Consolidated Financial Statements(Expressed in U.S. dollars)

BALLARD
POWER SYSTEMS INC.

Years ended
December 31, 2015 and 2014

---



MANAGEMENTS REPORT

Managements Responsibility for the
Financial Statements andReport on Internal Control over Financial
Reporting

The consolidated financial statements
contained in this Annual Report have been prepared by management in accordance
with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board. The integrity and objectivity of the
data in these consolidated financial statements are managements responsibility.
Management is also responsible for all other information in the Annual Report
and for ensuring that this information is consistent, where appropriate, with
the information and data contained in the consolidated financial statements.

Management is responsible for
establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external reporting purposes
in accordance with IFRS. Internal control over financial reporting may not
prevent or detect fraud or misstatements because of limitations inherent in any
system of internal control. Management has assessed the effectiveness of the
Corporations internal control over financial reporting based on the framework
in Internal Control  Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and concluded that the
Corporations internal control over financial reporting was effective as of
December 31, 2015. In addition, management maintains disclosure controls and
procedures to provide reasonable assurance that material information is
communicated to management and appropriately disclosed. Some of the assets and
liabilities include amounts, which are based on estimates and judgments, as
their final determination is dependent on future events.

The Corporation acquired Protonex
Technology Corporation (Protonex) during 2015, and management excludes from
its assessment of the effectiveness of the Corporations internal control over
financial reporting as of December 31, 2015, Protonex internal control over
financial reporting associated with total assets of $17,802,000 and total
revenue of $3,397,000 included in the consolidated financial statements of the
Corporation as of and for the year ended December 31, 2015 as Protonex was
acquired in the last quarter of 2015.

The Board of Directors oversees
managements responsibilities for financial reporting through the Audit
Committee, which consists of eight directors who are independent and not
involved in the daily operations of the Corporation. The Audit Committee meets
on a regular basis with management and the external and internal auditors to
discuss internal controls over the financial reporting process, auditing matters
and financial reporting issues. The Audit Committee is responsible for
appointing the external auditors (subject to shareholder approval), and
reviewing and approving all financial disclosure contained in our public
documents and related party transactions.

The external auditors, KPMG LLP, have
audited the financial statements and expressed an unqualified opinion thereon.
KPMG has also expressed an unqualified opinion on the effective operation of the
internal controls over financial reporting as of December 31, 2015. The external
auditors have full access to management and the Audit Committee with respect to
their findings concerning the fairness of financial reporting and the adequacy
of internal controls.

---



|RANDALL MACEWEN       | TONY GUGLIELMIN      
|----------------------- | -----------------------
|                       
|                       
|RANDALL MACEWEN         | TONY GUGLIELMIN        
|President and           | Vice President and     
|Chief Executive Officer | Chief Financial Officer
|February 25, 2016       | February 25,
2016      

---



| | KPMG
      LLP                           | Telephone |  | (604)
      691-3000
| | ---------------------------------------- | --------- |  | --------------------
| | Chartered
      Professional Accountants | Fax       |  | (604)
      691-3031
| | PO Box 10426 777
      Dunsmuir Street   | Internet  |  | www.kpmg.ca         
| | Vancouver BC V7Y
      1K3               |           |  |                     
| | Canada                                   |           |  |                     

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of
Directors of Ballard Power Systems Inc.

We have audited the accompanying
consolidated statements of financial position of Ballard Power Systems Inc.(the
Company) as of December 31, 2015 and December 31, 2014 and the related
consolidated statements of loss and comprehensive loss, changes in equity and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance
with Canadian generally accepted auditing standards and 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 the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of the Company as of December 31, 2015 and
December 31, 2014, and its consolidated financial performance and its
consolidated cash flows for the years then ended in conformity with
International Financial Reporting Standardsas
issued by the International Accounting Standards Board.

We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United
States), the Companys internal control over financial reporting as of December
31, 2015, based on the criteria established in Internal Control  Integrated
Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 24, 2016 expressed an
unqualified opinion on the effectiveness of the Companys internal control over
financial reporting.

Chartered Professional Accountants

February 24, 2016Vancouver, Canada

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.
KPMG Confidential


---



| | KPMG
      LLP                           | Telephone |  | (604)
      691-3000
| | ---------------------------------------- | --------- |  | --------------------
| | Chartered
      Professional Accountants | Fax       |  | (604)
      691-3031
| | PO Box 10426 777
      Dunsmuir Street   | Internet  |  | www.kpmg.ca         
| | Vancouver BC V7Y
      1K3               |           |  |                     
| | Canada                                   |           |  |                     

Report of Independent Registered
Public Accounting Firm

To the Shareholders and Board of
Directors of Ballard Power Systems Inc.

We have audited Ballard Power Systems
Inc.s (the Company) internal control over financial reporting as of December
31, 2015, based on criteria established inInternal Control  Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company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, included in the
section entitled Managements Report on Disclosure Controls and Procedures and
Internal Controls over Financial Reporting under the heading Internal control
over financial reporting included in the Companys Management and Discussion
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.

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.
KPMG Confidential


---



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, the Company maintained,
in all material respects, effective internal control over financial reporting as
of December 31, 2015, based on criteria established inInternal Control  Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).

The Company acquired Protonex
Technology Corporation during 2015, and management excluded from its assessment
of the effectiveness of the Companys internal control over financial reporting
as of December 31, 2015, Protonex Technology Corporations internal control over
financial reporting associated with total assets of $17.8 million and total
revenues of $3.4 million included in the consolidated financial statements of
the Company as of and for the year ended December 31, 2015. Our audit of
internal control over financial reporting of the Company also excluded an
evaluation of the internal control over financial reporting of Protonex
Technology Corporation.

We also have audited, in accordance
with Canadian general accepted auditing standards and the standards of the
Public Company Accounting Oversight Board (United States), the consolidated
statements of financial position of the Company as of December 31, 2015 and
December 31, 2014, and the related consolidated statements of loss and
comprehensive loss, changes in equity, and cash flows for the years then ended
and our report dated February 24, 2016 expressed an unqualified opinion on those
consolidated financial statements.

Chartered Professional Accountants

February 24, 2016Vancouver, Canada

---



BALLARD POWER SYSTEMS
INC.Consolidated Statement of Financial
Position(Expressed in thousands of U.S.
dollars)

|                                                           |      |      |      | December 31, |            |      | December 31, |      
|---------------------------------------------------------- | ---- | ---- | ---- | ------------ | ---------- | ---- | ------------ | -----
|                                                           | **** | Note | **** | 2015         |            | **** | 2014         |      
|Assets                                                     |      |      |      |              |            |      |              |      
|****                                                      
|Current assets:                                            |      |      |      |              |            |      |              |      
|Cash and cash
      equivalents                            |      |      |      | $            | 40,049     |      |              | **$**
|Trade and other
      receivables                          |      | 9    |      |              | 25,484     |      |              |      
|Inventories                                                |      | 10   |      |              | 20,369     |      |              |      
|Prepaid expenses and
      other current assets            |      |      |      |              | 1,672      |      |              |      
|Total current
      assets                                 |      |      |      |              | 87,574     |      |              |      
|****                                                      
|Non-current assets:                                        |      |      |      |              |            |      |              |      
|Property, plant and
      equipment                        |      | 11   |      |              | 16,725     |      |              |      
|Intangible
    assets                                      |      | 12   |      |              | 16,329     |      |              |      
|Goodwill                                                   |      | 13   |      |              | 40,562     |      |              |      
|Investments                                                |      |      |      |              | 6          |      |              |      
|Other long-term
      assets                               |      |      |      |              | 135        |      |              |      
|Total assets                                               |      |      |      | $            | 161,331    |      |              | $    
|****                                                      
|Liabilities
      and Equity                               |      |      |      |              |            |      |              |      
|****                                                      
|Current liabilities:                                       |      |      |      |              |            |      |              |      
|Trade and other
      payables                             |      | 15   |      | $            | 17,220     |      |              | $    
|Deferred revenue and
      other recoveries                |      |      |      |              | 6,085      |      |              |      
|Provisions                                                 |      | 16   |      |              | 5,368      |      |              |      
|Finance lease
      liability                              |      | 17   |      |              | 1,011      |      |              |      
|Debt to Dantherm Power
      A/S non-controlling interests |      | 18   |      |              | 504        |      |              |      
|Total current
      liabilities                            |      |      |      |              | 30,188     |      |              |      
|****                                                      
|Non-current
      liabilities:                             |      |      |      |              |            |      |              |      
|Finance lease
      liability                              |      | 17   |      |              | 6,723      |      |              |      
|Deferred gain on finance
      lease                       |      | 17   |      |              | 3,829      |      |              |      
|Provisions                                                 |      | 16   |      |              | 3,646      |      |              |      
|Employee future
      benefits                             |      | 19   |      |              | 5,331      |      |              |      
|Total
      liabilities                                    |      |      |      |              | 49,717     |      |              |      
|****                                                      
|Equity:                                                    |      |      |      |              |            |      |              |      
|Share capital                                              |      | 20   |      |              | 948,213    |      |              |      
|Contributed
    surplus                                    |      | 20   |      |              | 293,332    |      |              |      
|Accumulated
    deficit                                    |      |      |      |              | (1,127,655 | )    |              |      
|Foreign currency
      reserve                             |      |      |      |              | 567        |      |              |      
|Total equity attributable
      to equity holders          |      |      |      |              | 114,457    |      |              |      
|Dantherm Power
      A/S non-controlling interests         |      |      |      |              | (2,843     | )    |              |      
|Total equity                                               |      |      |      |              | 111,614    |      |              |      
|Total liabilities
      and equity                         |      |      |      | $            | 161,331    |      |              | $    

See accompanying notes to consolidated
financial statements

Approved on behalf of the Board:

|Ed Kilroy | Ian Bourne
|----------- | ------------
|Director    | Director    

---



BALLARD POWER SYSTEMS
INC.Consolidated Statement of Loss and
Comprehensive LossFor the year ended December 31(Expressed in thousands of U.S. dollars,
except per share amounts and number of shares)

|                                                                     | **** | Note | **** | 2015 |         | **** | 2014 |  
|-------------------------------------------------------------------- | ---- | ---- | ---- | ---- | ------- | ---- | ---- | -
|Revenues:                                                            |      |      |      |      |         |      |      |  
|Product and service revenues                                         |      |      |      | $    | 56,463  |      |      | $
|Cost of product and
      service revenues                           |      |      |      |      | 46,489  |      |      |  
|Gross margin                                                         |      |      |      |      | 9,974   |      |      |  
|****                                                                
|Operating expenses:                                                  |      |      |      |      |         |      |      |  
|Research and product development                                     |      |      |      |      | 16,206  |      |      |  
|General and
      administrative                                     |      |      |      |      | 10,594  |      |      |  
|Sales and marketing                                                  |      |      |      |      | 7,428   |      |      |  
|Other expense                                                        |      | 24   |      |      | 630     |      |      |  
|Total operating expenses                                             |      |      |      |      | 34,858  |      |      |  
|****                                                                
|Results from operating
      activities                              |      |      |      |      | (24,884 | )    |      |  
|Finance (loss)
      and other                                       |      | 25   |      |      | (305    | )    |      |  
|Finance
      expense                                                |      | 25   |      |      | (794    | )    |      |  
|Net finance expense                                                  |      |      |      |      | (1,099  | )    |      |  
|Gain (loss) on sale of
      property, plant and equipment           |      |      |      |      | 1       |      |      |  
|Gain on sale of intellectual
    property                            |      | 12   |      |      | 19,619  |      |      |  
|Impairment loss on
      investment                                  |      |      |      |      | -       |      |      |  
|Loss before income taxes                                             |      |      |      |      | (6,363  | )    |      |  
|Income tax
    expense                                               |      | 26   |      |      | (211    | )    |      |  
|Net loss from continuing
      operations                            |      |      |      |      | (6,574  | )    |      |  
|Net earnings from
      discontinued operations                      |      | 8    |      |      | -       |      |      |  
|Net loss                                                             |      |      |      |      | (6,574  | )    |      |  
|****                                                                
|Other comprehensive income (loss):                                   |      |      |      |      |         |      |      |  
|Items that will not be
      reclassified to profit or loss:         |      |      |      |      |         |      |      |  
|Actuarial gain (loss) on
      defined benefit plans                 |      | 19   |      |      | 168     |      |      |  
|****                                                                 |      |      |      |      | 168     |      |      |  
|Items that may be reclassified subsequently to profit or
      loss: |      |      |      |      |         |      |      |  
|Foreign currency translation
      differences                       |      |      |      |      | 560     |      |      |  
|****                                                                 |      |      |      |      | 560     |      |      |  
|Other comprehensive
      income (loss), net of tax                  |      |      |      |      | 728     |      |      |  
|Total comprehensive loss                                             |      |      |      | $    | (5,846  | )    |      | $

See accompanying notes to consolidated
financial statements

---



BALLARD POWER SYSTEMS
INC.Consolidated Statement of Loss and
Comprehensive Loss (contd)For the year ended December 31(Expressed in thousands of U.S.
dollars, except per share amounts and number of shares)

|                                                                                  |  | 2015 |             |   | 2014 |  
|--------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Net loss attributable to:                                                         |  |      |             |   |      |  
|Ballard
      Power Systems Inc. from continuing operations                       |  | $    | (5,815      | ) |      | $
|Ballard Power Systems
      Inc. from discontinued operations                     |  |      | -           |   |      |  
|Dantherm
      Power A/S non-controlling interest                                 |  |      | (759        | ) |      |  
|Net loss                                                                          |  | $    | (6,574      | ) |      | $
|                                                                                 
|Total comprehensive loss
      attributable to:                                   |  |      |             |   |      |  
|Ballard Power Systems
      Inc.                                                  |  | $    | (5,351      | ) |      | $
|Dantherm
      Power A/S non-controlling interest                                 |  |      | (495        | ) |      |  
|Total comprehensive
      loss                                                    |  | $    | (5,846      | ) |      | $
|                                                                                 
|Basic and diluted loss
      per share attributable to Ballard Power Systems Inc. |  |      |             |   |      |  
|Continuing
      operations                                                       |  | $    | (0.04       | ) |      | $
|Discontinued
      operations                                                     |  |      | -           |   |      |  
|Net loss                                                                          |  | $    | (0.04       | ) |      | $
|                                                                                 
|Weighted average number
      of common shares outstanding                        |  |      | 140,393,579 |   |      |  

See accompanying notes to consolidated
financial statements

---



BALLARD POWER SYSTEMS
INC.Consolidated Statement of Changes in
Equity(Expressed in thousands of U.S. dollars
except per share amounts and number of shares)

|                                              |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        |          |            |       |  |  |      
|--------------------------------------------- |  | --------------------------------- |  | ------- | ----------- | -------- | ----- | ----- | ----------- |  | ----- | ----------- | - |  | -------- | -------------- | ----- | ----------- | ------- | ------- |  | ------ | -------- | ---------- | ----- |  |  | -----
|                                              |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        | Dantherm |            |       |  |  |      
|                                              |  | Ballard Power Systems Inc. Equity |  |         | Power A/S   |          |       |       |             |  |      
|                                              |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             | Foreign |         |  | Non-   |          |            |       |  |  |      
|                                              |  | Number of                         |  | Share   |             | Treasury |       |       | Contributed |  |       | Accumulated |   |  | currency |                |       | controlling |         |         |  | Total  |         
|                                              |  | shares                            |  | capital |             | shares   |       |       | surplus     |  |       | deficit     |   |  | reserve  |                |       | interests   |         |         |  | equity |         
|Balance, December 31,
      2013              |  | 110,133,901                       |  | $       | 866,574     |          | $     | (118  | )           |  | $     | 296,368     |   |  | $        | (1,091,187     | )     |             | $       | 9       |  |        | $        | (1,392     | )     |  |  | $    
|Net loss                                      |  | -                                 |  |         | -           |          |       | -     |             |  |       | -           |   |  |          | (27,868        | )     |             |         | -       |  |        |          | (1,560     | )     |  |  |      
|Acquisition of intangible
      assets        |  | 5,121,507                         |  |         | 20,307      |          |       | -     |             |  |       | -           |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|(note 12 and
      20)                        |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        |          |            |       |  |  |      
|Warrants exercised (note 20)                  |  | 7,939,937                         |  |         | 12,299      |          |       | -     |             |  |       | -           |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Exercise of convertible
      promissory note |  | 4,761,905                         |  |         | 4,000       |          |       | -     |             |  |       | (4,000      | ) |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|(note 20)                                     |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        |          |            |       |  |  |      
|Sale of treasury shares (note 20)             |  | -                                 |  |         | -           |          |       | 118   |             |  |       | -           |   |  |          | 247            |       |             |         | -       |  |        |          | -          |       |  |  |      
|RSUs redeemed (note
      20)                 |  | 583,084                           |  |         | 866         |          |       | -     |             |  |       | (2,829      | ) |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Options exercised (note 20)                   |  | 3,563,782                         |  |         | 10,740      |          |       | -     |             |  |       | (3,946      | ) |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Share distribution
      plan                 |  | -                                 |  |         | -           |          |       | -     |             |  |       | 2,940       |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Other comprehensive income (loss):            |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        |          |            |       |  |  |      
|Defined benefit
      plan actuarial loss     |  | -                                 |  |         | -           |          |       | -     |             |  |       | -           |   |  |          | (2,863         | )     |             |         | -       |  |        |          | -          |       |  |  |      
|Foreign currency
      translation for        |  | -                                 |  |         | -           |          |       | -     |             |  |       | -           |   |  |          | -              |       |             |         | 271     |  |        |          | 258        |       |  |  |      
|foreign
      operations                      |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        |          |            |       |  |  |      
|Balance, December 31, 2014                    |  | 132,104,116                       |  | $       | 914,786     |          | $     | -     |             |  | **$** | 288,533     |   |  | $        | (1,121,671     | )     |             | $       | 280     |  |        | $        | (2,694     | )     |  |  | **$**
|Net loss                                      |  | -                                 |  |         | -           |          |       | -     |             |  |       | -           |   |  |          | (5,815         | )     |             |         | -       |  |        |          | (759       | )     |  |  |      
|Non-dilutive financing (note 22)              |  | -                                 |  |         | -           |          |       | -     |             |  |       | 3,347       |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Net Offering proceeds
      (note 20)         |  | 9,343,750                         |  |         | 13,389      |          |       | -     |             |  |       | -           |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Acquisition (note 7)                          |  | 11,415,704                        |  |         | 13,699      |          |       | -     |             |  |       | -           |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Private placement (note
      20)             |  | 3,322,479                         |  |         | 4,987       |          |       | -     |             |  |       | -           |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|DSUs redeemed (note 20)                       |  | 83,619                            |  |         | 354         |          |       | -     |             |  |       | (520        | ) |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|RSUs redeemed (note
      20)                 |  | 119,627                           |  |         | 203         |          |       | -     |             |  |       | (345        | ) |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Options exercised (note 20)                   |  | 322,892                           |  |         | 627         |          |       | -     |             |  |       | (239        | ) |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Warrants exercised (note
      20)            |  | 125,000                           |  |         | 168         |          |       | -     |             |  |       | -           |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Share distribution plan                       |  | -                                 |  |         | -           |          |       | -     |             |  |       | 2,556       |   |  |          | -              |       |             |         | -       |  |        |          | -          |       |  |  |      
|Dantherm power NCI
      adjustment for       |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        |          |            |       |  |  |      
|**cancellation
      of Azure shares**        |  | -                                 |  |         | -           |          |       | -     |             |  |       | -           |   |  |          | (337           | )     |             |         | -       |  |        |          | 337        |       |  |  |      
|Other comprehensive income (loss):            |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        |          |            |       |  |  |      
|**Defined
      benefit plan actuarial loss** |  | -                                 |  |         | -           |          |       | -     |             |  |       | -           |   |  |          | 168            |       |             |         | -       |  |        |          | -          |       |  |  |      
|**Foreign
      currency translation for**    |  |                                   |  |         |             |          |       |       |             |  |       |             |   |  |          |                |       |             |         |         |  |        |          |            |       |  |  |      
|**foreign
      operations**                  |  | -                                 |  |         | -           |          |       | -     |             |  |       | -           |   |  |          | -              |       |             |         | 287     |  |        |          | 273        |       |  |  |      
|**Balance,
      December 31, 2015**          |  | **156,837,187**                   |  | **$**   | **948,213** |          | **$** | **-** |             |  | **$** | **293,332** |   |  | **$**    | **(1,127,655** | **)** |             | **$**   | **567** |  |        | **$**    | **(2,843** | **)** |  |  | **$**

