was conditional on a future event, the entity had several options to
settle the obligation, and the obligation had an indeterminate settlement date.
Under IFRS, when the method and timing of the future settlement of an existing
obligation are uncertain, an entity should determine a range of possible
outcomes and methods of settlement and make an estimate of the future
obligation. Under Canadian GAAP, the Company did not recognize any liability and
corresponding asset for the estimated future costs of decommissioning and site
restoration for certain assets located at its textile and sock facilities since
the criteria for recognition had not been met. However, it was determined that
an obligation exists under IFRS. The Company has elected to use an optional
exemption that allows the use of a simplified approach to calculate the IFRS
adjustment for the depreciated cost of the property, plant and equipment at the
transition date relating to the decommissioning and site restoration liability,
as opposed to recalculating the asset value since its inception date as would
otherwise be required under IFRS.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:The estimate of the present
value of future decommissioning and site restoration costs for certain assets at
the Companys offshore locations resulted in the recognition as at October 4,
2010 of a site restoration liability classified as a non-current liability, an
increase to property, plant and equipment, and a reduction to equity to reflect
the accumulated depreciation for the property, plant and equipment since
inception.

|                                          |   | October 2, 2011 |   |   | October 4, 2010 |  
|----------------------------------------- | - | --------------- | - | - | --------------- | -
|                                          |   |                 |   |   |                 |  
|Increase in property, plant and equipment | $ | 4,528           |   | $ | 4,808           |  
|Increase in provisions                    |   | 8,226           |   |   | 7,951           |  
|Decrease in equity                        |   | (3,698          | ) |   | (3,143          | )

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:The increase in property, plant and equipment has resulted in
an increase in depreciation expense, which is reported in cost of sales, as well
as an increase in financial expenses to reflect the interest accretion on the
decommissioning and site restoration liability.

|                                 |   | Twelve months ended |  
|-------------------------------- | - | ------------------- | -
|                                 |   | October 2, 2011     |  
|                                 |   |                     |  
|Increase in cost of sales        | $ | 280                 |  
|Increase in financial expenses   |   | 275                 |  
|Decrease in comprehensive income |   | (555                | )

|6) | Components of property, plant and
  equipment
|-- | ---------------------------------------------

Under Canadian GAAP, the cost of an item of property, plant and
equipment made up of significant separable component parts was allocated to the
component parts only when practicable and when estimates could have been made of
the lives of the separate components. Under IFRS, each part of an item of
property, plant and equipment with a cost that is significant in relation to the
total cost of the item shall be depreciated separately, each with its own useful
life, resulting in depreciation expense which may differ from depreciation
expense under Canadian GAAP.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:The impact of the
identification of significant components of certain buildings resulted in a
reduction to property, plant and equipment, primarily due to lower useful lives
assigned to certain components.

GILDAN 2012 REPORT TO SHAREHOLDERS P.103

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|6) | Components of property, plant and equipment
      (continued)
|-- | -------------------------------------------------------------

|                                            |   | October 2, 2011 |   |   | October 4, 2010 |  
|------------------------------------------- | - | --------------- | - | - | --------------- | -
|                                            |   |                 |   |   |                 |  
|Decrease in property, plant and equipment   | $ | (3,447          | ) | $ | (2,354          | )
|Decrease in deferred income tax liabilities |   | (373            | ) |   | (315            | )
|Decrease in equity                          |   | (3,074          | ) |   | (2,039          | )

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:The impact of the lower useful lives of the components of
certain buildings resulted in an increase in depreciation expense resulting in
an increase in cost of sales and of SG&A expenses.

|                                       |   | Twelve months ended |  
|-------------------------------------- | - | ------------------- | -
|                                       |   | October 2, 2011     |  
|                                       |   |                     |  
|Increase in cost of sales              | $ | 860                 |  
|Increase in SG&A                       |   | 233                 |  
|Income taxes                           |   | (58                 | )
|Decrease in
      comprehensive income |   | (1,035              | )

|7) | Income taxes - Deferred income tax assets in a business
    combination recognized subsequent to the measurement
      period
|-- | -----------------------------------------------------------------------------------------------------------------------------

