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  Exhibit 4.2    
    

			
	Corporate Office

135 Queens Plate Drive, Suite 300

Toronto, Ontario M9W 6V1	 	

 

BFI CANADA INCOME FUND  

 
    NOTICE OF ANNUAL AND SPECIAL MEETING OF UNITHOLDERS    
    

 MAY 13, 2008  

        NOTICE IS HEREBY GIVEN that the annual and special meeting (the "Meeting") of
the holders of ordinary units (the "Units") and the Class A unit (the "Class A Unit" and, together with the Units, the "Trust Units") (the "Voting Unitholders") of
BFI Canada Income Fund (the "Fund") will be held at the The Toronto Board of Trade at 1 First Canadian Place, Toronto, Ontario on Tuesday, May 13,
2008 at 2:00 p.m., Toronto time, for the following purposes: 

	(a)
	to
receive the financial statements of the Fund for the period ended December 31, 2007 and the report of the auditors thereon;

	(b)
	to
appoint auditors and to authorize the trustees to fix the remuneration of the auditors;

	(c)
	to
appoint trustees;

	(d)
	to
elect nominees of the Fund to serve as directors of 4264126 Canada Limited ("BFI Canada Newco" or the "Company");

	(e)
	to
consider and, if deemed advisable, to pass, with or without variation, a special resolution in the form attached as Schedule "A" to the
accompanying management information circular approving the amendment and restatement of the Fund's Unit Option Plan, as summarized in the management information circular; and

	(f)
	to
transact such other business as may properly come before the Meeting and any and all adjournments thereof. 

        A
management information circular and form of proxy accompany this Notice. 

DATED at Toronto, Ontario this 3rd day of April, 2008. 

			
	 	 	 BY ORDER OF THE BOARD OF TRUSTEES
	

 	
 	

 
	

 	
 	

WILLIAM CHYFETZ

Vice President, General Counsel and Secretary,

4264126 Canada Limited, in its capacity as

attorney for BFI Canada Income Fund

        If
you are a Voting Unitholder and you are unable to attend the Meeting in person, you are requested to date, sign and return the enclosed form of proxy in the envelope provided for that
purpose to Computershare Investor Services Inc. so as to arrive not later than 2:00 p.m. (Toronto time) on May 9, 2008 or, if the Meeting is adjourned, 48 hours (excluding
weekends and holidays) before any reconvened meeting. The enclosed form of proxy may be returned by facsimile to 1-866-249-7775 or by mail (a) in the
enclosed envelope, or (b) in an envelope addressed to Computershare Investor Services Inc., 100 University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1. Only Voting
Unitholders of record at the close of business on April 3, 2008 will be entitled to vote at the Meeting or any adjournment thereof. 

 

 

  

BFI CANADA INCOME FUND  

 135 Queens Plate Drive, Suite 300

Toronto, Ontario

M9W 6V1  

  
    MANAGEMENT INFORMATION CIRCULAR    
    

 DATED APRIL 3, 2008  

 
 

  THE FUND AND BFI CANADA NEWCO    
    

        BFI Canada
Income Fund (the "Fund") is a limited purpose trust established under the laws of the Province of Ontario by a declaration of trust dated February 28,
2002, as amended and restated on April 15, 2002 and January 21, 2005, and further amended by a first supplemental indenture dated October 6, 2005 and a second supplemental
indenture dated January 1, 2006 (together the "Second Amended and Restated Declaration of Trust"). 

        The
Fund's activities are restricted to investing in and otherwise dealing with securities, including those issued by its direct and indirect subsidiary entities, 6814832 Canada
Limited ("6814832"), 4264126 Canada Limited ("BFI Canada Newco" or the "Company"), BFI Canada Holdings Inc. ("BFI Canada Holdings"), IESI Corporation ("IESI"), and
other entities involved, directly or indirectly, in the business of non-hazardous solid waste collection, management and disposal. The Fund is also the sole unitholder of the Ridge
Landfill Trust, which holds the Fund's indirect interest in the Ridge Landfill, acquired January 4, 2005. The Fund also carries on certain other activities permitted by the Second Amended and
Restated Declaration of Trust. 