See accompanying notes to consolidated
financial statements

---



|BALLARD POWER SYSTEMS INC.                    
|----------------------------------------------
|Consolidated Statement of Cash
      Flows    
|For the year ended December
    31            
|(Expressed in thousands of U.S.
      dollars)

|                                                                             |  | Note |  | 2015 |         |   | 2014 |      
|---------------------------------------------------------------------------- |  | ---- |  | ---- | ------- | - | ---- | -----
|Cash provided by (used
      in):                                            |  |      |  |      |         |   |      |      
|                                                                            
|Operating
    activities:                                                    |  |      |  |      |         |   |      |      
|                                                                            
|Net loss for the year                                                        |  |      |  | $    | (6,574  | ) |      | **$**
|Adjustments for:                                                             |  |      |  |      |         |   |      |      
|Share-based
      compensation                                               |  | 20   |  |      | 2,950   |   |      |      
|Employee future
      benefits                                               |  |      |  |      | 278     |   |      |      
|Employee future
      benefits plan contributions                            |  |      |  |      | (740    | ) |      |      
|Depreciation and
      amortization                                          |  |      |  |      | 4,375   |   |      |      
|Gain on
      decommissioning liabilities                                    |  |      |  |      | (602    | ) |      |      
|Loss (gain) on sale
      of property, plant and equipment                   |  |      |  |      | (1      | ) |      |      
|Gain on sale of
      intellectual property                                  |  | 12   |  |      | (19,619 | ) |      |      
|Reversal of
      impairment loss on property, plant and equipment           |  | 8    |  |      | -       |   |      |      
|Impairment loss on
      trade receivables                                   |  | 24   |  |      | 456     |   |      |      
|Impairment loss on
      investment                                          |  |      |  |      | -       |   |      |      
|Unrealized loss on
      forward contracts                                   |  |      |  |      | 162     |   |      |      
|                                                                             |  |      |  |      | (19,315 | ) |      |      
|Changes in non-cash working capital:                                         |  |      |  |      |         |   |      |      
|Trade and other
      receivables                                            |  |      |  |      | 410     |   |      |      
|Inventories                                                                  |  |      |  |      | (5,550  | ) |      |      
|Prepaid expenses
      and other current assets                              |  |      |  |      | (166    | ) |      |      
|Trade and other
      payables                                               |  |      |  |      | (1,344  | ) |      |      
|Deferred revenue
      and other recoveries                                  |  |      |  |      | 4,213   |   |      |      
|Warranty
      provision                                                     |  |      |  |      | (3,612  | ) |      |      
|                                                                             |  |      |  |      | (6,049  | ) |      |      
|Cash used by operating activities                                            |  |      |  |      | (25,364 | ) |      |      
|                                                                            
|Investing
    activities:                                                    |  |      |  |      |         |   |      |      
|                                                                            
|Additions to property, plant and
      equipment                             |  |      |  |      | (2,282  | ) |      |      
|Net proceeds on sale of property, plant and equipment and
      other        |  |      |  |      | 1       |   |      |      
|Additions to and acquisition of intangible
      assets                      |  | 12   |  |      | (1,604  | ) |      |      
|Net proceeds on sale of intangible assets                                    |  | 12   |  |      | 29,475  |   |      |      
|Cash and cash equivalents acquired on
      acquisition of Protonex          |  | 7    |  |      | 1,464   |   |      |      
|Acquisition of Protonex                                                      |  | 7    |  |      | (3,772  | ) |      |      
|Cash provided by (used in) investing
      activities                        |  |      |  |      | 23,282  |   |      |      
|                                                                            
|Financing
    activities:                                                    |  |      |  |      |         |   |      |      
|                                                                            
|Proceeds on sale of treasury
shares                                          |  |      |  |      | -       |   |      |      
|Net payment of finance lease liabilities                                     |  |      |  |      | (845    | ) |      |      
|Net proceeds on issuance of share capital
      from underwritten Offering   |  | 20   |  |      | 13,389  |   |      |      
|Net proceeds on issuance of share capital from private
      placement       |  | 20   |  |      | 4,987   |   |      |      
|Net proceeds on issuance of share capital
      from stock option exercises  |  | 20   |  |      | 388     |   |      |      
|Net proceeds on issuance of share capital from warrant
      exercises       |  | 20   |  |      | 168     |   |      |      
|Cash provided by financing
    activities                                    |  |      |  |      | 18,087  |   |      |      
|                                                                            
|Effect of exchange rate fluctuations on cash and cash
      equivalents held |  |      |  |      | 373     |   |      |      
|                                                                            
|Increase (decrease) in cash and
      cash equivalents                       |  |      |  |      | 16,378  |   |      |      
|Cash and cash equivalents,
      beginning of year                           |  |      |  |      | 23,671  |   |      |      
|Cash and cash equivalents, end
      of year                                 |  |      |  | $    | 40,049  |   |      | $    

Supplemental disclosure of cash flow
information (note 28)See accompanying notes to consolidated financial
statements

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|1. | Reporting
  entity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The principal business of Ballard
      Power Systems Inc. (the Corporation) is the design, development,
      manufacture, sale and service of fuel cell products for a variety of
      applications, focusing on our power product markets of Heavy-Duty Motive
      (consisting of bus and tram applications), Portable Power, Material
      Handling and Telecom Backup Power, as well as the delivery of Technology
      Solutions including engineering services and the license and sale of the
      Corporations extensive intellectual property portfolio and fundamental
      knowledge for a variety of fuel cell applications. A fuel cell is an
      environmentally clean electrochemical device that combines hydrogen fuel
      with oxygen (from the air) to produce electricity.
|  
|   | The Corporation is a company
      domiciled in Canada and its registered office is located at 9000 Glenlyon
      Parkway, Burnaby, British Columbia, Canada, V5J 5J8. The consolidated
      financial statements of the Corporation as at and for the year ended
      December 31, 2015 comprise the Corporation and its subsidiaries (note
      4(a)).                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|2. | Basis of
      preparation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|(a) | Statement of
  compliance:                                                                                                                                                                                                                                                                                                                                                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                           
|    | These consolidated financial
      statements of the Corporation have been prepared in accordance with
      International Financial Reporting Standards (IFRS) as issued by the
      International Accounting Standards Board (IASB).                                                                                                                                                               
|   
|    | The consolidated financial
      statements were authorized for issue by the Board of Directors on February
      24, 2016.                                                                                                                                                                                                                                                                               
|   
|(b) | Basis of
measurement:                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | The consolidated financial
      statements have been prepared on the historical cost basis except for the
      following material items in the statement of financial
  position:                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                           
|    | ●Financial
      instruments classified as fair value through profit or loss and
      available-for-sale are measured at fair
      value;
      ●Derivative financial
      instruments are measured at fair value; and
      ●Employee future
      benefits liability is recognized as the net total of the present value of
      the defined benefit obligation, less the fair value of plan assets.

|(c) | Functional and presentation
      currency:                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                   
|    | These consolidated financial
      statements are presented in U.S. dollars, which is the Corporations
      functional currency.

11

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**2.** | **Basis of
      preparation (contd):**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(d)    | Use of estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      
|       | The preparation of the
      consolidated financial statements in conformity with IFRS requires the
      Corporations 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      
|       | Significant areas having
      estimation uncertainty include revenue recognition, asset impairment,
      warranty provision, inventory provision, impairment loss (recoveries) on
      trade receivables, employee future benefits, and income taxes. These
      estimates and judgments are discussed further in note 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      
|(e)    | Future operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      
|       | The Corporation is required to
      assess its ability to continue as a going concern and whether substantial
      doubt exists as to the Corporations ability to continue as a going
      concern into the foreseeable future. The Corporation has forecast its cash
      flows and despite the ongoing volatility and uncertainties inherent in the
      business, the Corporation believes it has adequate liquidity in cash and
      working capital to finance its operations for the foreseeable future. The
      Corporations ability to continue as a going concern and realize its
      assets and discharge its liabilities and commitments in the normal course
      of business is ultimately dependent upon the Corporation having adequate
      liquidity and achieving profitable operations that are sustainable. There
      are various risks and uncertainties affecting the Corporation including,
      but not limited to, the market acceptance and rate of commercialization of
      the Corporations products, the ability of the Corporation to successfully
      execute its business plan, and general global economic conditions, certain
      of which are beyond the Corporations control.
|      
|       | The Corporations strategy to
      mitigate these risks and uncertainties is to execute a business plan aimed
      at continued focus on revenue growth, improving overall gross margins, and
      managing operating expenses and working capital requirements. Failure to
      implement this plan could have a material adverse effect on the
      Corporations financial condition and or results of
  operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|**3.** | Changes in accounting
      policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       | The Corporation has consistently
      applied the accounting policies set out in note 4 to all periods presented
      in these consolidated financial statements. The Corporation did not adopt
      any new accounting standard changes or amendments effective January 1,
      2015 that had a material impact on these consolidated financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

12

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**4.** | Significant accounting
      policies:                                                                                                                                                                                                                                                               
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                      
|       | The accounting policies set out
      below have been applied consistently to all periods presented in these
      consolidated financial statements, unless otherwise indicated. Certain
      prior year comparative figures have been reclassified to comply with
      current year presentation.
|       |                                                                                                                                                                                                                                                                                                      
|(a)    | Basis of
  consolidation:                                                                                                                                                                                                                                                                            
|      
|       | The consolidated financial
      statements include the accounts of the Corporation and its principal
      subsidiaries as follows:                                                                                                                                                                 

| |                                      | Percentage ownership
| | ------------------------------------ | --------------------
| |                                      | 2015                
| | Ballard Fuel Cell Systems
      Inc. | 100                 
| | Ballard Power Corporation            | 100                 
| | Ballard Services
      Inc.          | 100                 
| | Dantherm Power A/S                   | 57                  
| | Protonex Technology Corporation      | 100                 

| | Subsidiaries are entities
      controlled by the Corporation. The Corporation controls an entity when it
      is exposed to, or has rights to, variable returns from its involvement
      with the entity and has the ability to affect those returns though its
      power over the entity. The financial statements of subsidiaries are
      included in the consolidated financial statements from the date that
      control commences until the date that control ceases. Intercompany
      balances and transactions are eliminated in the consolidated financial
      statements.
      On October 1, 2015, the
      Corporation acquired Protonex Technology Corporation (note 7), a leading
      designer and manufacturer of advanced power management products and
      portable fuel cell solutions.
      The Corporation acquired a 45%
      interest in Dantherm Power A/S on January 18, 2010. In August 2010, the
      Corporation acquired an additional 7% interest in Dantherm Power A/S and a
      further 5% interest in December 2012. On March 31, 2013, Azure Hydrogen
      Energy Science and Technology Corporation (Azure) acquired a 10%
      ownership interest in Dantherm Power A/S, which reduced the Corporations
      interest from 57% to 51.3%. On June 8, 2015, the Corporation agreed to a
      mutual release with Azure whereby each party mutually released and forever
      discharged each other from any and all liability arising from the prior
      years licensing agreements. Pursuant to the Azure Mutual Release
      Agreement, Azure returned its 10% ownership position in Dantherm Power to
      Dantherm Power for $nil proceeds, upon which the shares were cancelled by
      Dantherm Power on June 17, 2015.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**4.** | Significant accounting
      policies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(a)    | Basis of consolidation
      (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | Following the Azure
      Mutual Release Agreement, the Corporations controlling ownership position
      in Dantherm Power was increased from 52% to 57%. The remaining 43%
      interest is held by Dantherm A/S. As the Corporation obtained control over
      Dantherm Power A/S as of the date of acquisition of the initial 45%
      interest, Dantherm Power A/S has been consolidated since acquisition on
      January 18, 2010. Acquisitions of non-controlling interest are accounted
      as transactions with equity holders in their capacity as equity holders;
      therefore no goodwill is recognized as a result of such
      transactions.
|      
|(b)    | Foreign
    currency:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      
|       | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      
|       | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      
|(c)    | Financial
      instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      
|       | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

14

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**4.** | Significant accounting
      policies (contd):
|------ | -----------------------------------------------
|       |                                                
|(c)    | Financial instruments
      (contd):          
|      
|       | (i)                                            
|       |                                                
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                

15

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**4.** | Significant accounting
      policies (contd):
|------ | -----------------------------------------------
|       |                                                
|(c)    | Financial instruments
      (contd):          
|      
|       | (i)                                            
|      
|       |                                                
|      
|       |                                                
|      
|       | (ii)                                           
|      
|       |                                                
|      
|       | (iii)                                          
|      
|       |                                                
|      
|       | (iv)                                           
|      
|       |                                                

16

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**4.** | Significant accounting
      policies (contd):
|------ | -----------------------------------------------
|       |                                                
|(c)    | Financial instruments
      (contd):          
|      
|       | (iv)                                           
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                
|      
|       |                                                

17

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**4.** | Significant accounting
      policies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(c)    | Financial instruments
      (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      
|       | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|      
|(d)    | Inventories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      
|       | Inventories are
      recorded at the lower of cost and net realizable value. The cost of
      inventories is based on the first-in first-out principle, and includes
      expenditures incurred in acquiring the inventories, production or
      conversion costs and other costs incurred in bringing them to their
      existing location and condition. In the case of manufactured inventories
      and work in progress, cost includes materials, labor and appropriate share
      of production overhead based on normal operating capacity. Costs of
      materials are determined on an average per unit basis.
|      
|       | Net realizable value is
      the estimated selling price in the ordinary course of business, less the
      estimated costs of completion and selling expenses. In establishing any
      impairment of inventory, management estimates the likelihood that
      inventory carrying values will be affected by changes in market demand,
      technology and design, which would impair the value of inventory on
      hand.                                                                                                                                                                                               
|      
|(e)    | Property, plant and
      equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|      
|       | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

18

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**4.** | Significant accounting
      policies (contd):
|------ | -----------------------------------------------
|       |                                                
|(e)    | Property, plant and
      equipment (contd):  
|      
|       | (ii)                                           
|      
|       |                                                
|      
|       | (iii)                                          
|      
|       |                                                
|      
|       |                                                

| | Building under finance lease                      |  | 15 years                                                     
| | ------------------------------------------------- |  | -------------------------------------------------------------
| | Computer equipment                                |  | 3 to 7 years                                                 
| | Furniture and
      fixtures                      |  | 5 to 14 years                                                
| | Furniture and fixtures under finance
      lease  |  | 5 years                                                      
| | Leasehold
      improvements                      |  | The shorter of initial
      term of the respective lease and
| |                                                   |  | estimated useful life                                        
| | Production and test
      equipment               |  | 4 to 15 years                                                
| | Production and test equipment under finance lease |  | 5 years                                                      

| | Depreciation methods, useful
      lives and residual values are reviewed at each reporting date and adjusted
      if appropriate.
| | -----------------------------------------------------------------------------------------------------------------------------------

|(f) | Leases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Leases where the
      Corporation assumes substantially all the risks and rewards of ownership
      are classified as finance leases. Upon initial recognition the leased
      asset is measured at an amount equal to the lower of its fair value and
      the present value of the minimum lease payments. Subsequent to initial
      recognition, the asset is accounted for in accordance with the accounting
      policy applicable to that asset. Other leases are operating leases and not
      recognized in the statement of financial position.
|   
|    | Minimum lease payments
      made under finance leases are apportioned between finance expense and the
      reduction of the outstanding liability. Finance expense is allocated to
      each period during the lease term so as to produce a constant periodic
      rate of interest on the remaining balance of the
  liability.                                                                                                                                                                                                                           