Under Canadian GAAP, additional deferred income tax assets of
an acquired company that were not initially recognized within the measurement
period, but were recognized subsequent to the measurement period were recognized
first as a reduction of goodwill, then as a reduction of intangible assets
before any adjustment was recognized in net earnings. Under IFRS, additional
deferred tax assets of an acquired company that are recognized after the
measurement period do not result in a reduction of intangible assets, and are
instead recognized in net earnings. Under Canadian GAAP, the Company had
recorded the recognition of a deferred income tax asset subsequent to the
measurement period, in connection with a business combination which occurred
prior to the IFRS transition date, as a reduction of intangible assets.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:This difference has resulted
in an increase to intangible assets, to reverse the reduction of intangible
assets described above.

|                                            |   | October 2, 2011 |  |   | October 4, 2010 | 
|------------------------------------------- | - | --------------- |  | - | --------------- | 
|                                            |   |                 |  |   |                 | 
|Increase in intangible assets               | $ | 5,186           |  | $ | 5,490           | 
|Increase in deferred income tax liabilities |   | 1,868           |  |   | 1,976           | 
|Increase in equity                          |   | 3,318           |  |   | 3,514           | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.104

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|7) | Income taxes - Deferred income tax assets in a business
    combination recognized subsequent to the measurement
      period (continued)
|-- | -----------------------------------------------------------------------------------------------------------------------------------------

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:The increase in intangible assets has resulted in an increase
in amortization expense, which is reported in SG&A.

|                                 |   | Twelve months ended |  
|-------------------------------- | - | ------------------- | -
|                                 |   | October 2, 2011     |  
|                                 |   |                     |  
|Increase in SG&A                 | $ | 304                 |  
|Income taxes                     |   | (108                | )
|Decrease in comprehensive income |   | (196                | )

|8) | Income taxes - Assets transferred between
      entities within the consolidated group
|-- | --------------------------------------------------------------------------------------

Under Canadian GAAP, deferred income tax assets and liabilities
were not recognized for temporary differences arising from assets transferred
between entities within the consolidated group, although any income tax
expense/recovery incurred by the selling entity was recorded on the statement of
financial position as a non-tax asset/liability. Under IFRS, the tax
expense/recovery incurred by the selling entity is not deferred, but a deferred
income tax asset/liability is recorded for the temporary difference resulting
from the internal transfer (essentially the change in the tax basis), measured
at the buying entitys tax rate.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:This difference has resulted
in the reversal of a non-tax asset which was included in other assets, and the
recognition of deferred income tax assets, which have been offset against
deferred income tax liabilities. The adjustment to decrease deferred income tax
liabilities reflects the tax effect of temporary differences for certain
inventories which have been transferred between entities within the consolidated
group, using the buying entitys tax rate.

|                                            |   | October 2, 2011 |   |   | October 4, 2010 |  
|------------------------------------------- | - | --------------- | - | - | --------------- | -
|                                            |   |                 |   |   |                 |  
|Decrease in other assets                    | $ | (1,029          | ) | $ | (1,029          | )
|Decrease in deferred income tax liabilities |   | (2,097          | ) |   | (1,366          | )
|Increase in equity                          |   | 1,068           |   |   | 337             |  

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:This difference has resulted in a decrease in income taxes with
a corresponding increase in net earnings and comprehensive income.

|                                       |   | Twelve months ended |  
|-------------------------------------- | - | ------------------- | -
|                                       |   | October 2, 2011     |  
|                                       |   |                     |  
|Income taxes                           | $ | (731                | )
|Increase in
      comprehensive income |   | 731                 |  

GILDAN 2012 REPORT TO SHAREHOLDERS P.105

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|9) | Business combinations - Contingent
      consideration
|-- | ------------------------------------------------------

Under Canadian GAAP, contingent consideration was recognized at
the date of acquisition of a business when the amount could have been reasonably
estimated and the outcome was determinable beyond reasonable doubt. Otherwise,
contingent consideration was recognized when resolved as an additional cost of
the purchase (which usually resulted in such costs being added to goodwill).
Under IFRS, contingent consideration is recognized at the date of acquisition at
fair value, generally as a liability, and the impact of changes in the
subsequent re-measurement of contingent consideration is generally recorded in
net earnings.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:At October 4, 2010, an
adjustment has been recorded to recognize a liability of $5.8 million at the
transition date with a corresponding decrease to retained earnings, with respect
to contingent consideration which was part of a business combination that
occurred prior to the IFRS transition date and which was recognized under
Canadian GAAP after the transition date. This adjustment has been charged to
retained earnings under IFRS rather than goodwill because IFRS does not permit
transition date adjustments to be made to goodwill in this case. During the
second quarter of fiscal 2011, the contingent consideration was resolved for an
amount of $5.8 million which was recorded as an increase to goodwill under
Canadian GAAP. As a result, no IFRS adjustment was required at October 2, 2011
to recognize a liability for the contingent consideration, however an adjustment
was required to reduce goodwill by $5.8 million since IFRS does not permit
adjustments to goodwill in this case.