        The
affairs of the Fund are supervised by its board of trustees (the "Board of Trustees" or "Trustees") who are responsible for, among other things, representing the Fund as a
securityholder of BFI Canada Newco, BFI Canada Holdings, IESI and Ridge Landfill Trust, and effecting payments of distributable cash from the Fund to its Unitholders. 

 
 

  PROXY SOLICITATION AND VOTING AT THE ANNUAL AND SPECIAL MEETING    
    

 Solicitation of Proxies  

        This management information circular (the "Circular") is furnished in connection with the solicitation
of proxies by the Trustees of the Fund from registered owners of ordinary trust units (the "Units") and the Class A trust unit (the "Class A Unit" and, together with the
Units, the "Trust Units") of the Fund for use at the annual and special meeting (the "Meeting") of holders of Trust Units ("Voting Unitholders") of the Fund to be held on May 13, 2008 at
The Toronto Board of Trade at 1 First Canadian Place, Toronto, Ontario at 2:00 p.m., and at any adjournment thereof, for the purposes set forth in the notice of
Meeting. Proxies will be solicited primarily by mail and may also be solicited personally by the Fund or its subsidiaries at nominal cost. The cost of such solicitation will be
borne by the Fund. 

 Appointment of Proxies  

        The persons named in the enclosed form of proxy are Trustees of the Fund. A Voting Unitholder who wishes to
appoint some other person to represent such Voting Unitholder at the Meeting may do so by inserting such person's name in the blank space provided in the form of proxy or by completing another proper
form of proxy. Such other person need not be a Voting Unitholder of the Fund.

        To
be valid, proxies must be returned to Computershare Investor Services Inc. so as to arrive not later than 2:00 p.m. (Toronto time) on May 9, 2008 or, if the
Meeting is adjourned, 48 hours (excluding weekends and 

1

 

holidays)
before any reconvened meeting. Proxies may be returned by facsimile to 1-866-249-7775 or by mail (a) in the enclosed envelope, or (b) in an
envelope addressed to Computershare Investor Services Inc., 100 University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1. 

 Voting of Trust Units — Advice to Non-Registered Holders  

        Only registered holders of Trust Units or the persons they appoint as their proxies are permitted to vote at the Meeting. However, in
many cases, Trust Units of the Fund beneficially owned by a person (a "Non-Registered Holder") are registered either: (i) in the name of an intermediary
(an "Intermediary") with whom the Non-Registered Holder deals in respect of the Trust Units (Intermediaries include, among others, banks, trust companies, securities dealers or
brokers and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans);
or (ii) in the name of a clearing agency (such as CDS Clearing and Depository Services Inc. ("CDS")) of which the Intermediary is a participant. In accordance with the requirements of
National Instrument 54-101, the Fund will have distributed copies of the notice, this Circular and the form of proxy (collectively, the "Meeting Materials") to the clearing agencies
and Intermediaries for onward distribution to Non-Registered Holders. 

        Intermediaries
are required to forward the Meeting Materials to Non-Registered Holders. Non-Registered Holders will be given, in substitution for the proxy
otherwise contained in proxy-related materials, a request for voting instructions (the "Voting Instructions Form") which, when properly completed and signed by the Non-Registered
Holder and returned to the Intermediary, will constitute voting instructions which the Intermediary must follow. 

        The
purpose of this procedure is to permit Non-Registered Holders to direct the voting of the Trust Units of the Fund they beneficially own. Should a
Non-Registered Holder who receives the Voting Instructions Form wish to vote at the Meeting in person (or have another person attend and vote on behalf of the
Non-Registered Holder), the Non-Registered Holder should so indicate in the place provided for that purpose in the Voting Instructions Form and a form of legal proxy will be
sent to the Non-Registered Holder. In any event, Non-Registered Holders should carefully follow the instructions of their Intermediary set out in the Voting
Instructions Form. 