19

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**4.** | Significant accounting
      policies (contd):                                                                                                                                                                                              
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                              
|(f)    | Leases (contd):                                                                                                                                                                                                                             
|      
|       | Payments made under operating
      leases are recognized in income on a straight-line basis over the term of
      the lease. Lease incentives received are recognized as a reduction to the
      lease expense over the term of the lease.
|      
|(g)    | Goodwill and intangible
      assets:                                                                                                                                                                                                        

| |     |                                
| | --- | -------------------------------
| | (i) | Recognition and
    measurement

| | Goodwill                       |  | Goodwill arising on the acquisition of
      subsidiaries is measured at cost less accumulated impairment
    losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Research and
      development |  | Expenditure on research activities is
      recognized in profit or loss as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                |  | Development expenditure is
      capitalized only if the expenditure can be measured reliably, the product
      or process is technically and commercially feasible, future economic
      benefits are probable and the Corporation intends to and has sufficient
      resources to complete development and to use or sell the asset. Otherwise,
      it is recognized in profit or loss as incurred. Subsequent to initial
      recognition, development expenditure is measured at cost less accumulated
      amortization and any accumulated impairment losses.
| | Intangible assets              |  | Intangible assets, including patents and
      trademarks, that are acquired by the Corporation and have finite useful
      lives are measured at cost less accumulated amortization and any
      accumulated impairment losses.                                                                                                                                                                                                                                                                                                                                        

| | (ii)  | Subsequent
  expenditure                                                                                                                                                                                                                                                                         
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      
| |       | Subsequent expenditure is
      capitalized only when it increases the future economic benefits embodied
      in the specific asset to which it relates. All other expenditure,
      including expenditure on internally generated goodwill, is recognized in
      profit or loss as incurred.
| |      
| | (iii) | Amortization                                                                                                                                                                                                                                                                                     
| |      
| |       | Amortization is calculated to
      write-off the cost of intangible assets less their estimated residual
      values using the straight-line method over their estimated useful lives,
      and is recognized in profit or loss. Goodwill is not
  amortized.                                 
| |      
| |       | The estimated useful lives for
      current and comparative periods are as
follows:                                                                                                                                                                                                             

| | Internally generated intangible assets                        |  | 5 years      
| | ------------------------------------------------------------- |  | -------------
| | Patents, know-how and in-process research
      & development |  | 5 to 20 years
| | Trademarks and service
      marks                            |  | 15 years     
| | Domain names                                                  |  | 15 years     
| | Customer base and
      relationships                         |  | 10 years     
| | Acquired non-compete agreements                               |  | 1
      year 

20

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|4.  | Significant accounting
      policies (contd):
|--- | -----------------------------------------------
|    |                                                
|(g) | Goodwill and intangible assets
      (contd): 
|    |                                                
|    | (iii)                                          
|    |                                                
|    |                                                
|   
|(h) | Impairment:                                    
|   
|    | (i)                                            
|   
|    |                                                
|   
|    |                                                
|   
|    | (ii)                                           
|   
|    |                                                
|   
|    |                                                

21

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|4.  | Significant accounting
      policies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(h) | Impairment (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(i) | Provisions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | A provision is recognized if, as
      a result of a past event, the Corporation has a present legal or
      constructive obligation that can be estimated reliably, and it is probable
      that an outflow of economic benefits will be required to settle the
      obligation. Provisions are determined by discounting the expected future
      cash flows at a pre-tax rate that reflects current market assessments of
      the time value of money and the risk specific to the liability. The
      unwinding of the discount is recognized as a finance cost.
|   
|    | Warranty
    provision                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | A provision for warranty costs is
      recorded on product sales at the time the sale is recognized. In
      establishing the warranty provision, management estimates the likelihood
      that products sold will experience warranty claims and the estimated cost
      to resolve claims received, taking into account the nature of the contract
      and past and projected experience with the products.                                                                                                                                                        
|   
|    | Decommissioning
      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    | Legal obligations to retire
      tangible long-lived assets are recorded at the net present value of the
      expected costs of settlement at acquisition with a corresponding increase
      in asset value. These include assets leased under operating leases. The
      liability is accreted over the life of the asset to the ultimate
      settlement amount and the increase in asset value is depreciated over the
      remaining useful life of the asset.                                                                                                   

22

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|4.  | Significant accounting
      policies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(j) | Revenue recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Corporation generates revenues primarily from
      product sales and services, the license and sale of intellectual property,
      and the provision of engineering services. Product and service revenues
      are derived primarily from standard equipment and material sales contracts
      and from long-term fixed price contracts. Intellectual property license
      and sale revenues are derived primarily from licensing and sale agreements
      and from long-term fixed price contracts. Engineering service revenue is
      derived primarily from cost-plus reimbursable contracts and from long-term
      fixed price contracts.                                                                       
|   
|    | On standard equipment and material sales contracts,
      revenues are recognized when (i) significant risks and rewards of
      ownership of the goods has been transferred to the buyer; (ii) the
      Corporation retains neither continuing managerial involvement to the
      degree usually associated with ownership nor effective control over the
      goods sold; (iii) the amount of revenue can be measured reliably; (iv) it
      is probable that the economic benefits associated with the sale will
      accrue to the Corporation; and (v) the costs incurred, or to be incurred,
      in respect of the transaction can be measured reliably. Provisions are
      made at the time of sale for warranties.
|   
|    | On standard licensing and sale agreements, revenues are
      recognized on the transfer of rights to the licensee if: (i) the rights to
      the assets are assigned to the licensee in return for a fixed fee or a
      non-refundable guarantee; (ii) the contract is non-cancellable; (iii) the
      licensee is able to exploit its rights to the asset freely; and (iv) the
      Corporation has no remaining obligations to perform. In other cases, the
      proceeds are considered to relate to the right to use the asset over the
      license period and the revenue is recognized over that
period.                                                                                                             
|   
|    | On cost-plus reimbursable contracts, revenues are
      recognized as costs are incurred, and include applicable fees earned as
      services are provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | On long-term fixed price contracts, revenues are
      recognized on the percentage-of-completion basis over the duration of the
      contract, which consists of recognizing revenue on a given contract
      proportionately with its percentage of completion at any given time. The
      percentage of completion is determined by dividing the cumulative costs
      incurred as at the balance sheet date by the sum of incurred and
      anticipated costs for completing a contract.                                                                                                                                                                                                                                   
|   
|    | The cumulative effect of changes to anticipated revenues
      and anticipated costs for completing a contract are recognized in the
      period in which the revisions are identified. In the event that the
      anticipated costs exceed the anticipated revenues on a contract, such loss
      is recognized in its entirety in the period it becomes known.                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | Deferred revenue represents cash received from customers
      in excess of revenue recognized on uncompleted
  contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

23

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|4.  | Significant accounting
      policies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(k) | Finance income and expense:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Finance income comprises interest income on funds
      invested, gains on the disposal of available-for-sale financial assets
      and changes in the fair value of financial assets at fair value through
      profit or loss. Interest income is recognized as it accrues in income,
      using the effective interest method.                                                                                                                                                                                                                                                                                      
|   
|    | Finance expense comprise interest expense on capital
      leases, unwinding of the discount on provisions, changes in the fair value
      of financial assets at fair value through profit or loss and impairment
      losses recognized on financial assets.                                                                                                                                                                                                                                                                                                                                                          
|   
|    | Foreign currency gains and losses are reported on a net
      basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(l) | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | The Corporation follows the asset and liability method
      of accounting for income taxes. Under this method, deferred income taxes
      are recognized for the deferred income tax consequences attributable to
      differences between the financial statement carrying values of assets and
      liabilities and their respective income tax bases (temporary differences)
      and for loss carry-forwards. The resulting changes in the net deferred tax
      asset or liability are included in income.                                                                                                     
|   
|    | Deferred tax assets and liabilities are measured using
      enacted, or substantively enacted, tax rates expected to apply to taxable
      income in the years in which temporary differences are expected to be
      recovered or settled. The effect on deferred income tax assets and
      liabilities, of a change in tax rates, is included in income in the period
      that includes the substantive enactment date. Deferred income 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.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(m) | Employee
  benefits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Defined contribution plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | A defined contribution plan is a
      post-employment benefit plan under which an entity pays fixed
      contributions into a separate entity and will have no legal or
      constructive obligation to pay further amounts.                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Obligations for contributions to
      defined contribution pension plans are recognized as an employee benefit
      expense in profit or loss in the periods during which services are
      rendered by employees. Prepaid contributions are recognized as an asset to
      the extent that a cash refund or a reduction in future payments is
      available. Contributions to a defined contribution plan that are due more
      than 12 months after the end of the period in which the employees render
      the service are discounted to their present value.                                                

24

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|4.  | Significant accounting
      policies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(m) | Employee benefits (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Defined benefit plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    | A defined benefit plan is a post-employment pension plan
      other than a defined contribution plan. The Corporations net obligation
      in respect of defined benefit pension plans is calculated separately for
      each plan by estimating the amount of future benefit that employees have
      earned in return for their service in the current and prior periods; that
      benefit is discounted to determine its present value. Any unrecognized
      past service costs and the fair value of any plan assets are deducted. The
      discount rate is the yield at the reporting date on AA credit-rated bonds
      that have maturity dates approximating the terms of the Corporations
      obligations and that are denominated in the same currency in which the
      benefits are expected to be paid. The calculation is performed annually by
      a qualified actuary using the projected unit credit method.
|   
|    | When the calculation results in a benefit to the
      Corporation, the recognized asset is limited to the total of any
      unrecognized past service costs and the present value of economic benefits
      available in the form of any future refunds from the plan or reductions in
      future contributions to the plan. In order to calculate the present value
      of economic benefits, consideration is given to any minimum funding
      requirements that apply to any plan in the Corporation. An economic
      benefit is available to the Corporation if it is realizable during the
      life of the plan, or on settlement of the plan liabilities.                                                                                                                                                                                                                                                                   
|   
|    | The Corporation recognizes all remeasurements arising
      from defined benefit plans, which comprise actuarial gains and losses,
      immediately in other comprehensive income. Remeasurements recognized in
      other comprehensive income are not recycled through profit or loss in
      subsequent periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    | Other long-term employee benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    | The Corporations net obligation in respect of long-term
      employee benefits other than pension plans is the amount of future benefit
      that employees have earned in return for their service in the current and
      prior periods; that benefit is discounted to determine its present value,
      and the fair value of any related assets is deducted. The discount rate is
      the yield at the reporting date on AA credit-rated bonds that have
      maturity dates approximating the terms of the Corporations obligations.
      The calculation is performed using the projected unit credit method. Any
      actuarial gains and losses are recognized in other comprehensive income or
      loss in the period in which they arise.                                                                                                                                                                               

25

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|4.  | Significant accounting
      policies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(m) | Employee benefits (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | Termination benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | Termination benefits are recognized as an expense when
      the Corporation is committed demonstrably, without realistic possibility
      of withdrawal, to a formal detailed plan to either terminate employment
      before the normal retirement date, or to provide termination benefits as a
      result of an offer made to encourage voluntary redundancy. Termination
      benefits for voluntary redundancies are recognized as an expense if the
      Corporation has made an offer of voluntary redundancy, it is probable that
      the offer will be accepted, and the number of acceptances can be estimated
      reliably. If benefits are payable more than 12 months after the reporting
      period, then they are discounted to their present value.
|   
|    | Short-term employee benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | 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
      Corporation 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.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(n) | Share-based compensation plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | The Corporation uses the fair-value based method of
      accounting for share-based compensation for all awards of shares and share
      options granted. The resulting compensation expense, based on the fair
      value of the awards granted, excluding the impact of any non-market
      service and performance vesting conditions, is charged to income over the
      period that the employees unconditionally become entitled to the award,
      with a corresponding increase to contributed surplus.                                                                                                                                                                                                                                                           
|   
|    | Fair values of share options are calculated using the
      Black-Scholes valuation method as of the grant date and adjusted for
      estimated forfeitures. For awards with graded vesting, the fair value of
      each tranche is calculated separately and recognized over its respective
      vesting period. Non-market vesting conditions are considered in making
      assumptions about the number of awards that are expected to vest. At each
      reporting date, the Corporation reassesses its estimates of the number of
      awards that are expected to vest and recognizes the impact of any revision
      in the income statement with a corresponding adjustment to contributed
      surplus.                                                        
|   
|    | The Corporation issues shares and share options under
      its share-based compensation plans as described in note 20. Any
      consideration paid by employees on exercise of share options or purchase
      of shares, together with the amount initially recorded in contributed
      surplus, is credited to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                             

26

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|4.  | Significant accounting
      policies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(o) | Earnings (loss) per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Basic earnings (loss) per share is computed using the
      weighted average number of common shares outstanding during the period,
      adjusted for treasury shares. Diluted earnings per share is calculated
      using the treasury stock method.                                                                                                                                                                                                                                                                                                                
|   
|    | Under the treasury stock method, the dilution is
      calculated based upon the number of common shares issued should deferred
      share units (DSUs), restricted share units (RSUs), and in the money
      options, if any, be exercised. When the effects of outstanding stock-based
      compensation arrangements would be anti-dilutive, diluted loss per share
      is not calculated.                                                                                                                                                               
|   
|(p) | Government assistance and investment tax
    credits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | Government assistance and investment tax credits are
      recorded as either a reduction of the cost of the applicable assets, or
      credited against the related expense incurred in the statement of
      comprehensive loss, as determined by the terms and conditions of the
      agreements under which the assistance is provided to the Corporation or
      the nature of the expenditures which gave rise to the credits. Government
      assistance and investment tax credit receivables are recorded when their
      receipt is reasonably assured.
|   
|(q) | Segment reporting:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | An operating segment is a component of the Corporation
      that engages in business activities from which it may earn revenues and
      incur expenses, including revenues and expenses that relate to
      transactions with any of the Corporations other components. Segment
      results include items directly attributable to a segment as well as those
      that can be allocated on a reasonable basis. Unallocated items comprise
      mainly corporate assets, head office expenses, and income tax assets and
      liabilities.                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|5.  | Critical judgments in applying
      accounting policies and key sources of estimation uncertainty:                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Critical judgments in applying
      accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Critical judgments that
      management has made in the process of applying the Corporations
      accounting policies and that have the most significant effect on the
      amounts recognized in the consolidated financial statements are limited to
      managements assessment of the Corporations ability to continue as a
      going concern (note 2(e)).                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Key sources of estimation
      uncertainty:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The following are key assumptions
      concerning the future and other key sources of estimation uncertainty that
      have significant risk of resulting in a material adjustment to the
      reported amount of assets, liabilities, income and expenses within the
      next fiscal year.                                                                                                                                                                                                                                                                       

27

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|5.  | Critical judgments in applying
      accounting policies and key sources of estimation uncertainty (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(a) | Revenue recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | On long-term fixed price contracts, revenues are
      recorded on the percentage-of-completion basis over the duration of the
      contract, which consists of recognizing revenue on a given contract
      proportionately with its percentage of completion at any given time. The
      percentage of completion is determined by dividing the cumulative costs
      incurred as at the balance sheet date by the sum of incurred and
      anticipated costs for completing a contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | ●The determination of anticipated costs for completing a contract is
      based on estimates that can be affected by a variety of factors such as
      variances in the timeline to completion, the cost of materials, the
      availability and cost of labour, as well as
      productivity.
      ●The determination of potential revenues includes the contractually
      agreed amount and may be adjusted based on the estimate of the
      Corporations attainment on achieving certain defined contractual
      milestones. Managements estimation is required in determining the
      probability that the revenue will be received and in determining the
      measurement of that amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Estimates used to determine
      revenues and costs of long-term fixed price contracts involve
      uncertainties that ultimately depend on the outcome of future events and
      are periodically revised as projects progress. There is a risk that a
      customer may ultimately disagree with managements assessment of the
      progress achieved against milestones, or that our estimates of the work
      required to complete a contract may change. The cumulative effect of
      changes to anticipated revenues and anticipated costs for completing a
      contract are recognized in the period in which the revisions are
      identified. If the anticipated costs exceed the anticipated revenues on a
      contract, such loss is recognized in its entirety in the period it becomes
      known.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | Asset impairment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The recoverable amount of an
      asset or cash-generating unit is the greater of its value in use and its
      fair value less costs to sell. In assessing value in use, the estimated
      future cash flows 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. In assessing fair value less
      costs to sell, the price that would be received on the sale of an asset in
      an orderly transaction between market participants at the measurement date
      is estimated. For the purposes of impairment testing, assets that cannot
      be tested individually are grouped together into the smallest group of
      assets that generates cash inflows from continuing use that are largely
      independent of the cash inflows of other groups of assets. The allocation
      of goodwill to cash-generating units reflects the lowest level at which
      goodwill is monitored for internal reporting purposes. Many of the factors
      used in assessing fair value are outside the control of management and it
      is reasonably likely that assumptions and estimates will change from
      period to period.