|                                                     |   | October 2, 2011 |   |   | October 4, 2010 |  
|---------------------------------------------------- | - | --------------- | - | - | --------------- | -
|                                                     |   |                 |   |   |                 |  
|Decrease in goodwill                                 | $ | (5,815          | ) | $ | -               |  
|Increase in accounts payable and accrued liabilities |   | -               |   |   | 5,815           |  
|Decrease in equity                                   |   | (5,815          | ) |   | (5,815          | )

The acquisition of Gold Toe Moretz in fiscal 2011 (see note 5
to the audited annual consolidated financial statements) included a contingent
consideration of approximately $5.3 million. The contingent consideration was
not recognized under Canadian GAAP, but must be recognized under IFRS, resulting
in an adjustment to increase accounts payable and accrued liabilities to
recognize the estimated fair value of the contingent consideration at the date
of acquisition, with a corresponding increase to goodwill of approximately $3.3
million, net of deferred income taxes. The contingent consideration was
subsequently re-measured at October 2, 2011 as described below which resulted in
a decrease of the contingent consideration payable from $5.3 million to $3.9
million.

|                                                     |   | October 2, 2011 |   |   | October 4, 2010 | 
|---------------------------------------------------- | - | --------------- | - | - | --------------- | 
|                                                     |   |                 |   |   |                 | 
|Increase in goodwill                                 | $ | 3,345           |   | $ | -               | 
|Increase in accounts payable and accrued liabilities |   | 3,850           |   |   | -               | 
|Decrease in deferred income tax liabilities          |   | (1,425          | ) |   | -               | 
|Increase in equity                                   |   | 920             |   |   | -               | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.106

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|9) | Business combinations - Contingent
      consideration (continued)
|-- | ------------------------------------------------------------------

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:The re-measurement of the contingent consideration mentioned
above relating to the Gold Toe Moretz acquisition resulted in a credit to net
earnings during the fourth quarter of fiscal 2011, and was included in
restructuring and acquisition-related costs.

|                                                              |   | Twelve months ended |  
|------------------------------------------------------------- | - | ------------------- | -
|                                                              |   | October 2, 2011     |  
|                                                              |   |                     |  
|Decrease in restructuring and
      acquisition-related costs | $ | (1,460              | )
|Income taxes                                                  |   | 540                 |  
|Increase in comprehensive income                              |   | 920                 |  

|10) | Classification of statutory severance and
      other post-employment benefit obligations
|--- | -----------------------------------------------------------------------------------------

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:An adjustment has been
recorded to reclassify statutory severance and other post-employment benefit
obligations of $13.8 million as at October 2, 2011 and $12.2 million as at
October 4, 2010 from accounts payable and accrued liabilities to non-current
employee benefit obligations.

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:There is no impact on net earnings and comprehensive income.

|11) | Foreign exchange cumulative translation
      differences
|--- | ---------------------------------------------------------

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:The Company has elected to
use an exemption which permits the balance of any cumulative translation
adjustment (CTA) to be eliminated by an adjustment to opening retained
earnings at the transition date. As a result, the Company eliminated its CTA
balance of $26.2 million which was included in accumulated other comprehensive
income through an adjustment to retained earnings as at October 2, 2011 and
October 4, 2010.

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:There is no impact on net earnings and comprehensive income.

|12) | Business combinations  Restructuring and
      acquisition-related costs
|--- | -------------------------------------------------------------------------

Under IFRS, transaction costs and restructuring costs are
generally charged to earnings as incurred. Under Canadian GAAP, transaction
costs and certain anticipated post-acquisition restructuring and integration
costs incurred in connection with the acquisition of Gold Toe Moretz in fiscal
2011 were included in the cost of the purchase (which resulted in such costs
being added to goodwill, net of income taxes).

Impact on consolidated statement of financial position as
at October 4, 2010:There is no impact on the consolidated statement of
financial position as at October 4, 2010.