 Revocation of Proxies  

        A registered Voting Unitholder who has given a proxy may revoke the proxy (a) by completing and signing a proxy bearing a later
date and returning it to Computershare Investor Services Inc. in the manner and so as to arrive as described above, (b) by depositing an instrument in writing executed by the Voting
Unitholder or by the Voting Unitholder's attorney authorized in writing (i) at the head office of the Fund at any time up to and including the last business day preceding the date of the
Meeting, or any reconvened meeting, at which the proxy is to be used, or (ii) with the Chairperson of the Meeting prior to the commencement of the Meeting on the day of the Meeting or any
adjournment or postponement thereof, or (c) in any other manner permitted by law. 

 Voting of Proxies  

        The persons named in the accompanying form of proxy will vote or withhold from voting the Trust Units in respect of which they are
appointed in accordance with the direction of the Voting Unitholder appointing them, and if the Voting Unitholder specifies a choice with respect to any matter to be acted upon, the Trust Units will
be voted accordingly. Where no choice is specified, the proxy will confer discretionary authority and will be voted FOR the appointment of the auditors and the authorization of
the Trustees to fix the remuneration of the auditors, FOR the appointment of the nominees named herein as Trustees, FOR the election of nominees of the Fund to serve as directors of the Company and
FOR the amendment and restatement of the Fund's Unit Option Plan, all as set out in this Circular.
The enclosed form of proxy also confers discretionary authority upon the persons named therein to vote with respect to amendments or variations to the matters identified in the Notice of Meeting and
with respect to other matters which may properly come before the Meeting. At the time of the printing of this Circular, the Trustees know of no such amendments, variations or other matters to come
before the Meeting. However, if any such amendment, variation or other matter properly comes before the Meeting, it is the intention of the persons named in the accompanying
form of proxy to vote thereon in accordance with their judgment. 

2

 
 
 

  TRUST UNITS AND THE RETAINED INTEREST    
    

        On April 3, 2008, the Fund had outstanding 57,567,571 Units and one Class A Unit. Each holder of Trust Units of
record at the close of business on April 3, 2008, the record date established for notice of the Meeting, will be entitled to vote on all matters proposed to come before the Meeting, subject to
certain restrictions with respect to the election of Trustees described below, even though such Voting Unitholder has since that date disposed of such Voting Unitholder's Trust Units. No Voting
Unitholder who acquires Trust Units after the record date shall be entitled to vote at the Meeting or any adjournment thereof. 

        On
November 28, 2004, the Fund, certain of its affiliates and IESI entered into an agreement (the "Transaction Agreement"), which provided for, among other things, the
combination of the business carried on by BFI Canada Holdings and its direct and indirect subsidiaries with the business carried on by IESI and its direct and indirect subsidiaries
(the "Transaction"). Following the completion of the Transaction on January 21, 2005, the Fund indirectly owns all of the outstanding common shares of BFI Canada Holdings and
IESI, the holding companies for the combined business's Canadian and U.S. operations, respectively, and IESI acquired the Class A Unit. Also, upon the completion of the Transaction, the
former equity investors in IESI (the "Retained Interest Holders") were issued participating preferred shares of IESI (the "Participating Preferred Shares"). The Participating Preferred
Shares are indirectly exchangeable for Units (the "IESI Exchange Rights") pursuant to a securityholders' agreement dated January 21, 2005 between the Fund, BFI Canada Newco and IESI, as
trustee on behalf of the Retained Interest Holders (the "Securityholders' Agreement"). As at April 3, 2008, the Participating Preferred Shares remaining outstanding were exchangeable for
approximately 11.1 million Units, representing an approximate 17% interest in the Fund. 