28

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|5.  | Critical judgments in applying
      accounting policies and key sources of estimation uncertainty (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b) | Asset impairment (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | These changes may result in future impairments. For
      example, the revenue growth rate could be lower than projected due to
      economic, industry or competitive factors, or the discount rate used in
      the value in use model could increase due to a change in market interest
      rates. In addition, future goodwill impairment charges may be necessary if
      the market capitalization decreased due to a decline in the trading price
      of the Corporations common stock, which could negatively impact the fair
      value of the Corporations operating segments.                                                                                                                                                                                                                                                                                                                            
|   
|(c) | Warranty provision:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    | A provision for warranty costs is recorded on product
      sales at the time of shipment. In establishing the warranty provision,
      management estimates the likelihood that products sold will experience
      warranty claims and the cost to resolve claims received. In making such
      determinations, the Corporation uses estimates based on the nature of the
      contract and past and projected experience with the products. Should these
      estimates prove to be incorrect, the Corporation may incur costs different
      from those provided for in the warranty provision. Management reviews
      warranty assumptions and makes adjustments to the provision at each
      reporting date based on the latest information available, including the
      expiry of contractual obligations. Adjustments to the warranty provision
      are recorded in cost of product and service revenues.
|   
|(d) | Inventory provision:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    | In determining the lower of cost and net realizable
      value of inventory and in establishing the appropriate provision for
      inventory obsolescence, management estimates the likelihood that inventory
      carrying values will be affected by changes in market pricing or demand
      for the products and by changes in technology or design which could make
      inventory on hand obsolete or recoverable at less than the recorded value.
      Management performs regular reviews to assess the impact of changes in
      technology and design, sales trends and other changes on the carrying
      value of inventory. Where it is determined that such changes have occurred
      and will have an negative impact on the value of inventory on hand,
      appropriate provision are made.                                                                                                       
|   
|    | If there is a subsequent increase in the value of
      inventory on hand, reversals of previous write-downs to net realizable
      value are made. Unforeseen changes in these factors could result in
      additional inventory provisions, or reversals of previous provisions,
      being required.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

29

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|5.  | Critical judgments in applying
      accounting policies and key sources of estimation uncertainty (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(e) | Impairment loss (recoveries) on trade
    receivables:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    | Trade and other receivables are recognized initially at
      fair value and subsequently at amortized cost using the effective interest
      method, less any impairment losses. Fair value is estimated as the present
      value of future cash flows, discounted at the market rate of interest at
      the reporting date. In determining the fair value of trade and other
      receivables and establishing the appropriate provision for doubtful
      accounts, management performs regular reviews to estimate the likelihood
      that trade and other receivables will ultimately be collected in a timely
      manner. Where management determines that customer collectability issues
      have occurred and will have a negative impact on the value of trade and
      other receivables, appropriate provisions are made. If there is a
      subsequent recovery in the value of trade and other receivables, reversals
      of previous write-downs to fair value are made. Unforeseen changes in
      these factors could result in additional impairment provisions, or
      reversals of previous impairment provisions, being required.
|   
|(f) | Employee future benefits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | The present value of the defined benefit obligation is
      determined by discounting the estimated future cash outflows using
      interest rates of high-quality corporate bonds that have terms to maturity
      approximating the terms of the related pension liability. Determination of
      benefit expense requires assumptions such as the discount rate to measure
      obligations, expected plan investment performance, expected healthcare
      cost trend rate, and retirement ages of employees. Actual results will
      differ from the recorded amounts based on these estimates and
      assumptions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(g) | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | Deferred tax assets and liabilities are measured using
      enacted, or substantively enacted, tax rates expected to apply to taxable
      income in the years in which temporary differences are expected to be
      recovered or settled. The effect on deferred income tax assets and
      liabilities of a change in tax rates is included in income in the period
      that includes the substantive enactment date. Management reviews the
      deferred income tax assets at each reporting period and records
      adjustments to the extent that it is no longer probable that the related
      tax benefit will be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|6.  | Recent accounting
      pronouncements and future accounting policy changes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Corporation did not adopt any
      new accounting standard changes or amendments in 2015 that had a material
      impact on the Corporations financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The following is an overview of
      accounting standard changes that the Corporation will be required to adopt
      in future years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

30

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|6.  | Recent accounting
      pronouncements and future accounting policy changes
      (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(a) | IFRS 11 (Amendments) Business Combination Accounting for Interests in a Joint
      Operation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    | On May 6, 2014, the IASB issued amendments toIFRS 11 Accounting for Acquisitions of
      Interests in Joint Operations. The
      amendments require business combination accounting to be applied to
      acquisitions of interests in a joint operation that constitute a
      business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | The amendments apply prospectively for annual periods
      beginning on or after January 1, 2016. The Corporation intends to adopt
      the amendments to IFRS 11 in its financial statements for the fiscal year
      beginning on January 1, 2016. The Corporation does not expect the
      amendments to have a material impact on the financial
  statements.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(b) | IAS 16 and IAS 38 (Amendments) Methods of Depreciation and
Amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | On May 12, 2014, the IASB issued amendments toIAS 16 Property, Plant and EquipmentandIAS 38 Intangible Assets. The
      amendment made to IAS 16 explicitly state that revenue-based methods of
      depreciation cannot be used for property, plant and equipment. This is
      because such methods reflect factors other than the consumption of
      economic benefits embodied in the asset. The amendments in IAS 38
      introduce a rebuttable presumption that the use of revenue-based
      amortization methods for intangible assets is inappropriate. This
      presumption could be overcome only when revenue and consumption of the
      economic benefits of the intangible asset are highly correlated or when
      the intangible asset is expressed as a measure of revenue.
|   
|    | The amendments apply prospectively for annual periods
      beginning on or after January 1, 2016. The Corporation intends to adopt
      the amendments to IAS 16 and IAS 38 in its financial statements for the
      fiscal year beginning on January 1, 2016. The Corporation does not expect
      the amendments to have a material impact on the financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(c) | Annual Improvements to IFRS (2012  2014)
      Cycle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | On September 25, 2014, the IASB issued narrow-scope
      amendments to a total of four standards as part of its annual improvements
      process. Amendments were made to clarify the following in their respective
      standards:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | ●Changes in method for disposal under IFRS 5 Non-current Assets Held
      for Sale and Discontinued Operations;
      ●Continuing involvement for servicing contracts and offsetting
      disclosures in condensed interim financial statements under IFRS 7
      Financial Instruments: Disclosures;
      ●Discount rate in a regional market sharing the same currency under
      IAS 19 Employee Benefits; and
      
      ●Disclosure of information elsewhere in the interim financial
      report under IAS 34 Interim Financial
  Reporting;                                                                                                                                                                                                                                           

31

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**6.** | Recent accounting
      pronouncements and future accounting policy changes
      (contd):
|------ | -------------------------------------------------------------------------------------------
|       |                                                                                            

|(c) | Annual Improvements to IFRS
      (2012  2014) Cycle (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | The amendments will apply for
      annual periods beginning on or after January 1, 2016. Each of the
      amendments has its own specific transition requirements. The Corporation
      intends to adopt the amendments in its financial statements for the fiscal
      year beginning on January 1, 2016. The Corporation does not expect the
      amendments to have a material impact on the financial
  statements.                                                                                                                                                                                                                                
|   
|(d) | IAS 1 (Amendments) Disclosure Initiative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    | On December 18, 2014, the IASB
      issued amendments toIAS 1 Presentation
      of Financial Statementsas part of its
      major initiative to improve presentation and disclosure in financial
      reports (the Disclosure Initiative). The amendments will not require any
      significant change to current practice, but should facilitate improved
      financial statement disclosures.                                                                                                                                                                                                                                                     
|   
|    | The amendments are effective for
      annual periods beginning on or after January 1, 2016. The Corporation
      intends to adopt the amendments to IAS 16 and IAS 38 in its financial
      statements for the fiscal year beginning on January 1, 2016. The extent of
      the impact of adoption of the amendments has not yet been
      determined.                                                                                                                                                                                                                                                                                                 
|   
|(e) | IFRS 15 Revenue from Contracts with Customers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    | On May 28, 2014, the IASB issuedIFRS 15 Revenue from Contracts with
      Customers, which replacesIAS 11 Construction Contracts, IAS 18
      Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the
      Construction of Real Estate,IFRIC 18 Transfer of Assets from
      Customers, andSIC 31 Revenue  Barter Transactions Involving
      Advertising Services.                                                                                                                                                                                                                                                                 
|   
|    | IFRS 15 contains a single model
      that applies to contracts with customers and two approaches to recognizing
      revenue: at a point in time or over time. The model features a
      contract-based five-step analysis of transactions to determine whether,
      how much, and when revenue is recognized. New estimates and judgmental
      thresholds have been introduced, which may affect the amount and/or timing
      of revenue recognized. The new standard applies to contracts with
      customers. It does not apply to insurance contracts, financial instruments
      or lease contracts, which fall in the scope of other IFRSs.
|   
|    | The new standard is effective for
      fiscal years ending on or after December 31, 2018 and is available for
      early adoption. The Corporation intends to adopt IFRS 15 in its financial
      statements for the fiscal year beginning on January 1, 2018. The extent of
      the impact of adoption of the standard has not yet been
    determined.                                                                                                                                                                                                                                                                                               

32

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**6.** | Recent accounting
      pronouncements and future accounting policy changes
      (contd):
|------ | -------------------------------------------------------------------------------------------
|       |                                                                                            

|(f) | IFRS 9 Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | On July 24, 2014, the IASB issued
      the completeIFRS 9 Financial
      Instruments(IFRS 9 (2014)). IFRS 9
      (2014) introduces new requirements for the classification and measurement
      of financial assets. Under IFRS 9 (2014), financial assets are classified
      and measured based on the business model in which they are held and the
      characteristics of their contractual cash flows.                                                                                                                                                                                                                           
|   
|    | The standard introduces
      additional changes relating to financial liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | It also amends the impairment
      model by introducing a new expected credit loss model for calculating
      impairment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | IFRS 9 (2014) also includes a new
      general hedge accounting standard which aligns hedge accounting more
      closely with risk management. This new standard does not fundamentally
      change the types of hedging relationships or the requirement to measure
      and recognize ineffectiveness; however it will provide more hedging
      strategies that are used for risk management to qualify for hedge
      accounting and introduce more judgment to assess the effectiveness of a
      hedging relationship. Special transitional requirements have been set for
      the application of the new general hedging model.
|   
|    | The mandatory effective date of
      IFRS 9 (2014) is for annual periods beginning on or after January 1, 2018
      and must be applied retrospectively with some exemptions. Early adoption
      is permitted. The restatement of prior periods is not required and is only
      permitted if information is available without the use of hindsight. The
      Corporation intends to adopt IFRS 9 (2014) in its financial statements for
      the fiscal year beginning on January 1, 2018. The extent of the impact of
      adoption of the standard has not yet been determined.                                                     
|   
|(g) | IFRS 16 Leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | On January 13, 2016, the IASB
      issuedIFRS 16 Leases. IFRS 16 standard introduces a single lessee accounting
      model and requires a lessee to recognize assets and liabilities for all
      leases with a term of more than 12 months, unless the underlying asset is
      of low value. A lessee is required to recognize a right-of-use asset
      representing its right to use the underlying asset and a lease liability
      representing its obligation to make lease payments.                                                                                                                                             
|   
|    | This standard substantially
      carries forward the lessor accounting requirements of IAS 17, while
      requiring enhanced disclosures to be provided by lessors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    | Other areas of the lease
      accounting model have been impacted, including the definition of a lease.
      Transitional provisions have been provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

33

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**6.** | Recent accounting
      pronouncements and future accounting policy changes
      (contd):
|------ | -------------------------------------------------------------------------------------------
|       |                                                                                            

|(g)    | IFRS 16 Leases (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|       | The new standard is effective for
      annual periods beginning on or after January 1, 2019. Early adoption is
      permitted for entities that applyIFRS
      15 Revenue from Contracts with Customersas at or before the date of initial adoption of IFRS 16. IFRS 16
      will replaceIFRS 17 Leases.The Corporation intends to adopt IFRS
      16 in its financial statements for the fiscal year beginning on January 1,
      2019. The extent of the impact of adoption of the standard has not yet
      been determined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|**7.** | Acquisition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | On October 1, 2015, the
      Corporation completed the acquisition of Protonex, a leading designer and
      manufacturer of advanced power management products and portable fuel cell
      solutions. As consideration for the transaction, the Corporation assumed
      and paid certain of Protonex debt obligations and transaction costs on
      closing of $3,772,000, and issued 11,415,704 of Ballard shares at fair
      value of $1.20 per share at a total value of $13,699,000, for total
      purchase consideration of $17,471,000. The fair value of the Corporations
      11,415,704 common shares has been measured for accounting purposes using
      the closing price of the Ballard common shares on the day immediately
      preceding the acquisition date.
      The acquisition has been
      accounted for as a business combination using the acquisition method of
      accounting in accordance with IFRS 3Business Combinations. As such,
      consideration given by the Corporation to acquire Protonex has been
      allocated to the assets acquired, and the liabilities assumed, based on
      their fair values as of the acquisition date of October 1, 2015.
      The fair value of purchase
      consideration is as follows:
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | Total Ballard shares issued on closing                               |   | 11,415,704
| | -------------------------------------------------------------------- | - | ----------
| | Ballard Share Price pre-closing                                      | $ | 1.20      
| | Fair value of Ballard shares                                         | $ | 13,699    
| | Cash paid to Protonex for transaction costs
      assumed            |   | 1,397     
| | Cash paid direct to lender to settle Protonex debt
      obligations |   | 2,375     
| | Total cash paid                                                      |   | 3,772     
| | Total purchase consideration                                         | $ | 17,471    

34

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**7.** | Acquisition
      (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | In accordance with IFRS 3, the
      identifiable assets acquired and liabilities assumed as part of a business
      combination are recognized separately from goodwill at the acquisition
      date if they meet the definition of an asset or liability and are
      exchanged as part of the business combination. The identifiable assets
      acquired and liabilities assumed are then measured at their acquisition
      date fair values based on the contractual terms, economic conditions, the
      Corporations operating and accounting policies and other pertinent
      conditions as of the acquisition date. The fair value review of Protonex
      assets and liabilities commenced with a review of the carrying amount of
      each respective asset and liability. The carrying amounts of all assets
      and liabilities were audited as of September 30, 2015 (the former fiscal
      year-end of Protonex) and included confirmation of existence and a review
      of potential impairment of all significant assets and a review for
      completeness of all liabilities. Each asset and liability was then
      reviewed and measured for potential fair value adjustments from carrying
      cost to arrive at each asset and liabilitys preliminary fair value as of
      the acquisition date of October 1, 2015.
      The preliminary fair values of
      assets acquired and liabilities assumed are as follows:

| | Net assets
    acquired:                       |   |        |  
| | ---------------------------------------------- | - | ------ | -
| | Cash and cash equivalents                      | $ | 1,464  |  
| | Accounts
    receivable                        |   | 558    |  
| | Inventory                                      |   | 2,330  |  
| | Other current
    assets                       |   | 167    |  
| | Property, plant and equipment                  |   | 1,223  |  
| | Intangible
assets                              |   | 11,138 |  
| | Goodwill                                       |   | 4,272  |  
| | Other long-term
      assets                   |   | 22     |  
| | Accounts payable and accrued
      liabilities |   | (2,676 | )
| | Deferred revenue                               |   | (275   | )
| | Accrued warranty obligations                   |   | (47    | )
| | Payable to Ballard
      Power                 |   | (703   | )
| | Other long-term liabilities                    |   | (2     | )
| | Total purchase consideration                   | $ | 17,471 |  

| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The goodwill of $4,272,000
      resulting from the acquisition consists largely of the expectation that
      the acquisition will complement the Corporations Fuel Cell Products and
      Services growth platform by delivering strategic benefits in
      diversification, growth, scale, and
profitability.

35

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**7.** | Acquisition
      (contd):                                                                                                                  
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                              
|       | Identified intangible assets of
      $11,138,000 consist of the following and are being amortized based on the
      following useful lives:

| |                                                                |   |        |  | Estimated  
| | -------------------------------------------------------------- | - | ------ |  | -----------
| | Fair value (preliminary) of Identified Intangible
      Assets |   |        |  | Useful Life
| | Patents, know-how and
      in-process research & development  | $ | 8,973  |  | 20 years   
| | Customer base and relationships                                |   | 986    |  | 10 years   
| | Trademarks and service
      marks                             |   | 1,135  |  | 15 years   
| | Domain names                                                   |   | 17     |  | 15 years   
| | Non-compete agreements                                         |   | 27     |  | 1 year     
| |                                                                | $ | 11,138 |  |            

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The amount of revenue and net
      loss attributable to Protonex included in the consolidated statement of
      loss from the acquisition date, through the period ended December 31, 2015
      was $3,397,000 and ($652,000), respectively.
      The following table presents the
      unaudited pro forma results for the year ended December 31, 2015. The
      proforma financial information combines the results of operations of
      Ballard Power Systems Inc. and Protonex as though the businesses had been
      combined as of the beginning of fiscal 2015. The pro forma financial
      information is presented for informational purposes only and is not
      indicative of the results of operations that would have been achieved if
      the acquisition had taken place at the beginning of fiscal 2015. The pro
      forma financial information presented includes amortization charges for
      acquired tangible and intangible assets, based on the values assigned in
      the preliminary purchase price allocation.

| |                                   | December 31, |        
| | --------------------------------- | ------------ | -------
| |                                   | 2015         |        
| | Proforma
      Information:       |              |        
| | Revenue                           | $            | 62,535 
| | Loss from
    operations          |              | (27,315
| | Net
      loss                    |              | (9,614 
| | Basic loss per share (in dollars) | $            | (0.06  

| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Acquisition costs of $1,542,000
      were incurred in 2015 as a result of the transaction, and are recognized
      in other (expense).

36

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|8. | Discontinued operations 
      Disposition of Material Products division:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | On January 31, 2013, the
      Corporation completed an agreement to sell substantially all of the assets
      of its Material Products division for net cash proceeds of $9,085,000
      after deducting for working capital adjustments, brokers commissions and
      expenses, and legal and other expenses.                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   | In March 2014, the Corporation
      received additional proceeds of $320,000 payable through a product credit
      in 2014 and 2015 for fuel cell gas diffusion layers based on 2013 results
      of the former Material Products division. The additional proceeds payable
      have been recorded as a reversal of previously recorded impairment losses
      on property, plant and equipment, and were recorded in net earnings from
      discontinued operations in 2014. As of March 31, 2015, the additional
      proceeds had been fully paid through the product credit. The former
      Material Products division has been classified and accounted for as a
      discontinued operation.
|  
|9. | Trade and other
      receivables:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  

|        |                   | December 31, |        | December 31,
|------- | ----------------- | ------------ | ------ | ------------
|        |                   |              | 2015   |             
|        | Trade
receivables | $            | 23,664 |             
|        | Other             |              | 1,820  |             
|        |                   | $            | 25,484 |             
|        |                   |              |        |             
|**10.** | Inventories:      |              |        |             
|        |                   |              |        |             

| |                                     | December 31, |        | December 31,
| | ----------------------------------- | ------------ | ------ | ------------
| |                                     |              | 2015   |             
| | Raw materials and
      consumables | $            | 15,289 |             
| | Work-in-progress                    |              | 739    |             
| | Finished goods                      |              | 3,388  |             
| | Service inventory                   |              | 953    |             
| |                                     | $            | 20,369 |             

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In 2015, changes in raw materials
      and consumables, finished goods and work-in-progress recognized as cost of
      product and service revenues amounted to $17,905,000 (2014 - $22,628,000).
      In 2015, the write-down of
      inventories to net realizable value amounted to $855,000 (2014 -
      $1,392,000) and the reversal of previously recorded write-downs amounted
      to $239,000 (2014 - $nil), resulting in a net write-down of $616,000 (2014
      - $1,392,000). Write-downs and reversals are included in either cost of
      product and service revenues, or research and product development expense,
      depending on the nature of inventory.