Impact on consolidated statement of financial position
as at October 2, 2011 and consolidated statement of earnings and comprehensive
income for the year ended October 2, 2011:An adjustment of $7.7 million
was recorded as a charge to restructuring and acquisition-related costs in the
third quarter of fiscal 2011 with a $5.8 million reduction to goodwill and a
decrease in income taxes of $1.8 million, regarding acquisition-related costs
incurred in connection with the acquisition of Gold Toe Moretz in the third
quarter of fiscal 2011.

GILDAN 2012 REPORT TO SHAREHOLDERS P.107

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS (continued):
|--------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|12) | Business combinations  Restructuring and
      acquisition-related costs (continued)
|--- | -------------------------------------------------------------------------------------

|                     |   | October 2, 2011 |   |   | October 4, 2010 | 
|-------------------- | - | --------------- | - | - | --------------- | 
|                     |   |                 |   |   |                 | 
|Decrease in goodwill | $ | (5,839          | ) | $ | -               | 
|Decrease in equity   |   | (5,839          | ) |   | -               | 

|                                                              |   | Twelve months ended |  
|------------------------------------------------------------- | - | ------------------- | -
|                                                              |   | October 2, 2011     |  
|                                                              |   |                     |  
|Increase in restructuring and
      acquisition-related costs | $ | 7,666               |  
|Income taxes                                                  |   | (1,827              | )
|Decrease in comprehensive income                              |   | (5,839              | )

|13) | Business combinations  Employee
    benefits
|--- | ---------------------------------------------

Under both Canadian GAAP and IFRS, the funded status of a
defined benefit pension plan of an acquired company is fully recognized at the
acquisition date. Under Canadian GAAP, the effects of any planned amendments,
terminations or curtailments are included in the measurement of the funded
status of the plan at the date of acquisition. However under IFRS, the effects
of any planned, but not executed, amendments, terminations, or curtailments to
defined benefit pension plans and other post-employment plans acquired are
excluded from the measurement of the funded status of those plans at the date of
acquisition. Such actions are recognized post business combination as a charge
or credit to earnings, as the actions occur.

Impact on consolidated statement of financial position
as at October 4, 2010:No impact on the consolidated statement of
financial position as at October 4, 2010.

Impact on consolidated statement of financial position as
at October 2, 2011 and consolidated statement of earnings and comprehensive
income for the year ended October 2, 2011:As a result of the planned
termination of the Gold Toe Moretz defined benefit pension plan, the initial
measurement of the accrued pension benefit liability at the date of acquisition
was higher under Canadian GAAP resulting in an IFRS adjustment to decrease
accounts payable and accrued liabilities by $4.7 million, and a decrease to
goodwill of $3 million, net of deferred income taxes. The subsequent impact on
net earnings related to differences between Canadian GAAP and IFRS in the
measurement of the accrued benefit liability at October 2, 2011 resulted in an
additional pension expense of $3.5 million under IFRS, which was included in
restructuring and acquisition-related costs, since the charge was due to the
partial settlement of the defined benefit pension plan, bringing the net
adjustment to employee benefit obligations to $1.2 million at October 2,
2011.

|                                            |   | October 2, 2011 |   |   | October 4, 2010 | 
|------------------------------------------- | - | --------------- | - | - | --------------- | 
|                                            |   |                 |   |   |                 | 
|Decrease in goodwill                        | $ | (2,977          | ) | $ | -               | 
|Decrease in employee benefit obligations    |   | (1,220          | ) |   | -               | 
|Increase in deferred income tax liabilities |   | 452             |   |   | -               | 
|Decrease in equity                          |   | (2,209          | ) |   | -               | 

GILDAN 2012 REPORT TO SHAREHOLDERS P.108

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|13) | Business combinations  Employee benefits
      (continued)
|--- | -----------------------------------------------------------

|                                                              |   | Twelve months ended |  
|------------------------------------------------------------- | - | ------------------- | -
|                                                              |   | October 2, 2011     |  
|                                                              |   |                     |  
|Increase in restructuring and
      acquisition-related costs | $ | 3,506               |  
|Income taxes                                                  |   | (1,297              | )
|Decrease in comprehensive income                              |   | (2,209              | )

|14) | Employee benefits  Actuarial gains/losses
      related to defined benefit plans
|--- | ---------------------------------------------------------------------------------