        So
long as the holder of the Class A Unit is entitled to designate at least one Trustee, the holders of the Participating Preferred Shares are entitled, voting together as a
single class, to designate one of the three directors of IESI (see "Governance Arrangements"). The holders of the Participating Preferred Shares are also entitled to exercise all rights
associated with the Class A Unit that was issued to IESI on the completion of the Transaction. The Class A Unit entitles the holder to exercise voting and other rights as a unitholder of
the Fund as though the holder held the number of Units that would be owned by the Retained Interest Holders assuming the exercise in full of the IESI Exchange Rights. In particular, the Class A
Unit enables the holder to vote on all matters at any meeting (including resolutions in writing) of Voting Unitholders on
the basis of one vote for each Unit for which the Participating Preferred Shares are exchangeable, other than with respect to the election of Trustees. So long as the holder of the Class A Unit
is entitled to designate at least one Trustee, all votes attaching to the Class A Unit and any Units held by Retained Interest Holders shall be deemed to be voted in favour of the Trustees
nominated for election by the Fund's Governance and Nominating Committee, subject to certain conditions under the Securityholders' Agreement and the Transaction Agreement. Accordingly, the holder of
the Class A Unit will be entitled to cast 11,138,810 votes on all matters presented to the Voting Unitholders at the Meeting, subject to the foregoing restriction with respect to the
election of Trustees, based on the number of Units issuable to the Retained Interest Holders as at April 3, 2008, the record date for the Meeting. 

        Holders
of Units (the "Unitholders") will be entitled to cast one vote for each Unit held of record as at April 3, 2008, the record date for the Meeting, on any matters
presented to the Voting Unitholders at the Meeting. 

 Governance Arrangements  

        The constating documents of the Fund, BFI Canada Newco, as well as certain associated agreements relating to the Transaction
(including the Securityholders' Agreement) set out the rules with respect to the governance of the Fund and BFI Canada Newco and establish the respective rights of their securityholders as to board
representation, approval rights in respect of certain transactions, exchange rights and related matters (the "Governance Arrangements"). 

        The
Governance Arrangements provide for the composition of the Board of Trustees as well as the board of directors of BFI Canada Newco, and create obligations for the parties to
nominate and/or vote for the election of certain representatives to those boards. The Governance Arrangements also prescribe the establishment of 

3

 

specified
committees of those boards and their respective mandates, as well as the composition of those committees. 

        The
Governance Arrangements provide for a seven-member Board of Trustees and a seven-member board of directors of BFI Canada Newco composed of the same individuals. The number of
members of such boards may not be changed so long as the Retained Interest Holders own at least 10% of the then-outstanding Units (calculated on a fully-diluted basis), including Units
that may be acquired upon exercise of the IESI Exchange Rights. 

        The
Retained Interest Holders' entitlement to designate members of the boards of the Fund and BFI Canada Newco depends on the number of Units owned by the Retained Interest
Holders, including Units that may be acquired upon exercise of the IESI Exchange Rights. Of the seven members of each of those boards, the
number of members that may be designated by the Retained Interest Holders will be based on the following table: 

					
	Ownership Interest

 
	 	Number of Members 	 
	20% or greater	 	 	2	 
	Between 10% and 20%	 	 	1	 
	Less than 10%	 	 	0	 

        As
of April 3, 2008, the Retained Interest Holders have approximately a 17% ownership interest and will therefore be entitled to designate one member of the Board of Trustees and
one member of the board of directors of BFI Canada Newco. The balance of the members of the Board of Trustees and the board of directors of BFI Canada Newco will be elected by the
Unitholders, with the Governance and Nominating Committee of the Fund's Board of Trustees proposing nominees to be elected. 