37

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**11.** | Property, plant and
      equipment:
|------- | ------------------------------------
|        |                                     

| |                                                       | December 31, |        | December 31,
| | ----------------------------------------------------- | ------------ | ------ | ------------
| | Net
      carrying amounts                            | 2015         |        | 2014        
| | Building under finance
      lease                    | $            | 7,443  |             
| | Computer equipment                                    |              | 826    |             
| | Furniture and
      fixtures                          |              | 229    |             
| | Furniture and fixtures under finance
      lease      |              | 26     |             
| | Leasehold
      improvements                          |              | 2,741  |             
| | Production and test equipment                         |              | 4,506  |             
| | Production and test equipment under finance
    lease |              | 954    |             
| |                                                       | $            | 16,725 |             

| |                                     |              |        |             | Additions |           |  |           |       |                |   |              | Effect of |              |     |  
| | ----------------------------------- | ------------ | ------ | ----------- | --------- | --------- |  | --------- | ----- | -------------- | - | ------------ | --------- | ------------ | --- | -
| |                                     | December 31, |        | through     |           |           |  |           |       |                |   | movements in |           | December 31,
| | Cost                                | 2014         |        | Acquisition |           | Additions |  | Disposals |       | exchange rates |   | 2015        
| | Building under finance
      lease  | $            | 12,180 |             | $         | -         |  | $         | -     |                | $ | -            |           | $            | -   |  
| | Computer equipment                  |              | 4,600  |             |           | 165       |  |           | 428   |                |   | (49          | )         |              | (11 | )
| | Furniture and
      fixtures        |              | 685    |             |           | 83        |  |           | 137   |                |   | (3           | )         |              | (11 | )
| | Furniture and fixtures under        |              | 317    |             |           | -         |  |           | -     |                |   | -            |           |              | -   |  
| | finance
      lease                 |              |        |             |           |           |  |           |       |                |   |              |           |              |     |  
| | Leasehold
      improvements        |              | 8,779  |             |           | 350       |  |           | 95    |                |   | (105         | )         |              | (40 | )
| | Production and test equipment       |              | 29,308 |             |           | 625       |  |           | 1,622 |                |   | (364         | )         |              | (9  | )
| | Production and test
      equipment |              | 3,667  |             |           | -         |  |           | -     |                |   | -            |           |              | -   |  
| | under finance
      lease           |              |        |             |           |           |  |           |       |                |   |              |           |              |     |  
| |                                     | $            | 59,536 |             | $         | 1,223     |  | $         | 2,282 |                | $ | (521         | )         | $            | (71 | )

| | During 2015, additions through
      acquisition of property, plant and equipment relate to the acquisition of
      Protonex on October 1, 2015 (note 7).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                           

| |                                                  |              |        |              |   |           |  |                      |      |              | Effect of |              |   |  
| | ------------------------------------------------ | ------------ | ------ | ------------ | - | --------- |  | -------------------- | ---- | ------------ | --------- | ------------ | - | -
| | Accumulated depreciation and                     | December 31, |        |              |   |           |  |                      |      | movements in |           | December 31,
| | impairment
    loss                              | 2014         |        | Depreciation |   | Disposals |  | exchange
      rates |      | 2015        
| | Building under finance
      lease               | $            | 3,925  |              | $ | 812       |  | $                    | -    |              | $         | -            |   | $
| | Computer equipment                               |              | 4,157  |              |   | 210       |  |                      | (49  | )            |           | (11          | ) |  
| | Furniture and
      fixtures                     |              | 654    |              |   | 21        |  |                      | (3   | )            |           | (10          | ) |  
| | Furniture and fixtures under finance
      lease |              | 227    |              |   | 64        |  |                      | -    |              |           | -            |   |  
| | Leasehold
      improvements                     |              | 5,785  |              |   | 589       |  |                      | -    |              |           | (36          | ) |  
| | Production and test equipment                    |              | 25,927 |              |   | 1,123     |  |                      | (365 | )            |           | (9           | ) |  
| | Production and test
      equipment under        |              | 2,176  |              |   | 537       |  |                      | -    |              |           | -            |   |  
| | finance
    lease                                |              |        |              |   |           |  |                      |      |              |           |              |   |  
| |                                                  | $            | 42,851 |              | $ | 3,356     |  | $                    | (417 | )            | $         | (66          | ) | $

38

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**11.** | Property, plant and equipment
      (contd):
|------- | ---------------------------------------------
|        |                                              

| |                                                  |              |        |              |   |           |  |                      |        |              |   | Effect of    |   |   |       
| | ------------------------------------------------ | ------------ | ------ | ------------ | - | --------- |  | -------------------- | ------ | ------------ | - | ------------ | - | - | ------
| |                                                  | December 31, |        |              |   |           |  |                      |        | movements in |   | December 31,
| | Cost                                             | 2013         |        | Additions    |   | Disposals |  | exchange
      rates |        | 2014        
| | Building under finance
      lease               | $            | 12,180 |              | $ | -         |  | $                    | -      |              | $ | -            |   | $ | 12,180
| | Computer equipment                               |              | 4,581  |              |   | 227       |  |                      | (193   | )            |   | (15          | ) |   | 4,600 
| | Furniture and
      fixtures                     |              | 688    |              |   | 18        |  |                      | (7     | )            |   | (14          | ) |   | 685   
| | Furniture and fixtures under finance
      lease |              | 317    |              |   | -         |  |                      | -      |              |   | -            |   |   | 317   
| | Leasehold
      improvements                     |              | 9,043  |              |   | 11        |  |                      | (224   | )            |   | (51          | ) |   | 8,779 
| | Production and test equipment                    |              | 29,390 |              |   | 599       |  |                      | (669   | )            |   | (12          | ) |   | 29,308
| | Production and test
      equipment under        |              | 3,667  |              |   | -         |  |                      | -      |              |   | -            |   |   | 3,667 
| | finance
      lease                              |              |        |              |   |           |  |                      |        |              |   |              |   |   |       
| |                                                  | $            | 59,866 |              | $ | 855       |  | $                    | (1,093 | )            | $ | (92          | ) | $ | 59,536
| |                                                 
| |                                                  |              |        |              |   |           |  |                      |        |              |   | Effect of    |   |   |       
| | Accumulated depreciation and                     | December 31, |        |              |   |           |  |                      |        | movements in |   | December 31,
| | impairment
      loss                            | 2013         |        | Depreciation |   | Disposals |  | exchange rates       |        | 2014        
| | Building under finance
      lease               | $            | 3,113  |              | $ | 812       |  | $                    | -      |              | $ | -            |   | $ | 3,925 
| | Computer equipment                               |              | 4,207  |              |   | 157       |  |                      | (193   | )            |   | (14          | ) |   | 4,157 
| | Furniture and
      fixtures                     |              | 652    |              |   | 22        |  |                      | (7     | )            |   | (13          | ) |   | 654   
| | Furniture and fixtures under finance
      lease |              | 164    |              |   | 63        |  |                      | -      |              |   | -            |   |   | 227   
| | Leasehold
      improvements                     |              | 5,216  |              |   | 612       |  |                      | -      |              |   | (43          | ) |   | 5,785 
| | Production and test equipment                    |              | 25,026 |              |   | 1,482     |  |                      | (572   | )            |   | (9           | ) |   | 25,927
| | Production and test
      equipment under        |              | 1,543  |              |   | 633       |  |                      | -      |              |   | -            |   |   | 2,176 
| | finance
      lease                              |              |        |              |   |           |  |                      |        |              |   |              |   |   |       
| |                                                  | $            | 39,921 |              | $ | 3,781     |  | $                    | (772   | )            | $ | (79          | ) | $ | 42,851

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Leased assets
      The Corporation leases certain
      assets under finance lease agreements including the Corporations head
      office building in Burnaby, British Columbia and certain production and
      test equipment (note 17).
      Impairment loss
      There were no impairment losses
      or reversals of previously recorded impairment losses recognized against
      property, plant and equipment used for continuing operations in 2015 and
      2014. In 2014, a $320,000 reversal of previously recognized impairment
      losses was recorded against property, plant and equipment used for
      discontinued operations based on the additional proceeds received from the
      disposition of the former Material Products division (note
    8).

39

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**12.** | Intangible
      assets:
|------- | ------------------------
|        |                         

| |                                                             | December 31, |        | December 31,
| | ----------------------------------------------------------- | ------------ | ------ | ------------
| | Net
      carrying amounts                                  | 2015         |        | 2014        
| | Intellectual property
      acquired from UTC               | $            | 2,757  |             
| | Intellectual property acquired from Idatech,
      LLC      |              | 914    |             
| | Intellectual property
      acquired from H2 Logic A/S      |              | 301    |             
| | Intellectual property acquired from Protonex
      (note 7) |              | 10,975 |             
| | Internally generated intellectual assets                    |              | 1,382  |             
| |                                                             | $            | 16,329 |             

| | Intangible assets                                       |      |         |              | Accumulated |        | Net carrying |  
| | ------------------------------------------------------- | ---- | ------- | ------------ | ----------- | ------ | ------------ | -
| | Balance                                                 | Cost |         | amortization |             | amount |             
| | At January 1,
    2014                                  | $    | 46,329  |              | $           | 43,613 |              | $
| | Additions to and acquisition of intangible
      assets |      | 23,718  |              |             | -      |              |  
| | Amortization
    expense                                |      | -       |              |             | 2,283  |              |  
| | Disposals                                               |      | (519    | )            |             | (519   | )            |  
| | At December 31,
    2014                                |      | 69,528  |              |             | 45,377 |              |  
| | Additions to and acquisition of intangible
      assets |      | 12,742  |              |             | -      |              |  
| | Amortization
    expense                                |      | -       |              |             | 1,464  |              |  
| | Disposals                                               |      | (20,202 | )            |             | (1,102 | )            |  
| | At December 31, 2015                                    | $    | 62,068  |              | $           | 45,739 |              | $

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Amortization expense on
      intangible assets is allocated to research and product development
      expense. In 2015, amortization of $1,464,000 (2014 - $2,283,000) was
      recorded. There were no impairment losses recorded in 2015 and 2014.
      Sale of Intellectual Property
      to Volkswagen
      On February 11, 2015, the
      Corporation entered into a transaction (Volkswagen IP Agreement) with
      Volkswagen Group (Volkswagen) to transfer to Volkswagen in two separate
      transactions the automotive-related portion of the UTC Portfolio, in
      exchange for total payments of $50,000,000:
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | (i) |  | On the closing of the initial
      transaction on February 23, 2015, the Corporation transferred ownership of
      the automotive-related patents and patent applications of United
      Technologies Corporation (the UTC Portfolio) in exchange for
      $40,000,000. This receipt triggered a 25%, or $10,000,000, license fee
      payment to UTC. Although ownership of the patents and patent applications
      was transferred to Volkswagen, the Corporation received a royalty-free
      back-license to all the transferred patents and patent applications for
      use in all of the Corporations non-automotive applications, in bus
      applications, and in certain limited pre-commercial automotive
      applications.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

40

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**12.** | Intangible assets
      (contd):
|------- | ---------------------------------
|        |                                  

| | (ii)                                                                                                                                                                                                                                                                      |  | On December 2, 2015, the Corporation sold a copy of the
      automotive-related know-how of the UTC Portfolio for consideration
      receivable of $10,000,000. This has been recorded in accounts receivable
      at December 31, 2015. This receipt triggered a 9%, or $900,000, payable to
      UTC. On the closing of the sale of a copy of the know-how, the Corporation
      retained full ownership of the know-how, including the right to sell
      additional copies of the know-how to third parties as well as retaining
      the right to use the know-how in all of the Corporations
      applications.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                          
| | On the closing of the sale of the
      automotive-related patents and patent applications of the UTC Portfolio on
      February 23, 2015, the Corporation recognized a gain on sale of
      intellectual property of $14,195,000 on net proceeds of
      $29,475,000.
| |                                                                                                                                                                                                                                                                          

| | Gross proceeds                        | $                                                      | 40,000 |        
| | ------------------------------------- | ------------------------------------------------------ | ------ | -------
| | Less:                                 | License
      fee                                      |        | (10,000
| |                                       | Disposition costs                                      |        | (525   
| | Net proceeds                          |                                                        | 29,475 |        
| | Less:                                 | Net book value of
      disposed intellectual property |        | (15,280
| | Gain on sale of intellectual property | $                                                      | 14,195 |        

| |                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On the closing of the sale of a
      copy of the automotive-related know-how on December 2, 2015, the
      Corporation recognized a gain on sale of intellectual property of
      $5,424,000 on net receivable proceeds of $9,244,000.
| |                                                                                                                                                                                                                                          

| | Gross proceeds                              | $                                                      | 10,000 |       
| | ------------------------------------------- | ------------------------------------------------------ | ------ | ------
| | Less:                                       | License fee                                            |        | (900  
| |                                             | Disposition recovery
      (costs)                     |        | 144   
| | Net
      proceeds                          |                                                        | 9,244  |       
| | Less:                                       | Net book value of
      disposed intellectual property |        | (3,820
| | Gain on sale of intellectual
      property | $                                                      | 5,424  |       

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The net book value of disposed
      intellectual property related to the two transactions of $19,100,000
      represents the decline in value of the underlying UTC intellectual
      property assets as Ballard is no longer able to effectively monetize the
      automotive intellectual property assets through future intellectual
      property licensing and royalty transactions.
      UTC Intellectual Property
      Acquisition
      On April 24, 2014, the
      Corporation acquired the UTC Portfolio for total consideration of
      $22,307,000. The acquired UTC Portfolio assets consist of approximately
      800 patents and patent applications, as well as patent licenses, invention
      disclosures and know-how primarily related to PEM fuel cell
      technology.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

41

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015,
      and 2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|12. | Intangible assets
      (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | As consideration for the UTC
      Portfolio, UTC received 5,121,507 of the Corporations common shares
      valued at $20,307,000, $2,000,000 in cash, a grant back license to use the
      patent portfolio in UTCs existing businesses, and a portion of royalties,
      typically 25%, on the Corporations future intellectual property sale or
      licensing income generated from the combined intellectual property
      portfolio for a period of 15 years to April 2029. Since the acquisition,
      an additional $209,000 (2014 - $981,000) has been incurred to prepare the
      intellectual property for use, which has been capitalized.                                                                                         
|   
|    | Internally Generated
      Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    | In 2015, the Corporation
      commenced development of two new configurations of its fuel cell module
      for heavy-duty motive applications. The two new product configurations are
      expected to deliver net power of 30kW and 60kW, respectively, in addition
      to ongoing development of its 90kW application. The Corporation has
      assessed its development expenditure on these product configurations to be
      internally generated intangible assets. During 2015, total development
      expenditures of $1,395,000 have been capitalized at cost. The estimated
      useful life has been assessed as five years. In 2015, amortization of
      $13,000 (2014 - $nil) was recorded on these assets.                       
|   
|    | After the conclusion of the
      Volkswagen Agreement, the net carrying amount of the remaining intangible
      assets of the UTC Portfolio of $2,757,000 as of December 31, 2015 consists
      of certain stationary related fuel cell intellectual property assets and
      the royalty-free back-license from Volkswagen to utilize the entire UTC
      Portfolio in the Corporations bus and non-automotive applications and in
      certain limited pre-commercial purposes for automotive applications. The
      estimated useful life of the remaining UTC Portfolio has been reassessed
      from approximately fourteen years to seven years, and will be amortized
      over seven years from the date of the Volkswagen IP
Agreement.
|   
|13. | Goodwill:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | For the purpose of impairment
      testing, goodwill is allocated to the Corporations cash-generating units
      which represent the lowest level within the Corporation at which the
      goodwill is monitored for internal management purposes, which is not
      higher than the Corporations operating segments (note 29).                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | Fuel Cell Products and
      Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | As of December 31, 2015, the
      aggregate carrying amount of the Corporations goodwill is $40,562,000
      (2014 - $36,291,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | The impairment testing requires a
      comparison of the carrying value of the asset to the higher of (i) value
      in use; and (ii) fair value less costs to sell. Value in use is defined as
      the present value of future cash flows expected to be derived from the
      asset in its current state.                                                                                                                                                                                                                                                                                                                                                                                                                                          

42

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|13. | Goodwill
    (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | The Corporations fair value test
      is in effect a modified market capitalization assessment, whereby the fair
      value of the Fuel Cell Products and Services segment is determined by
      first calculating the value of the Corporation at December 31, 2015 based
      on the average closing share price in the month of December, adding a
      reasonable estimated control premium of 25% to determine the Corporations
      enterprise value on a controlling basis after adjusting for excess cash
      balances, and deducting the estimated costs to sell from this enterprise
      value, arriving at the fair value of the Fuel Cell Products and Services
      segment. Based on the fair value test, the Corporation has determined that
      the fair value of the Fuel Cell Products and Services segment exceeds its
      carrying value as of December 31, 2015.                                                                                                                                                                                                                             
|   
|    | In addition to the fair value
      test, the Corporation also performed a value in use test on the Fuel Cell
      Products and Services segment, comparing the carrying value of the segment
      to the present value of future cash flows expected to be derived from the
      segment. The principal factors used in the discounted cash flow analysis
      requiring significant estimation are the projected results of operations,
      the discount rate based on the weighted average cost of capital (WACC),
      and terminal value assumptions. The Corporations value in use test was
      based on a WACC of 15%; an average estimated compound annual growth rate
      of approximately 27% from 2016 to 2021; and a terminal year earnings
      before interest, taxes, depreciation and amortization (EBITDA)
      multiplied by a terminal value multiplier of 10. The value in use
      assessment resulted in an estimated fair value for the Fuel Cell Products
      and Services segment that is consistent with that determined under the
      fair value, less costs to sell, assessment.
|   
|    | As the recoverable amount of the
      Fuel Cell Products and Services segment was determined to be greater than
      its carrying amount, no impairment loss was recorded in 2015.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|14. | Bank
  facilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | The Corporation has certain bank
      facilities available to it, which are secured by a hypothecation of the
      Corporations cash and cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    | Bank Operating
    Line                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | The Corporation has a demand
      revolving facility (Bank Operating Line) in which an operating line of
      credit of up to CDN $7,000,000 is made available to be drawn upon by the
      Corporation. The Bank Operating Line can be utilized to assist in
      financing the day-to-day operating activities and short-term working
      capital requirements of the business. Outstanding amounts are charged
      interest at the banks prime rate minus 0.50% per annum and are repayable
      on demand by the bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | There was no activity under the
      Bank Operating Line in 2015, and there were no outstanding amounts payable
      on the Bank Operating Line as of December 31, 2015 and
  2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