Under IFRS, companies are permitted an accounting policy choice
of either (i) recognizing the full funded status of defined benefit plans and
recording the entire amount of actuarial gains or losses in earnings
immediately; (ii) recognizing a partial amount of the funded status and
recording the actuarial gains or losses in earnings using the corridor method
for the portion of actuarial gains or losses exceeding a certain minimum
threshold; or (iii) recognizing the entire amount of actuarial gains or losses
to other comprehensive income with no systematic periodic amortization to
earnings. The Companys accounting policy choice under Canadian GAAP for the
Gold Toe Moretz defined benefit plan was to use the corridor method and
recognize only the portion of actuarial gains or losses that exceeded a certain
threshold, of which the excess amounted to nil in fiscal 2011. Canadian GAAP
also permitted companies to apply different accounting policy choices when more
than one defined benefit plan existed. Under IFRS, companies must apply the same
accounting policy for all types of defined benefit plans. The Company has
adopted an accounting policy for its defined benefit plans under IFRS to
recognize the entire amount of actuarial gains or losses in other comprehensive
income with no systematic periodic amortization to earnings.

Impact on consolidated statement of financial position
as at October 4, 2010:There is no impact on the consolidated statement
of financial position as at October 4, 2010.

Impact on consolidated statement of financial position as
at October 2, 2011 and consolidated statement of earnings and comprehensive
income for the year ended October 2, 2011:An adjustment of $4.0 million
was recorded in order to reclassify the pension liability previously recorded in
accounts payable and accrued liabilities under Canadian GAAP to non-current
employee benefit obligations under IFRS. An adjustment was also recorded to
increase the pension liability by $3.7 million as at October 2, 2011 under IFRS
(resulting in a total increase to employee benefit obligations of $7.6 million),
with a corresponding charge of $2.3 million, net of deferred income taxes, to
other comprehensive income to reflect the funded status of the defined benefit
pension plan.

|                                                           |   | October 2, 2011 |   |   | October 4, 2010 | 
|---------------------------------------------------------- | - | --------------- | - | - | --------------- | 
|                                                           |   |                 |   |   |                 | 
|Decrease in accounts payable and accrued
      liabilities | $ | (3,973          | ) | $ | -               | 
|Increase in employee benefit obligations                   |   | 7,639           |   |   | -               | 
|Decrease in deferred income tax liabilities                |   | (1,357          | ) |   | -               | 
|Decrease in equity                                         |   | (2,309          | ) |   | -               | 

|                                       |   | Twelve months ended |  
|-------------------------------------- | - | ------------------- | -
|                                       |   | October 2, 2011     |  
|                                       |   |                     |  
|Decrease in other comprehensive income | $ | (2,309              | )
|Decrease in
      comprehensive income |   | (2,309              | )

GILDAN 2012 REPORT TO SHAREHOLDERS P.109

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29. FIRST TIME ADOPTION OF IFRS
    (continued):
|------------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|15) | Employee Benefits  Statutory severance
      liability
|--- | -------------------------------------------------------

The Company maintains a liability for statutory severance and
pre-notice benefit obligations for active employees located in the Caribbean
Basin and Central America which is payable to the employees in a lump sum
payment upon termination of employment. The liability meets the definition of a
defined benefit plan under both Canadian GAAP and IFRS. As described in note 14)
above, under Canadian GAAP, companies were permitted to apply different
accounting policy choices when more than one defined benefit plan existed. As
such, the Companys accounting policy under Canadian GAAP for the statutory
severance liability was to recognize the entire amount of actuarial gains or
losses in earnings which amounted to an actuarial loss of approximately $1.6
million based on an actuarial valuation that was performed in the fourth quarter
of fiscal 2011. As mentioned in note 14) above, the Company has adopted an
accounting policy for its defined benefit plans under IFRS to recognize the
entire amount of actuarial gains or losses to other comprehensive income with no
systematic periodic amortization to earnings. As such, a reclassification
adjustment was required in the fourth quarter of fiscal 2011 resulting in a
decrease to cost of sales and a decrease to other comprehensive income of $1.6
million.

Impact on consolidated statements of financial position
as at October 2, 2011 and October 4, 2010:There is no impact on the
consolidated statements of financial position as at October 2, 2011 and October
4, 2010.