        The
member of the Board of Trustees who is designated by the Retained Interest Holders, through the holder of the Class A Unit, will be appointed as a Trustee in accordance with
the Second Amended and Restated Declaration of Trust and will not be elected or subject to removal by Unitholders. The remaining members of the Board of Trustees will be elected by the Unitholders,
and all votes attaching to the Class A Unit and any Units held by the Retained Interest Holders will be deemed to be voted in favour of the Trustees nominated for election by the Fund's
Governance and Nominating Committee. 

        The
Retained Interest Holders' rights to board representation will be determined annually in conjunction with the preparation of the Fund's proxy solicitation materials and will remain
effective until the next following annual general meeting of Voting Unitholders notwithstanding any intervening change in its direct or indirect ownership interest (calculated as described above) in
the relevant entities. To the extent that the Retained Interest Holders are no longer entitled to designate a member of the boards of the Fund and BFI Canada Newco, the number of members that
will be elected by the Unitholders or shareholders, as applicable, at the next annual meeting of the relevant entity will increase correspondingly. 

        To
the knowledge of the Trustees, no person or company other than TC Carting III, L.L.C., a Retained Interest Holder, and IESI, representing the Retained Interest Holders as a group,
through the Class A Unit, beneficially owns, directly or indirectly, or exercises control or direction over, more than 10% of the outstanding Units. 

4

 
 
 

  MATTERS TO BE CONSIDERED AT THE MEETING    
    

 Financial Statements  

        The consolidated financial statements of the Fund for the period ended December 31, 2007, together with the auditors' report
thereon, are contained in the 2007 Annual Report, which is available on SEDAR at www.sedar.com. The financial statements and auditors' report will be submitted to the Meeting, and receipt thereof at
the Meeting will not constitute approval or disapproval of any matter referred to therein. 

 Appointment of Auditor  

        It is proposed that the firm of Deloitte & Touche LLP, Chartered Accountants, be re-appointed as auditors of
the Fund, to hold office until the next annual meeting of the Voting Unitholders or until their successor is appointed, and that the Trustees be authorized to fix the remuneration of the auditors.
Deloitte & Touche LLP have been the auditors of the Fund since its inception in 2002. 

        Proxies
received in favour of management's nominees will be voted FOR the appointment of Deloitte & Touche LLP, Chartered
Accountants, as auditors of the Fund and the authorization of the Trustees to fix the remuneration of the auditors, unless the Voting Unitholder has specified in the proxy that such Voting
Unitholder's Trust Units are to be withheld from voting in respect thereof. 

        Deloitte &
Touche LLP billed the Fund and its subsidiaries $1,250,491 and $1,047,929 for 2007 and 2006, respectively, for audit services; $96,482 and $78,310 for 2007 and
2006, respectively, for audit-related services (including accounting consultations and translation services); and $283,754 and $536,445 for 2007 and 2006, respectively, for tax compliance, tax advice
and tax planning services. 

 Appointment of Trustees of the Fund and Election of Nominees of the Fund as Directors of the Company  

        As described above under "Trust Units and the Retained Interest — Governance Arrangements", the
Governance Arrangements provide for a seven-member Board of Trustees and a seven-member board of directors of BFI Canada Newco composed of the same individuals. Mr. Daniel M. Dickinson,
the member of the Board of Trustees who is designated by the Retained Interest Holders, through the holder of the Class A Unit, will be appointed as a Trustee in accordance with the Second
Amended and Restated Declaration of Trust and will not be elected or subject to removal by Unitholders. The remaining members of the Board of Trustees will be elected by the Voting Unitholders, with
all Class A Unit holder votes deemed to be cast in favor of the nominees named below. 

        Proxies
received in favour of management's nominees will be voted FOR the appointment of the nominees named below as Trustees of the Fund
and FOR their election as nominees of the Fund to serve as directors of the Company, unless the Unitholder has, in either case, specified in the proxy
that such Unitholder's Units are to be withheld from voting in respect thereof. The Trustees have no reason to believe that any of the nominees will be unable to serve as a Trustee of the Fund or as a
director of the Company but, if a nominee is for any reason unavailable to serve as such, proxies received in favour of management's nominees will be voted in favour of the remaining nominees and may
be voted for a substitute nominee unless the Unitholder has specified in the proxy that such Voting Unitholder's Units are to be withheld from voting in respect of the appointment of Trustees or the
election of nominees of the Fund to serve as directors of the Company, as the case may be. 