43

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|14. | Bank facilities
      (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Leasing
  Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | The Corporation also has a CDN
      $1,830,770 capital leasing facility (Leasing Facility) which can be
      utilized to finance the acquisition and lease of operating equipment
      (notes 11 & 17). Interest is charged on outstanding amounts at the
      banks prime rate per annum and is repayable on demand by the bank in the
      event of certain conditions.                                                                                                                                                                                                                                                         
|   
|    | At December 31, 2015, $510,000
      (2014 - $1,061,000) was outstanding on the Leasing Facility which is
      included in the finance lease liability (note 17). The remaining
      $7,224,000 finance lease liability relates to the lease of the
      Corporations head office building.                                                                                                                                                                                                                                                                                                                                           
|   
|    | Forward Contract
      Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    | The Corporation also has a CDN
      $5,000,000 demand revolving line (Forward Contract Facility), which is
      available for use when the Corporation purchases forward foreign exchange
      contracts or forward platinum contracts used to hedge against currency and
      platinum price fluctuations, respectively.                                                                                                                                                                                                                                                                                                           
|   
|    | Periodically, the Corporation
      uses forward foreign exchange and forward platinum purchase contracts to
      manage exposure to currency rate fluctuations and platinum price
      fluctuations. These contracts are recorded at their fair value as either
      assets or liabilities on the balance sheet. Any changes in fair value are
      either (i) recorded in the statement of comprehensive income if formally
      designated and qualified under hedge accounting criteria; or (ii) recorded
      in the statement of operations if either not designated, or not qualified,
      under hedge accounting criteria.
|   
|    | At December 31, 2015, the
      Corporation had outstanding foreign exchange currency contracts to
      purchase a total of CDN $10,750,000 at an average rate of 1.33 CDN per
      U.S. dollar, resulting in an unrealized loss of $392,000 at December 31,
      2015. The outstanding foreign exchange currency contracts are not
      qualified under hedge accounting. The Corporation did not have any
      outstanding foreign exchange currency contracts at December 31,
      2014.                                                                                                                                         
|   
|15. | Trade and other
      payables:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                              |  | December 31, |        | December 31,
| | ---------------------------- |  | ------------ | ------ | ------------
| |                              |  |              | 2015   |             
| | Trade accounts
      payable |  | $            | 9,030  |             
| | Compensation payable         |  |              | 4,137  |             
| | Other
liabilities            |  |              | 3,641  |             
| | Taxes payable                |  |              | 412    |             
| |                              |  | $            | 17,220 |             

44

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|16. | Provisions:
|--- | -----------
|    |            

| |                                               |  |               |      |   |           | Warranty |        |             | Decommissioning |   |       |   |  |  
| | --------------------------------------------- |  | ------------- | ---- | - | --------- | -------- | ------ | ----------- | --------------- | - | ----- | - |  | -
| | Balance                                       |  | Restructuring |      |   | provision |          |        | liabilities |                 |   | Total |  
| | At January 1,
    2014                        |  | $             | 237  |   |           | $        | 6,582  |             |                 | $ | 4,857 |   |  | $
| | Provisions made during the year               |  |               | 78   |   |           |          | 6,258  |             |                 |   | 129   |   |  |  
| | Provisions used during the
      year         |  |               | (226 | ) |           |          | (1,562 | )           |                 |   | -     |   |  |  
| | Provisions reversed during the
year           |  |               | -    |   |           |          | (1,843 | )           |                 |   | (222  | ) |  |  
| | Effect of movements in exchange rates         |  |               | (11  | ) |           |          | (503   | )           |                 |   | (411  | ) |  |  
| | At December 31, 2014                          |  |               | 78   |   |           |          | 8,932  |             |                 |   | 4,353 |   |  |  
| | Provisions acquired
      through acquisition |  |               | -    |   |           |          | 47     |             |                 |   | -     |   |  |  
| | Provisions made during the year               |  |               | -    |   |           |          | 1,171  |             |                 |   | 110   |   |  |  
| | Provisions used during the
      year         |  |               | (47  | ) |           |          | (2,473 | )           |                 |   | -     |   |  |  
| | Provisions reversed during the
year           |  |               | (24  | ) |           |          | (1,620 | )           |                 |   | (104  | ) |  |  
| | Effect of movements in exchange rates         |  |               | -    |   |           |          | (696   | )           |                 |   | (713  | ) |  |  
| | At
      December 31, 2015                    |  | $             | 7    |   |           | $        | 5,361  |             |                 | $ | 3,646 |   |  | $
| |                                              
| | Current                                       |  | $             | 7    |   |           | $        | 5,361  |             |                 | $ | -     |   |  | $
| | Non-current                                   |  |               | -    |   |           |          | -      |             |                 |   | 3,646 |   |  |  
| |                                               |  | $             | 7    |   |           | $        | 5,361  |             |                 | $ | 3,646 |   |  | $

| | Restructuring
      Restructuring charges relate to
      minor restructurings focused on overhead cost reductions and relate
      primarily to employee termination benefits. Restructuring charges are
      recognized in other expense.
      Warranty provision
      During 2015, the Corporation
      acquired $47,000 of warranty provisions through business combinations
      (2014  $nil). It also recorded $1,171,000 of warranty provisions (2014 -
      $6,258,000) of which $890,000 related to new product sales (2014 -
      $1,020,000) and $281,000 related to upward warranty adjustments (2014 -
      $5,238,000). This was offset by warranty expenditures of $2,473,000 (2014
      - $1,562,000) and downward warranty adjustments of $1,620,000 (2014 -
      $1,843,000), due primarily to contractual expirations and changes in
      estimated and actual costs to repair. The remaining $696,000 reduction to
      the warranty provision related to the effect of movements in exchange
      rates (2014  $503,000).
      Decommissioning liabilities
      Provisions for decommissioning
      liabilities have been recorded for the Corporations two leased locations
      in Burnaby, British Columbia, comprising the Corporations head office
      building and manufacturing facilities, and are related to estimated site
      restoration obligations at the end of their respective lease terms. The
      Corporation has made certain modifications to the leased buildings to
      facilitate the manufacturing and testing of its fuel cell products.
      Consequently, the site restoration obligations relate primarily to
      dismantling and removing various manufacturing and test equipment and
      restoring the infrastructures of the leased buildings to their original
      states of when the respective leases were
entered.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

45

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|16. | Provisions
    (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Decommissioning liabilities
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | Due to the long-term nature of
      the liability, the most significant uncertainty in estimating the
      provision is the costs that will be incurred. The Corporation has
      determined a range of reasonably possible outcomes of the total costs for
      the head office building and manufacturing facility. In determining the
      fair value of the decommissioning liabilities, the estimated future cash
      flows have been discounted at 2.15% per annum (2014  2.0%).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | The Corporation performed an
      assessment of the estimated cash flows required to settle the obligations
      for the two buildings as of December 31, 2015. Based on the assessment, a
      $104,000 (2014 - $222,000) reduction of the provision was recorded against
      decommissioning liabilities, which was offset in part by accretion costs
      of $110,000 (2014 - $129,000). The total undiscounted amount of the
      estimated cash flows required to settle the obligation for one of the
      buildings is $1,606,000 (2014 - $1,979,000) which is expected to be
      settled at the end of the lease term in 2025. The total undiscounted
      amount of the estimated cash flows required to settle the obligation for
      the second building is $2,639,000 (2014 - $3,226,000), which is expected
      to be settled at the end of the operating lease term of 2019. The net
      discounted amount of estimated cash flows required to settle the
      obligations for both buildings is $3,646,000 as at December 31, 2015 (2014
      - $4,353,000).
|   
|17. | Finance lease
      liability:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | The Corporation leases certain
      assets under finance lease agreements (note 17). The finance leases have
      imputed interest rates ranging from 3.00% to 7.35% per annum and expire
      between June 2016 and February 2025.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | Finance lease liabilities are
      payable as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                            |  |                |        |          |   |          |               | Present value of
| | -------------------------- |  | -------------- | ------ | -------- | - | -------- | ------------- | ----------------
| |                            |  | Future minimum |        |          |   |          | minimum lease
| | At
      December 31, 2015 |  | lease payments |        | Interest |   | payments
| | Less than one
    year     |  | $              | 1,524  |          | $ | 513      |               | $               
| | Between one and five years |  |                | 4,181  |          |   | 1,617    |               |                 
| | More than five years       |  |                | 4,830  |          |   | 671      |               |                 
| |                            |  | $              | 10,535 |          | $ | 2,801    |               | $               
| |                           
| | Current                    |  |                |        |          |   |          |               | $               
| | Non-current                |  |                |        |          |   |          |               |                 
| |                            |  |                |        |          |   |          |               | $               

46

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|17. | Finance lease liability
      (contd):
|--- | ---------------------------------------
|    |                                        

| |                            |  |                |        |          |   |          |               | Present value of
| | -------------------------- |  | -------------- | ------ | -------- | - | -------- | ------------- | ----------------
| |                            |  | Future minimum |        |          |   |          | minimum lease
| | At
      December 31, 2014 |  | lease payments |        | Interest |   | payments
| | Less than one
    year     |  | $              | 1,680  |          | $ | 672      |               | $               
| | Between one and five years |  |                | 5,423  |          |   | 2,144    |               |                 
| | More than five years       |  |                | 7,145  |          |   | 1,198    |               |                 
| |                            |  | $              | 14,248 |          | $ | 4,014    |               | $               
| |                           
| | Current                    |  |                |        |          |   |          |               | $               
| | Non-current                |  |                |        |          |   |          |               |                 
| |                            |  |                |        |          |   |          |               | $               

|    | At December 31, 2015, $510,000
      (2014 - $1,061,000) was outstanding on the Leasing Facility which is
      included in the finance lease liability. The remaining $7,224,000 (2014-
      $9,173,000) finance lease liability relates to the lease of the
      Corporations head office building.                                                                                                                                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Deferred gains were also recorded
      on closing of the finance lease agreements and are amortized over the
      finance lease term. At December 31, 2015, the outstanding deferred gain
      was $3,829,000 (2014  $4,274,000).                                                                                                                                                                                                                                                                                                                                   
|   
|18. | Debt to Dantherm Power A/S
      non-controlling interests:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    | Dantherm Power has received
      financing from its non-controlling partner in the form of a revolving
      credit facility. The revolving credit facility makes available a revolving
      facility to Dantherm Power of a maximum aggregate amount of DKK 2,977,975
      ($433,000) from the non-controlling partner, Dantherm A/S. Interest is
      accrued at 6% and the facility matures on December 31, 2016. At December
      31, 2015, the total principal and interest outstanding on the revolving
      credit facility was $504,000 (2014  $529,000).
|   
|19. | Employee future
      benefits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |                                                        |  | December 31, |       | December 31,
| | ------------------------------------------------------ |  | ------------ | ----- | ------------
| |                                                        |  |              | 2015  |             
| | Net defined benefit
      pension plan liability       |  | $            | 5,116 |             
| | Net
      other post-retirement benefit plan liability |  |              | 215   |             
| | Employee future benefits                               |  | $            | 5,331 |             

| | The Corporation maintains a
      defined benefit pension plan covering existing and former employees in the
      United States. The benefits under the pension plan are based on years of
      service and salary levels accrued as of December 31, 2009. In 2009,
      amendments were made to the defined benefit pension plan to freeze
      benefits accruing to employees at their respective years of service and
      salary levels obtained as of December 31, 2009. Certain employees in the
      United States are also eligible for post-retirement healthcare, life
      insurance, and other benefits.
      The Corporation accrues the
      present value of its obligations under employee future benefit plans and
      related costs, net of the present value of plan assets.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

47

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|19. | Employee future benefits
      (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The measurement date used to
      determine pension and other post-retirement benefit obligations and
      expense is December 31 of each year. The most recent actuarial valuation
      of the employee future benefit plans for funding purposes was as of
      January 1, 2015. The next actuarial valuation of the employee future
      benefit plans for funding purposes is expected to be performed as of
      January 1, 2016.
      The Corporation expects
      contributions of approximately $750,000 to be paid to its defined benefit
      plans in 2016.
      The following tables reconcile
      the opening balances to the closing balances for the net defined benefit
      liability and its components for the two plans. The expense recognized in
      net income is recorded in finance income (loss) and other.

| |                                                |  | Defined benefit obligation |        |   | Fair value of plan assets |       |        | Net defined benefit liability | 
| | ---------------------------------------------- |  | -------------------------- | ------ | - | ------------------------- | ----- | ------ | ----------------------------- | 
| | Defined benefit pension plan                   |  | 2015                       |        |   | 2014                      |       |        | 2015                          | 
| | Balance at January 1                           |  | $                          | 16,167 |   |                           | **$** | 13,703 |                               | 
| | Included in profit or
      loss               |  |                            |        |   |                           |       |        |                               | 
| | Current service
    cost                       |  |                            | 58     |   |                           |       | 38     |                               | 
| | Interest cost (income)                         |  |                            | 663    |   |                           |       | 654    |                               | 
| | Benefits payable                               |  |                            | -      |   |                           |       | -      |                               | 
| |                                                |  |                            | 721    |   |                           |       | 692    |                               | 
| | Included in other comprehensive income         |  |                            |        |   |                           |       |        |                               | 
| | Remeasurements loss (gain):                    |  |                            |        |   |                           |       |        |                               | 
| | Actuarial loss (gain)
      arising from:      |  |                            |        |   |                           |       |        |                               | 
| | Demographic
      assumptions                  |  |                            | (212   | ) |                           |       | 830    |                               | 
| | Financial
      assumptions                    |  |                            | (620   | ) |                           |       | 1,462  |                               | 
| | Experience
      adjustment                    |  |                            | 116    |   |                           |       | 108    |                               | 
| | Return on plan assets
      excluding interest |  |                            | -      |   |                           |       | -      |                               | 
| | income                                         |  |                            |        |   |                           |       |        |                               | 
| | Plan expenses                                  |  |                            | (40    | ) |                           |       | (57    | )                             | 
| |                                                |  |                            | (756   | ) |                           |       | 2,343  |                               | 
| | Other                                          |  |                            |        |   |                           |       |        |                               | 
| | Contributions paid by the
      employer       |  |                            | -      |   |                           |       | -      |                               | 
| | Benefits paid                                  |  |                            | (553   | ) |                           |       | (571   | )                             | 
| |                                                |  |                            | (553   | ) |                           |       | (571   | )                             | 
| | Balance at December 31                         |  | $                          | 15,579 |   |                           | $     | 16,167 |                               | 

48

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|19. | Employee future benefits
      (contd):
|--- | ----------------------------------------
|    |                                         

| |                                           |  | Defined benefit obligation |     |   | Fair value of plan assets |       |     | Net defined benefit liability | 
| | ----------------------------------------- |  | -------------------------- | --- | - | ------------------------- | ----- | --- | ----------------------------- | 
| | Other post-retirement benefit plan        |  | 2015                       |     |   | 2014                      |       |     | 2015                          | 
| | Balance at January 1                      |  | $                          | 260 |   |                           | **$** | 133 |                               | 
| | Included in profit or
      loss          |  |                            |     |   |                           |       |     |                               | 
| | Interest cost (income)                    |  |                            | 8   |   |                           |       | 2   |                               | 
| |                                           |  |                            | 8   |   |                           |       | 2   |                               | 
| | Included in other comprehensive income    |  |                            |     |   |                           |       |     |                               | 
| | Remeasurements loss (gain):               |  |                            |     |   |                           |       |     |                               | 
| | Actuarial loss (gain)
      arising from: |  |                            |     |   |                           |       |     |                               | 
| | Financial
      assumptions               |  |                            | (25 | ) |                           |       | 144 |                               | 
| | Experience
      adjustment               |  |                            | (15 | ) |                           |       | (6  | )                             | 
| |                                           |  |                            | (40 | ) |                           |       | 138 |                               | 
| | Other                                     |  |                            |     |   |                           |       |     |                               | 
| | Contributions paid by the employer        |  |                            | -   |   |                           |       | -   |                               | 
| | Benefits paid                             |  |                            | (13 | ) |                           |       | (13 | )                             | 
| |                                           |  |                            | (13 | ) |                           |       | (13 | )                             | 
| | Balance at December 31                    |  | $                          | 215 |   |                           | $     | 260 |                               | 

| | Pension plan assets comprise:
| | -----------------------------

| |                                 | 2015 |  | 2014
| | ------------------------------- | ---- |  | ----
| | Cash and cash
      equivalents | 1%   |  | 1%  
| | Equity securities               | 62%  |  | 22% 
| | Debt securities                 | 37%  |  | 77% 
| | Total                           | 100% |  | 100%

| | The significant actuarial
      assumptions adopted in measuring the fair value of benefit obligations at
      December 31 were as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------

| |                               |              |  | 2015               |  |              |  | 2014              
| | ----------------------------- | ------------ |  | ------------------ |  | ------------ |  | ------------------
| |                               | Pension plan |  | Other benefit plan |  | Pension plan |  | Other benefit plan
| | Discount rate                 | 4.44%        |  | 3.89%              |  | 4.18%        |  | 3.53%             
| | Rate of compensation increase | n/a          |  | n/a                |  | n/a          |  | n/a               

| | The significant actuarial
      assumptions adopted in determining net expense for the years ended
      December 31 were as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------

| |                               |              |  | 2015               |  |              |  | 2014              
| | ----------------------------- | ------------ |  | ------------------ |  | ------------ |  | ------------------
| |                               | Pension plan |  | Other benefit plan |  | Pension plan |  | Other benefit plan
| | Discount rate                 | 4.18%        |  | 3.53%              |  | 4.87%        |  | 2.03%             
| | Rate of compensation increase | n/a          |  | n/a                |  | n/a          |  | n/a               