Impact on consolidated statement of earnings and
comprehensive income for the year ended October 2, 2011:

|                                             |   | Twelve months ended |  
|-------------------------------------------- | - | ------------------- | -
|                                             |   | October 2, 2011     |  
|                                             |   |                     |  
|Decrease in cost of sales                    | $ | (1,643              | )
|Decrease in other
      comprehensive income |   | (1,643              | )

|16) | Statement of cash flows
|--- | -----------------------

The transition from Canadian GAAP to IFRS has not had a
significant impact on the consolidated statement of cash flows for the fiscal
year ended October 2, 2011, except for the following:

|                                                                                                           |   | Canadian |   |   |             |   |   |          |  
|---------------------------------------------------------------------------------------------------------- | - | -------- | - | - | ----------- | - | - | -------- | -
|                                                                                                           |   | GAAP     |   |   | Adjustments |   |   | IFRS     |  
|                                                                                                           |   |          |   |   |             |   |   |          |  
|Cash flows from operating activities                                                                       | $ | 181,550  |   | $ | (17,911     | ) | $ | 163,639  |  
|Cash flows from financing activities                                                                       |   | 172,832  |   |   | (17,233     | ) |   | 155,599  |  
|Cash flows used in investing activities                                                                    |   | (523,937 | ) |   | 35,966      |   |   | (487,971 | )
|Effect of exchange
      rate changes on cash and cash equivalents denominated in foreign
      currencies |   | (85      | ) |   | -           |   |   | (85      | )
|Net decrease in cash and cash equivalents
      during the period                                          |   | (169,640 | ) |   | 822         |   |   | (168,818 | )
|Cash and cash
      equivalents, beginning of period                                                       |   | 258,442  |   |   | (7,599      | ) |   | 250,843  |  
|Cash and cash equivalents, end of period                                                                   | $ | 88,802   |   | $ | (6,777      | ) | $ | 82,025   |  

The decrease in cash flows from operating activities for the
year ended October 2, 2011 from Canadian GAAP to IFRS of $17.9 million is due
primarily to: (i) the impact of the decrease in net earnings resulting from the
expensing of acquisition-related costs incurred in connection with the
acquisition of Gold Toe Moretz of $7.7 million as described in note 12) to the
reconciliations from Canadian GAAP to IFRS; (ii) the impact of the decrease in
accounts payable and accrued liabilities as a result of the contingent
consideration of $5.8 million which was recorded at the transition date under
IFRS in connection with a business combination which occurred prior to the
transition date and was paid during fiscal 2011 as described in note 9) to the
reconciliations from Canadian GAAP to IFRS; and (iii) the impact of the change
of accounting for the Companys investment in CanAm as described in note 1) to
the reconciliations from Canadian GAAP to IFRS which resulted in a decrease in
cash flows from operating activities of $4.0 million.

GILDAN 2012 REPORT TO SHAREHOLDERS P.110

---

| | NOTES TO CONSOLIDATED FINANCIAL
  STATEMENTS
| | --------------------------------------------

|29.FIRST TIME ADOPTION OF IFRS
    (continued):
|-----------------------------------------------

NOTES TO RECONCILIATIONS FROM CANADIAN GAAP TO IFRS
(continued):

|16) | Statement of cash flows
  (continued)
|--- | -------------------------------------

The decrease in cash flows from financing activities for the
year ended October 2, 2011 from Canadian GAAP to IFRS of $17.2 million is
primarily due to the impact of the repayment of the finance lease obligation in
the amount of $17.0 million as a result of the disposal of the corporate
aircraft which was reclassified as a finance lease under IFRS as described in
note 2) to the reconciliations from Canadian GAAP to IFRS.

The decrease in cash flows used in investing activities for the
year ended October 2, 2011 from Canadian GAAP to IFRS of $36 million is
primarily due to: (i) the impact of the reclassification of the corporate
aircraft lease as a finance lease in which the repayment of the finance lease
obligation of $17 million described above, was previously offset against the
proceeds of disposal in investing activities; (ii) the impact of the
acquisition-related costs incurred in connection with the acquisition of Gold
Toe Moretz in the amount of $7.7 million described above which was previously
included as a cash outflow in investing activities under Canadian GAAP; (iii)
the impact of the contingent consideration of $5.8 million described above which
was settled in fiscal 2011 and was not considered as part of investing
activities under IFRS; and (iv) the impact of the change of accounting for the
Companys investment in CanAm from Canadian GAAP to IFRS which resulted in an
increase in cash flows from investing activities of $4.8 million.

GILDAN 2012 REPORT TO SHAREHOLDERS P.111

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