        Each
Trustee elected will hold office until the next annual meeting or until he ceases to be a Trustee in accordance with the Second Amended and Restated Declaration of Trust. The common
shares of the Company held by 6814832, which is a wholly-owned subsidiary of the Fund, will be voted to cause the election of the nominees appointed by the Class A Unit holder and the nominees
elected by the Voting Unitholders as directors of the Company. Each director elected will hold office until the next annual meeting or until his successor is elected or appointed. 

5

 

        The
following table sets forth the names of and certain additional information for the persons proposed to be nominated for appointment as Trustees and for election as nominees to the
Fund to serve as directors of the Company: 

									
	 	Name and Municipality of Residence

 
	 	Major Positions with the Fund, the

Company and Significant Affiliates 	 	Principal Occupation 	 	Ownership or

Control Over

Trust Units as

at April 3,

2008 	 
	
 	
Keith A. Carrigan

Caledon, Ontario, Canada

Date of birth: July 17, 1950	
 	

Trustee and director since 2002

Member of:

• the Environmental, Health and Safety Committee of BFI Canada Newco	
 	

Trustee, Vice-Chairman of

the Fund's Board of Trustees

and Chief Executive Officer,

BFI Canada Newco	
 	

242,950	
 
	
 	
Daniel M. Dickinson

Northfield, Illinois, U.S.

Date of birth: July 31, 1961	
 	

Trustee and director since 2005

Independent

Member of:

• the Governance and Nominating Committee of the Fund;

• the Compensation Committee of BFI Canada Newco; and

• the Environmental, Health and Safety Committee of BFI Canada Newco	
 	

Managing Partner,

Thayer/Hidden Creek Partners	
 	

Nil	
(1)
	
 	
Charles F. Flood

Fort Worth, Texas, U.S.

Date of birth: February 20, 1946	
 	

Trustee and director since 2005

Member of:

• the Environmental, Health and Safety Committee of BFI Canada Newco (Chair)	
 	

Trustee, President,

BFI Canada Newco and

President and Chief

Executive Officer, IESI	
 	

238,310	
(2)
	
 	
James J. Forese

Naples, Florida, U.S.

Date of birth: December 31, 1935	
 	

Trustee since 2005

Independent

Member of:

• the Audit Committees of the Fund and BFI Canada Newco (Chair)	
 	

Operating Partner and Chief

Operating Officer,

Thayer/Hidden Creek

Partners	
 	

Nil	
(1)

6

 

									
	 	Name and Municipality of Residence

 
	 	Major Positions with the Fund, the

Company and Significant Affiliates 	 	Principal Occupation 	 	Ownership or

Control Over

Trust Units as

at April 3,

2008 	 
	
 	
Daniel R. Milliard

Port Carling, Ontario, Canada

Date of birth: June 29, 1947	
 	

Trustee since 2002

Independent

Member of:

• the Audit Committees of the Fund and BFI Canada Newco;

• the Governance and Nominating Committee of the Fund (Chair); and

• the Compensation Committee of BFI Canada Newco (Chair)	
 	

Executive	
 	

1,000	
 
	
 	
Douglas W. Knight

Toronto, Ontario, Canada

Date of birth: February 14, 1952	
 	

Trustee and director since 2007

Independent

Member of:

• the Audit Committees of the Fund and BFI Canada Newco;

• the Governance and Nominating Committee of the Fund; and

• the Compensation Committee of BFI Canada Newco	
 	

Executive	
 	

20,000	
 
	
 	