49

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|19. | Employee future benefits
      (contd):                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                          
|    | The assumed health care cost
      trend rates applicable to the other benefit plan at December 31 were as
      follows:

| |                                                                              | 2015 |  | 2014
| | ---------------------------------------------------------------------------- | ---- |  | ----
| | Initial medical health
      care cost trend rate                            | 7.5% |  | 7.0%
| | Initial dental health care cost trend
      rate                             | 5.0% |  | 5.0%
| | Cost trend rate declines
      to medical and dental                         | 5.0% |  | 5.0%
| | Year that the medical rate reaches the rate
      it is assumed to remain at | 2020 |  | 2018
| | Year that the dental rate reaches the rate it is assumed to
      remain at  | 2015 |  | 2013

|        | A one-percentage-point change in
      assumed health care cost trend rates would not have a material impact on
      the Corporations financial statements.                                                                                                                                                                    
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                  
|**20.** | Equity:                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                  
|(a)     | Share capital:                                                                                                                                                                                                                                                                                                                   
|       
|        | Authorized and
      issued:                                                                                                                                                                                                                                                                                                     
|       
|        | Unlimited number of common
      shares, voting, without par value. 
Unlimited number of preferred shares,
      issuable in series.                                                                                                                                                                                             
|       
|        | Offering:                                                                                                                                                                                                                                                                                                                        
|       
|        | On July 7, 2015, the Corporation
      closed an underwritten offering (Offering) of 9,343,750 common shares at
      a price of $1.60 per share for gross proceeds of $14,950,000. Net cash
      proceeds to Ballard were $13,389,000, after deducting underwriting
      discounts, commissions and other offering
expenses.

| | Gross July Offering proceeds (9,343,750 shares at $1.60 per
      share) | $ | 14,950 |  
| | ------------------------------------------------------------------------ | - | ------ | -
| | Less: Underwriting expenses                                              |   | (1,047 | )
| | Less: Other financing expenses                                           |   | (514   | )
| | Net
      July Offering proceeds                                         | $ | 13,389 |  

| | Acquisition:
      On October 1, 2015, the
      Corporation completed the acquisition of Protonex (note 7). On closing of
      the transaction, the Corporation assumed and paid certain of Protonex
      debt obligations and transaction costs of $3,772,000, and issued
      11,415,704 shares at fair value of $1.20 per share, or
      $13,699,000.
      Private placement:
      On November 10, 2015, the
      Corporation closed a private placement strategic equity investment with
      Nisshinbo Holdings Inc. (Nisshinbo) of 3,322,479 common shares issued
      from treasury at $1.5049 per share for gross proceeds of $5,000,000.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

50

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|20. | Equity
      (contd):
|--- | ----------------------
|    |                       

| | Gross Nisshinbo Offering proceeds (3,322,479
      shares at $1.5049 per share) |  | $ | 5,000 |  
| | ------------------------------------------------------------------------------- |  | - | ----- | -
| | Less: Legal expenses                                                            |  |   | (13   | )
| | Net Nisshinbo Offering proceeds                                                 |  | $ | 4,987 |  

|    | Acquisition of intangible
      assets:
      On April 24, 2014, the
      Corporation issued 5,121,507 of its common shares valued at $20,306,775 to
      UTC as part of the consideration for acquired intellectual property assets
      (note 12).
      At December 31, 2015, 156,837,187
      common shares were issued and outstanding (2014  132,104,116).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                      
|(b) | Share purchase warrants:                                                                                                                                                                                                                                                                                                                                             

| |                            |  | Exercise price of |   |  | Exercise price of |   |  | Total      |  
| | -------------------------- |  | ----------------- | - |  | ----------------- | - |  | ---------- | -
| | Warrants Outstanding       |  | $1.50             |   |  | $2.00             |   |  | Warrants   |  
| | At January 1,
    2014     |  | 7,275,000         |   |  | 2,587,500         |   |  | 9,862,500  |  
| | Warrants exercised in 2014 |  | (7,027,437        | ) |  | (912,500          | ) |  | (7,939,937 | )
| | At December 31,
    2014   |  | 247,563           |   |  | 1,675,000         |   |  | 1,922,563  |  
| | Warrants exercised in 2015 |  | (125,000          | ) |  | -                 |   |  | (125,000   | )
| | At December 31, 2015       |  | 122,563           |   |  | 1,675,000         |   |  | 1,797,563  |  

|    | During 2015, 125,000 warrants
      were exercised for an equal amount of common shares for net proceeds of
      $168,000. During 2014, 7,939,937 warrants were exercised for an equal
      amount of common shares for net proceeds of $12,299,000.
      At December 31, 2015, 1,797,563
      share purchase warrants were issued and outstanding (2014  1,922,563).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(c) | Convertible promissory
      note:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | On March 28, 2013, the
      Corporation completed an agreement with Anglo American Platinum Limited
      (Anglo), under which Anglo invested $4,000,000 in the Corporation
      through its Platinum Group Metals Development Fund, to support continued
      development and commercial advancement of the Corporations fuel cell
      products in target market applications. The investment took the form of a
      5-year non-interest bearing convertible promissory note (Note). The Note
      may be repaid in the form of the Corporations common shares at Anglos
      option on or before the loan maturity date of April 1, 2018. The
      conversion, or repayment price, was set at a fixed price of $0.84 per
      share which was equal to a 20% discount to the market price of the shares
      on the closing date of the agreement.
|   
|    | In March 2014, Anglo exercised
      its option and converted the Note into 4,761,905 common shares. The
      conversion right and $4,000,000 proceeds received in 2013 were accounted
      for as a single equity instrument and originally recorded in contributed
      surplus, which has been reclassified to share capital upon the issuance of
      the common shares in March 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

51

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**20.** | Equity
    (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(d)     | Share options:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | The Corporation has options
      outstanding under a consolidated share option plan. All directors,
      officers and employees of the Corporation, and its subsidiaries, are
      eligible to participate in the share option plans although as a matter of
      policy, options are currently not issued to directors. Option exercise
      prices are denominated in both Canadian and U.S. dollars, depending on the
      residency of the recipient. Canadian dollar denominated options have been
      converted to U.S. dollars using the year-end exchange rate for
      presentation purposes.
|       
|        | All options have a term of seven
      to ten years from the date of grant unless otherwise determined by the
      board of directors. One-third of the options vest and may be exercised, at
      the beginning of each of the second, third, and fourth years after
      granting.                                                                                                                                                                                                                                                                                                                        
|       
|        | As at December 31, options
      outstanding from the consolidated share option plan were as
    follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                         |  | Options for   |   |  | Weighted average
| | ----------------------- |  | ------------- | - |  | ----------------
| | Balance                 |  | common shares |   |  | exercise price  
| | At January 1,
    2014  |  | 6,972,102     |   |  | $               
| | Options
      granted   |  | 1,417,507     |   |  |                 
| | Options
      exercised |  | (3,563,782    | ) |  |                 
| | Options
      forfeited |  | (153,236      | ) |  |                 
| | Options
      expired   |  | (356,164      | ) |  |                 
| | At December 31, 2014    |  | 4,316,427     |   |  |                 
| | Options
      granted   |  | 2,306,635     |   |  |                 
| | Options
      exercised |  | (322,892      | ) |  |                 
| | Options
      forfeited |  | (349,336      | ) |  |                 
| | Options
      expired   |  | (445,334      | ) |  |                 
| | At December 31, 2015    |  | 5,505,500     |   |  | $               

| | The following table summarizes
      information about the Corporations share options outstanding as at
      December 31, 2015:
| | ---------------------------------------------------------------------------------------------------------------------------------

| |                         |  | Options outstanding |  |                  | Options exercisable
| | ----------------------- |  | ------------------- |  | ---------------- | -------------------
| |                         |  |                     |  | Weighted average |                    
| |                         |  |                     |  | remaining        |                    
| |                         |  | Number              |  | contractual life |                    
| | Range of exercise price |  | outstanding         |  | (years)          |                    
| | $0.59  $0.97           |  | 769,509             |  | 4.0              |                    
| | $1.19  $1.41           |  | 758,760             |  | 4.6              |                    
| | $1.52  $2.18           |  | 2,292,974           |  | 5.8              |                    
| | $2.36  $3.45           |  | 1,427,507           |  | 3.1              |                    
| | $4.18  $6.10           |  | 256,750             |  | 0.2              |                    
| |                         |  | 5,505,500           |  | 4.4              |                    

| | During 2015, 322,892 options were
      exercised for an equal amount of common shares for proceeds of $388,000.
      During 2014, 3,563,782 options were exercised for an equal amount of
      common shares for proceeds of $6,794,000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

52

---



|BALLARD
      POWER SYSTEMS INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to
      Consolidated Financial Statements                                                                   
|Years ended
      December 31, 2015, and 2014                                                                      
|(Tabular
      amounts expressed in thousands of U.S. dollars, except per share amounts
      and number of shares)
|                                                                                                                   

|**20.** | Equity
    (contd):                                                                                                                                                                                                                    
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                         
|(d)     | Share options
  (contd):                                                                                                                                                                                                               
|       
|        | During 2015, options to purchase
      2,306,635 common shares were granted with a weighted average fair value of
      $1.23 (2014  1,417,507 options and $1.74 fair value). The granted options
      vest annually over three years.
|       
|        | The fair values of the options
      granted were determined using the Black-Scholes valuation model under the
      following weighted average assumptions:                                                                            

| |                         | 2015    |  | 2014   
| | ----------------------- | ------- |  | -------
| | Expected life           | 4 years |  | 4 years
| | Expected dividends      | Nil     |  | Nil    
| | Expected
    volatility | 78%     |  | 69%    
| | Risk-free interest rate | 1%      |  | 1%     

|    | As at December 31, 2015, options
      to purchase 5,505,500 common shares were outstanding (2014  4,316,427).
      During 2015, compensation expense of $2,048,000 (2014  $1,471,000) was
      recorded in net income based on the grant date fair value of the awards
      recognized over the vesting period.                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(e) | Share distribution
  plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | The Corporation has a
      consolidated share distribution plan that permits the issuance of common
      shares for no cash consideration to employees of the Corporation to
      recognize their past contribution and to encourage future contribution to
      the Corporation. At December 31, 2015, there were 8,748,294 (2014 
      7,334,927) shares available to be issued under this plan.                                                                                                                       
|   
|    | No compensation expense was
      recorded against income during the years ended December 31, 2015 and 2014
      for shares distributed, and to be distributed, under the
plan.                                                                                                                                                                                                                                                                                                                                               
|   
|(f) | Deferred share
units:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    | Deferred share units (DSUs) are
      granted to the board of directors and executives. Eligible directors may
      elect to receive all or part of their annual retainers and executives may
      elect to receive all or part of their annual bonuses in DSUs. Each DSU is
      redeemable for one common share in the capital of the Corporation after
      the director or executive ceases to provide services to the Corporation.
      Shares will be issued from the Corporations share distribution
      plan.

| | Balance                    |  | DSUs for common shares |  
| | -------------------------- |  | ---------------------- | -
| | At January 1,
    2014     |  | 616,264                |  
| | DSUs
    granted           |  | 295,579                |  
| | At December 31,
    2014   |  | 911,843                |  
| | DSUs
    granted           |  | 160,062                |  
| | DSUs
      exercised       |  | (154,280               | )
| | At
      December 31, 2015 |  | 917,625                |  

53

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**20.** | Equity
    (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(f)     | Deferred share units (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | During 2015, $659,000 of compensation expense was
      recorded in net income, of which $265,000 related to DSUs granted during
      the year. The remaining $394,000 related to compensation expense expected
      to be earned for DSUs not yet issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | During 2015, 154,280 DSUs were exercised for 83,619
      common shares. During 2014, no DSUs were exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | During 2014, 295,579 DSUs were issued and $306,000 of
      compensation expense was recorded in net income relating to 96,269 DSUs
      granted during the year. For the remaining 199,310 DSUs granted during the
      year, estimated compensation expense of $737,000 was recorded in net
      income in 2013. Upon the issuance of the 199,310 DSUs in 2014, an $18,000
      adjustment increasing net income was recorded.                                                                                                                                                                                                                                                                                                                                              
|       
|        | As at December 31, 2015, 917,625 deferred share units
      were outstanding (2014  911,843).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|(g)     | Restricted share units:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | Restricted share units (RSUs) are granted to employees
      and executives. Each RSU is convertible into one common share. The RSUs
      vest after a specified number of years from the date of issuance, and
      under certain circumstances, are contingent on achieving specified
      performance criteria.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | The Corporation has two plans under which RSUs may be
      granted, the consolidated share distribution plan and the market purchase
      RSU plan. Awards under the consolidated share distribution plan (note
      20(e)) are satisfied by the issuance of treasury shares on maturity.
      Awards granted under the market purchase RSU Plan are satisfied by shares
      purchased on the open market by a trust established for that purpose. No
      common shares were repurchased in 2015 and 2014. In March 2014, the
      Corporation sold its remaining 65,441 treasury shares for proceeds of
      $118,000 as no RSUs remained outstanding under the market purchase RSU
      plan. As of December 31, 2014, the Corporation held no treasury
      shares.

| |                          |  | RSUs for common shares
| | ------------------------ |  | ----------------------
| |                          |  | Share                 
| | Balance                  |  | Distribution Plan     
| | At January 1,
    2014   |  | 2,399,722             
| | RSUs
      granted       |  | 588,372               
| | RSUs
      exercised     |  | (1,022,658            
| | RSUs
      forfeited     |  | (41,453               
| | At December 31,
    2014 |  | 1,923,983             
| | RSUs
      granted       |  | 1,036,417             
| | RSUs
      exercised     |  | (206,333              
| | RSUs
      forfeited     |  | (1,045,441            
| | At December 31, 2015     |  | 1,708,626             

54

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|       
|-------
|**20.**
|       
|(g)    
|       
|       
|       
|       
|       
|**21.**
|       
|       
|       
|       

| | Less than 1 year             | $ | 2,409 
| | ---------------------------- | - | ------
| | 1-3 years                    |   | 4,532 
| | 4-5 years                    |   | 2,616 
| | Thereafter                   |   | 1,890 
| | Total minimum lease payments | $ | 11,447

|22. | Commitments and
      contingencies:                                                                                                                                                                                                                                                                                                                                           
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                
|    | In connection with the
      acquisition of intellectual property from UTC in April 2014 (note 12), the
      Corporation retains a royalty obligation to pay UTC a portion (typically
      25%) of any future intellectual property sale and licensing income
      generated from our intellectual property portfolio for a period of 15
      years expiring in April 2029.
|   
|    | The Corporation retains a
      previous funding obligation to pay royalties of 2% of revenues, to a
      maximum of $4,613,000 (CDN $5,351,000), on sales of certain fuel cell
      products for commercial distributed utility applications. As of December
      31, 2015, no royalties have been incurred to date for this
      agreement.                              
|   
|    | The Corporation also retains a
      previous funding obligation to pay royalties of 2% of revenues, to a
      maximum of $1,896,000 (CDN $2,200,000), on sales of certain fuel cell
      products for commercial transit applications. As of December 31, 2015, no
      royalties have been incurred to date for this
  agreement.                                         

55

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|22. | Commitments and contingencies (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | On December 31, 2008, the Corporation completed a
      restructuring agreement (Arrangement) with Superior Plus Income Fund
      (Superior Plus), whereby the Corporation caused its entire business and
      operations, including all assets and liabilities, to be transferred to a
      new corporate entity, such that the new corporate entity held all of the
      same assets, liabilities, directors, management and employees as the
      Corporation formerly had under its old corporate entity, except for its
      tax attributes. The Arrangement included an indemnification agreement (the
      "Indemnity Agreement") which set out each partys continuing obligations
      to the other including a provision for adjustments to be paid by the
      Corporation, or to the Corporation, depending on the final determination
      of the amount of the Corporations Canadian non-capital losses, scientific
      research and development expenditures and investment tax credits generated
      to December 31, 2008, to the extent that such amounts are more or less
      than the amounts estimated at the time the Arrangement was executed. In
      2015, an agreement was reached and the Corporation signed mutual releases
      with Superior Plus as to the full and final amount payable to the
      Corporation under the Indemnity Agreement and received additional cash
      proceeds of $3,347,000 in February 2016. The cash proceeds receivable have
      been recorded as a credit to shareholders equity as of December 31, 2015
      consistent with the accounting for the original transaction in
    2008.
|   
|    | At December 31, 2015, the Corporation has outstanding
      commitments aggregating up to a maximum of $432,000 (2014 - $232,000)
      relating primarily to purchases of property, plant and
  equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|23. | Personnel expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    | Personnel expenses are included in cost of product and
      service revenues, research and product development expense, general and
      administrative expense, sales and marketing expense, and other
      expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |                                      |  | December 31, |        | December 31,
| | ------------------------------------ |  | ------------ | ------ | ------------
| |                                      |  | 2015         |        | 2014        
| | Salaries and employee
      benefits |  | $            | 47,762 |             
| | Share-based compensation (note 20)   |  |              | 2,950  |             
| |                                      |  | $            | 50,712 |             

|**24.** | **Other
      expense:**                                  |  |   |              |   |  |   |             
|------- | --------------------------------------------------------- |  | - | ------------ | - |  | - | ------------
|        |                                                           |  |   |              |   |  |   |             
|        |                                                           |  |   | December 31, |   |  |   | December 31,
|        |                                                           |  |   | 2015         |   |  |   | 2014        
|        | Net impairment loss
      (recovery) on trade receivables |  | $ | (899         | ) |  | $ | 6,206       
|        | Restructuring costs (recovery)                            |  |   | (13          | ) |  |   | 85          
|        | Acquisition costs (note 7)                                |  |   | 1,542        |   |  |   | -           
|        |                                                           |  | $ | 630          |   |  | $ | 6,291       

56

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|24. | Other expense (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | In 2015, net impairment loss (recovery) on trade
      receivables of ($899,000) consists of recoveries of $1,586,000 as the
      Corporation collected on certain trade receivables in 2015 principally in
      Asia that were considered impaired and written down in 2014, less new
      impairment charges in 2015 of $687,000 relating to the non-collection of
      certain trade receivables outstanding from certain customers primarily
      located in Asia. In the event that the Corporation recovers any amounts
      previously recorded as impairment losses, the recovered amount will be
      recognized as a reversal of the impairment loss in the period of recovery.
      Of the new impairment charges in 2015 of $687,000, $231,000 relates to
      cash collected within the year, resulting in net impairment charges of
      $456,000.
|   
|    | In 2014, net impairment loss on trade receivables of
      $6,206,000 consisted of a $4,415,000 impairment charge as a result of
      material breaches by Azure Hydrogen Energy Science and Technology
      (Azure) relating to the Azure Telecom Backup Power Licensing Agreement
      and the Azure Bus Licensing Agreement. The Corporation also incurred
      impairment charges of $1,791,000 relating to the non-collection of certain
      trade receivables outstanding from certain customers primarily located in
      Asia.                                                                                                                                                                                                                                                                                                                           
|   
|25. | Finance income and
expense:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                                             |  |   | 2015 |   |  |   | 2014 |  
| | ----------------------------------------------------------- |  | - | ---- | - |  | - | ---- | -
| | Employee future benefit
      plan expense (note 19)        |  | $ | (291 | ) |  | $ | (183 | )
| | Pension administration expense                              |  |   | (103 | ) |  |   | (100 | )
| | Investment and other
      income                           |  |   | 143  |   |  |   | 139  |  
| | Unrealized loss on forward foreign exchange
      contracts |  |   | (287 | ) |  |   | -    |  
| | Foreign exchange gain                                       |  |   | 233  |   |  |   | 31   |  
| | Finance (loss) and other                                    |  | $ | (305 | ) |  | $ | (113 | )
| | Finance expense                                             |  | $ | (794 | ) |  | $ | (942 | )

57

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**26.** | **Income taxes:**                                                                                                                                      
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                        
|(a)     | Current tax expense:                                                                                                                                   
|        |                                                                                                                                                        
|        | The components of
      income tax benefit / (expense) included in the determination of the profit
      (loss) from continuing operations comprise
of:

| |                                                               |  | 2015 |         |   | 2014 |  
| | ------------------------------------------------------------- |  | ---- | ------- | - | ---- | -
| | Current tax expense                                           |  |      |         |   |      |  
| | Current period income tax                                     |  | $    | 5       |   |      | $
| | Withholding tax                                               |  |      | 206     |   |      |  
| | Adjustment for prior periods                                  |  |      | -       |   |      |  
| | Total current tax expense                                     |  | $    | 211     |   |      | $
| |                                                              
| | Deferred tax
      expense                                    |  |      |         |   |      |  
| | Origination and reversal
      of temporary differences       |  | $    | 14,144  |   |      | $
| | Adjustments for prior periods                                 |  |      | 2,874   |   |      |  
| | Change in unrecognized deductible temporary
      differences |  |      | (17,018 | ) |      |  
| | Total deferred tax expense                                    |  | $    | -       |   |      | $
| |                                                              
| | Total income tax expense                                      |  | $    | 211     |   |      | $

| | The Corporations effective income tax rate
      differs from the combined Canadian federal and provincial statutory income
      tax rate for companies. The principal factors causing the difference are
      as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                               | 2015 |        |   | 2014 |  
| | ------------------------------------------------------------- | ---- | ------ | - | ---- | -
| | Net loss before income taxes                                  | $    | (6,363 | ) |      | $
| | Expected tax recovery at 26.00% (2014 
      26.00%)         | $    | (1,654 | ) |      | $
| | Increase (reduction) in
      income taxes resulting from:    |      |        |   |      |  
| | Non-taxable
      portion of capital gain                     |      | (2,213 | ) |      |  
| | Non-deductible
      expenses                                 |      | 1,875  |   |      |  
| | Expiry of
      losses and investment tax credits             |      | 1,181  |   |      |  
| | Investment tax
      credits earned                           |      | (2,883 | ) |      |  
| | Foreign tax
      rate differences                            |      | (304   | ) |      |  
| | Change in
      unrecognized deductible temporary differences |      | 4,209  |   |      |  
| | Income taxes                                                  | $    | 211    |   |      | $

|(b) | Unrecognized deferred tax liabilities:                                                                                                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                        
|    | At December 31, 2015, the Corporation did not recognize
      any deferred tax liabilities resulting from taxable temporary differences
      for financial statement and income tax purposes.         
|   
|(c) | Unrecognized deferred tax asset:                                                                                                                                                                       
|   
|    | At December 31, 2015, the Corporation did not have any
      deferred tax assets resulting from the following deductible temporary
      differences for financial statement and income tax
  purposes.

58

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**26.** | Income taxes (contd):                     
|------- | -------------------------------------------
|        |                                            
|(c)     | Unrecognized deferred tax asset
  (contd):

| |                                                         |  |   | 2015    |  |   | 2014   
| | ------------------------------------------------------- |  | - | ------- |  | - | -------
| | Scientific research
      expenditures                  |  | $ | 58,385  |  | $ | 66,943 
| | Accrued warranty provision                              |  |   | 17,079  |  |   | 25,830 
| | Share issuance
    costs                                |  |   | 2,605   |  |   | 1,826  
| | Losses from operations carried
    forward              |  |   | 89,872  |  |   | 89,176 
| | Investment tax
      credits                            |  |   | 23,757  |  |   | 26,637 
| | Property, plant and equipment and intangible
    assets |  |   | 149,892 |  |   | 189,123
| |                                                         |  | $ | 341,590 |  | $ | 399,535

| | Deferred tax assets have not been recognized in respect of these
      deductible temporary differences because it is not currently probable that
      future taxable profit will be available against which the Corporation can
      utilize the benefits.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                              
| | The Corporation has available to carry forward the following as at
      December 31:                                                                                                                                                                        

| |                                                                |  |   | 2015   |  |   | 2014  
| | -------------------------------------------------------------- |  | - | ------ |  | - | ------
| | Canadian scientific
      research expenditures                |  | $ | 58,385 |  | $ | 66,943
| | Canadian losses from operations                                |  |   | 31,990 |  |   | 39,758
| | Canadian investment tax
      credits                          |  |   | 23,749 |  |   | 26,637
| | German losses from operations for corporate
      tax purposes |  |   | 303    |  |   | 303   
| | U.S. federal losses from
      operations                      |  |   | 30,320 |  |   | 13,023
| | Denmark losses from operations                                 |  |   | 27,259 |  |   | 35,973

| | The Canadian scientific research
      expenditures may be carried forward indefinitely. The Canadian losses from
      operations may be used to offset future Canadian taxable income and expire
      over the period from 2030 to 2035.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                            
| | The German and Denmark losses from
      operations may be used to offset future taxable income in Germany and
      Denmark for corporate tax and trade tax purposes and may be carried
      forward indefinitely.                       
| |                                                                                                                                                                                                                                            
| | The U.S. federal losses from operations may
      be used to offset future U.S. taxable income and expire over the period
      from 2019 to 2035.                                                                                         

59

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**26.** | **Income taxes (contd):**                                                                                                                                                           
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                      
|(c)     | Unrecognized deferred tax asset (contd):
The Canadian
      investment tax credits may be used to offset future Canadian income taxes
      otherwise payable and expire as follows:

| | 2019 | $ | 1,900 
| | ---- | - | ------
| | 2020 |   | 1,384 
| | 2021 |   | 1,304 
| | 2022 |   | 1,046 
| | 2023 |   | 740   
| | 2024 |   | 912   
| | 2025 |   | 1,447 
| | 2029 |   | 3,424 
| | 2030 |   | 2,344 
| | 2031 |   | 2,180 
| | 2032 |   | 1,895 
| | 2033 |   | 1,663 
| | 2034 |   | 1,571 
| | 2035 |   | 1,940 
| |      | $ | 23,750

|27. | Related party
      transactions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | Related parties include
      shareholders with a significant ownership interest in either the
      Corporation or Dantherm Power, together with their subsidiaries and
      affiliates. The revenue and costs recognized from transactions with such
      parties reflect the prices and terms of sales and purchase transactions
      with related parties, which are in accordance with normal trade practices.
      Transactions between the Corporation and its subsidiaries are eliminated
      on consolidation.

| | Balances with related parties:                           |  | 2015 |      | 2014
| | -------------------------------------------------------- |  | ---- | ---- | ----
| | Trade
      payables                                     |  | $    | 24   |     
| | Interest
      payable (note 17)                         |  |      | 69   |     
| | Revolving
      credit facility (note 17)                |  |      | 433  |     
| |                                                         
| | Transactions during the year with related
      parties: |  |      | 2015 |     
| | Purchases                                                |  | $    | 172  |     
| | Finance
      expense                                    |  |      | 30   |     

| | The Corporation provides key management
      personnel, being board directors and executive officers, certain benefits,
      in addition to their salaries. Key management personnel also participate
      in the Corporations share-based compensation plans (note
  20).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

60

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|27. | Related party transactions (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In addition to cash and equity compensation, the
      Corporation provides the executive officers with certain personal
      benefits, including car allowance, medical benefit program, long and
      short-term disability coverage, life insurance and an annual medical,
      financial planning allowance and relocation allowances and services as
      necessary.                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | In accordance with the employment agreements of the
      executive officers, the Corporation is required to provide notice of 12
      months plus one month for every year of employment completed with the
      Corporation, to a maximum of 24 months, or payment in lieu of such notice,
      consisting of the salary, bonus and other benefits that would have been
      earned during such notice period. If there is a change of control, and if
      the executive officers employment is terminated, including a constructive
      dismissal, within 2 years following the date of a change of control, the
      executive officer is entitled to a payment equivalent to payment in lieu
      of a 24 month notice period.
|   
|    | Key management personnel compensation is comprised
      of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                                      |  | 2015 |       | 2014
| | ------------------------------------ |  | ---- | ----- | ----
| | Salaries and employee
      benefits |  | $    | 2,164 |     
| | Post-employment retirement
benefits  |  |      | 49    |     
| | Share-based compensation (note 20)   |  |      | 1,006 |     
| |                                      |  | $    | 3,219 |     

|28. | Supplemental disclosure of cash flow
      information:
|--- | -------------------------------------------------------
|    |                                                        

| | Non-cash financing and investing
      activities:                 |  | 2015 |        | 2014
| | ------------------------------------------------------------------ |  | ---- | ------ | ----
| | Compensatory
      shares                                          |  | $    | 557    |     
| | Shares issued for
      acquisition of intangible assets (note 12) |  | $    | -      |     
| | Shares issued for
      acquisition of subsidiary (note 20)        |  | $    | 13,698 |     

|29. | Operating
    segments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Corporation operates in a
      single segment, Fuel Cell Products and Services, which consists of the
      design, development, manufacture, sale and service of fuel cell products
      for a variety of applications, focusing on the power product markets of
      Heavy-Duty Motive (consisting of bus and tram applications), Portable
      Power, Material Handling and Telecom Backup Power, as well as the delivery
      of Technology Solutions including engineering services and the licensing
      and sale of the Corporations extensive intellectual property portfolio
      and fundamental knowledge for a variety of fuel cell
    applications.
|   
|    | As a result of the disposition of
      the Material Products division on January 31, 2013, the former Material
      Products segment has been classified as discontinued operations and
      therefore has been removed from the continuing operating results (note 8).
      The former Material Products segment sold carbon fiber products primarily
      for automotive transmissions and gas diffusion layers (GDL) for fuel
      cells.                                                                                                                                                                                                                          

61

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|29. | Operating segments (contd):                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                 
|    | In 2015, revenues included sales to three individual
      customers of $14,517,000, $12,674,000 and $8,605,000, respectively, which
      each exceeded 10% of total revenue.  
|   
|    | In 2014, revenues included sales to three individual
      customers of $22,632,000, $13,918,000 and $9,082,000, respectively, which
      each exceeded 10% of total revenue.  
|   
|    | Revenues from continuing operations by geographic area,
      which are attributed to countries based on customer location for the years
      ended December 31, is as follows:

| | Revenues        |  | 2015 |        | 2014
| | --------------- |  | ---- | ------ | ----
| | Canada          |  | $    | 917    |     
| | U.S.            |  |      | 19,643 |     
| | Germany         |  |      | 15,046 |     
| | China           |  |      | 12,777 |     
| | India           |  |      | 2,195  |     
| | Taiwan          |  |      | 1,061  |     
| | Japan           |  |      | 993    |     
| | Denmark         |  |      | 656    |     
| | Other countries |  |      | 3,175  |     
| |                 |  | $    | 56,463 |     

| | Non-current assets by geographic area are as
      follows:
| | -----------------------------------------------------------

| |                    |  | December 31, |        | December 31,
| | ------------------ |  | ------------ | ------ | ------------
| | Non-current assets |  | 2015         |        | 2014        
| | Canada             |  | $            | 57,096 |             
| | U.S.               |  |              | 16,299 |             
| | Denmark            |  |              | 26     |             
| | Mexico             |  |              | 336    |             
| |                    |  | $            | 73,757 |             

|**30.** | **Financial instruments:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(a)     | Fair value:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|        | The Corporations financial instruments
      consist of cash and cash equivalents, trade and other receivables,
      investments, trade and other payables, and finance lease liability. The
      fair values of cash and cash equivalents, trade and other receivables, and
      trade and other payables approximate their carrying values because of the
      short-term nature of these instruments. The interest rates applied to the
      finance lease liability are not considered to be materially different from
      market rates, thus the carrying value of the finance lease liability
      approximates fair value.

62

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**30.** | **Financial instruments
      (contd):**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(a)     | Fair value (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       
|        | Fair value measurements recognized in the
      statement of financial position must be categorized in accordance with the
      following levels:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|(b)     | Financial risk management:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | The Corporation primarily has exposure to
      foreign currency exchange rate risk, commodity risk, interest rate risk,
      and credit risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | Foreign currency exchange
      rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | Foreign currency exchange rate risk is the
      risk that the fair value of deferred cash flows of a financial instrument
      will fluctuate because of changes in foreign exchange rates. The
      Corporation is exposed to currency risks primarily due to its holdings of
      Canadian dollar denominated cash equivalents and its Canadian dollar
      denominated purchases and accounts payable. Substantially all receivables
      are denominated in U.S. dollars.                                                                                                                                                                                                                                                                                                 
|       
|        | The Corporation limits its exposure to
      foreign currency risk by holding Canadian denominated cash and cash
      equivalents in amounts up to 100% of forecasted twelve month Canadian
      dollar net expenditures and up to 50% of the following twelve months of
      forecasted Canadian dollar net expenditures, thereby creating a natural
      hedge. Periodically, the Corporation also enters into forward foreign
      exchange contracts to further limit its exposure. At December 31, 2015,
      the Corporation held Canadian dollar denominated cash and cash equivalents
      of CDN $11,633,000 and outstanding forward foreign exchange contracts to
      sell a total of CDN $ 10,750,000 in 2016 at an average rate of CDN $1.33
      to US $1.00.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | The following exchange rates applied during
      the year ended December 31, 2015:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                                    |  | $U.S. to $1.00 CDN |  | $CDN to $1.00 U.S.
| | ---------------------------------- |  | ------------------ |  | ------------------
| | January 1, 2015 Opening
      rate |  | $   0.862          |  | $   1.160         
| | December 31, 2015 Closing rate     |  | $   0.723          |  | $   1.384         
| | Fiscal 2015 Average rate           |  | $   0.783          |  | $   1.279         

| | Based on cash and cash equivalents held at
      December 31, 2015, a 10% increase in the Canadian dollar against the U.S.
      dollar, with all other variables held constant, would result in an
      increase in foreign exchange gains of approximately $841,000 recorded
      against net income.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

63

---



|BALLARD POWER SYSTEMS
      INC.                                                                                   
|-------------------------------------------------------------------------------------------------------------------
|Notes to Consolidated Financial
      Statements                                                                   
|Years ended December 31, 2015, and
      2014                                                                      
|(Tabular amounts expressed in
      thousands of U.S. dollars, except per share amounts and number of
      shares)
|                                                                                                                   

|**30.** | **Financial instruments (contd):**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(b)     | Financial risk management (contd):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       
|        | If the Canadian dollar weakened 10% against the U.S. dollar,
      there would be an equal, and opposite impact, on net income. This
      sensitivity analysis includes foreign currency denominated monetary items,
      and adjusts their translation at year-end, for a 10% change in foreign
      currency rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | Commodity
  risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | Commodity risk is the risk of financial loss due to
      fluctuations in commodity prices, in particular, for the price of platinum
      and palladium, which are key components of the Corporations fuel cell
      products. Platinum and palladium are scarce natural resources and
      therefore the Corporation is dependent upon a sufficient supply of these
      commodities. To manage its exposure to commodity price fluctuations, the
      Corporation may include platinum and or palladium pricing adjustments
      directly into certain significant customer contracts, and may also
      periodically enter into platinum and or palladium forward contracts. At
      December 31, 2015, there were no outstanding forward platinum contracts
      under the Forward Contract Facility.
|       
|        | Interest rate
    risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | Interest rate risk is the risk that the fair value of
      deferred cash flows of a financial instrument will fluctuate because of
      changes in market interest rates. The Corporation is exposed to interest
      rate risk arising primarily from fluctuations in interest rates on its
      cash and cash equivalents. The Corporation limits its exposure to interest
      rate risk by continually monitoring and adjusting portfolio duration to
      align to forecasted cash requirements and anticipated changes in interest
      rates.                                                                                                                                                                                                                                                        
|       
|        | Based on cash and cash equivalents at December 31, 2015, a
      0.25% decline in interest rates, with all other variables held constant,
      would result in a decrease in investment income of $100,000, arising
      mainly as a result of an increase in the fair value of fixed rate
      financial assets classified as held-for-trading. If interest rates had
      been 0.25% higher, there would be an equal and opposite impact on net
      income.                                                                                                                                                                                                                                                                                                                                                
|       
|        | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | Credit risk is the risk of financial loss to the Corporation
      if a counterparty to a financial instrument fails to meet its contractual
      obligations and arises principally from the Corporations cash, cash
      equivalents, short-term investments and accounts receivable. The
      Corporation limits its exposure to credit risk on cash and cash
      equivalents by only investing in liquid, investment grade securities. The
      Corporation manages its exposure to credit risk on accounts receivable by
      assessing the ability of counterparties to fulfill their obligations under
      the related contracts prior to entering into such contracts, and
      continuously monitors these exposures.                                                                          

64

---