Joseph H. Wright

Toronto, Ontario, Canada

Date of birth: July 17, 1942	
 	

Trustee since 2002 and Non-Executive Chairman of the Fund's Board of Directors

Independent

Member of:

• the Audit Committees of the Fund and BFI Canada Newco;

• the Governance and Nominating Committee of the Fund; and

• the Compensation Committee of BFI Canada Newco	
 	

Executive	
 	

21,284	
 

	(1)
	Messrs. Dickinson
and Forese are officers of and hold equity interests in TC Carting III, L.L.C., a securityholder of the Fund. See "Trust Units and
Retained Interest — Governance Arrangements".

	(2)
	Includes
Units issuable upon the conversion of Participating Preferred Shares owned or controlled by Mr. Flood. 

        The following are brief profiles of the above-noted nominees. 

        Mr. Carrigan
has been the President and Chief Executive Officer of BFI Canada Holdings since June 2000 when it acquired its assets from Allied Waste Industries, Inc.
and its affiliates ("Allied"). He was responsible for 

7

 

successfully
acquiring, assimilating and improving the operations of BFI Canada Holdings after the acquisition. Prior to joining BFI Canada Holdings, Mr. Carrigan was involved in
the development and/or management of various non-hazardous solid waste management and recycling businesses. Mr. Carrigan has been involved with the solid waste management industry
for most of his career, which spans more than 27 years. Most notably, he was Vice President of Waste Management, Inc. ("WMI") in the United States, and President of WMI Waste
Management of Canada Corporation. 

        Mr. Flood
is one of the founders of IESI and has been IESI's Chief Executive Officer, President and a member of IESI's board of directors since IESI's inception. From 1989 to
1995, he was employed with WMI, as Group President from 1993 to 1995 in the northeastern United States and Canada, Regional Vice President from 1991 to 1993 in the south central
United States and as Vice President of Operations in Texas from 1989 to 1991. Mr. Flood was President of Laidlaw Waste Services' U.S. solid waste operations from 1986 to 1987.
Mr. Flood was President of the United States and Canada solid waste operations for GSX Corporation from 1984 to 1986. Mr. Flood was the Region Vice President of the Southern
Region of SCA
Services, Inc., from 1976 to 1984. Mr. Flood has over 36 years of experience in the solid waste management industry. Mr. Flood has a B.Sc. in education from the University
of Miami and is currently a Director of the Detachable Container Association. Mr. Flood is also a past director and past Chairman for the Environmental Industry Association, the parent of the
National Solid Waste Management Association and Waste Equipment Technology Association. 

        Mr. Dickinson
has been a member of IESI's board of directors since May 2001. Mr. Dickinson has been employed since 2001 by, and is currently a Managing Partner of,
Thayer/Hidden Creek Partners, a private equity investment firm located in Washington, D.C. Prior to joining Thayer/Hidden Creek Partners, Mr. Dickinson spent 15 years in
mergers & acquisitions, most recently as Co-Head of Global Mergers & Acquisitions at Merrill Lynch. Mr. Dickinson is on the board of directors of
Caterpillar Inc. Mr. Dickinson has a J.D. and an M.B.A. from The University of Chicago and a B.S. in Mechanical Engineering and Materials Science, magna cum laude, from Duke University. 

        Mr. Forese
has been a member of IESI's board of directors since October 2003. Mr. Forese joined Thayer/Hidden Creek Partners in July 2003 and currently serves
as an Operating Partner and Chief Operating Officer. From 1996 to 2003, Mr. Forese worked for IKON Office Solutions, most recently as the Chairman and Chief Executive Officer. Prior to joining
IKON, Mr. Forese spent 36 years with IBM Corporation, most recently as Chairman of IBM Credit Corporation. In addition, Mr. Forese held numerous other positions during his tenure
at IBM Corporation including as a senior executive with IBM World Trade Europe/Middle East/Africa and IBM World Trade Americas, President of the Office Products Division, Corporate Vice President and
Controller and Corporate Vice President of Finance. Mr. Forese currently serves on the board of directors of Anheuser-Busch Companies, Inc. and Spherion Corporation, as a
Non-Executive Chairman. Mr. Forese earned a B.E.E. in Electrical Engineering from Rensselaer Polytechnic Institute and an M.B.A. from Massachusetts Institute of Technology. 

        Mr. Milliard
currently serves as President and Chief Executive Officer of Sunwell Technologies Inc. He previously served as the Chief Legal and Business Development Officer
at Charles Cole Memorial Hospital from July 2005 to June 2006, the Interim Chief Executive Officer of Natural Convergence Inc. from December 2003 to May 2004, the
Chief Executive Officer of GT Group Telecom Inc. from September 1999 to February 2003 and President, Chief Operating Officer and a director of Hyperion Communications from
May 1992 to March 1999 and from March 1999 to August 1999 Vice Chairman and President. Mr. Milliard is a graduate of The Directors College Chartered Director
program. 

        Mr. Milliard
was Chief Executive Officer of GT Group Telecom Inc. which, in June 2002, while Mr. Milliard was acting in that capacity, made a proposal under
the Companies' Creditors Arrangement Act ("CCAA"). GT Group Telecom Inc. emerged from CCAA court protection in February 2003 and was
acquired by 360 Networks. 

        Mr. Knight
is President of St. Joseph Media, Inc. Mr. Knight has previously served as Chairman and Chief Executive Officer of ImpreMedia, LLC in
New York, Publisher and Chief Executive Officer of The Financial Post and of The Toronto Sun in Toronto. He is a director of Xstrata Canada Corporation and a trustee of the Governor General's
Performing Arts Awards Foundation. Mr. Knight is a graduate of the University of Toronto and has an M.Sc. from the London School of Economics. 

8

 

        Mr. Wright
has been the Managing Partner of Barnagain Capital since February 2001. He was formerly Managing Partner of Crosbie & Company Inc., and prior to
that he was President and Chief Executive Officer for Swiss Bank Corporation (Canada). Mr. Wright is currently the Chairman and Trustee of the Fund. He also serves on the Board of Directors of
President's Choice Bank, OutdoorPartner Media Corporation and ROC Pref Corp. During his professional career Mr. Wright spent 23 years with Citibank as a lending officer, eight and a half
years with Burns Fry as an investment banker and two years as President of Swiss Bank Canada. 

        Mr. Wright
was an officer and director of Hip Interactive Inc. from August 2002 until April 2005. Hip Interactive Inc. was made the subject of
bankruptcy proceedings in July 2005, after Mr. Wright ceased to be an officer and director. 

 Approval Of Amended And Restated Unit Option Plan  

        The Voting Unitholders are being asked to consider and, if deemed advisable, to pass, with or without variation, a resolution
(the "Amended and Restated Unit Option Plan Resolution"), the text of which is set out in Schedule "A" to this Circular, to approve the amendment and restatement of the Fund's
Unit Option Plan (the "Amended and Restated Unit Option Plan"). The Amended and Restated Unit Option Plan will increase the number of Units available for issuance under options granted and will
provide the Board of Trustees with the ability to make certain changes to the Unit Option Plan without obtaining unitholder approval, which would otherwise be required by the TSX. Approval of the
Amended and Restated Unit Option Plan Resolution requires the affirmative vote of the holders of a majority of the Trust Units present or represented and entitled to vote at the Meeting. 

 The Current Plan  

        The Unit Option Plan was approved by the Voting Unitholders of the Fund at the annual and special meeting of Unitholders held on
May 11, 2006. The Unit Option Plan is designed to reward certain eligible management employees with compensation opportunities that will encourage ownership of Units, enhance the Fund's ability
to attract, retain and motivate senior employees, and reward them for significant performance. The Unit Option Plan permits options to acquire Units to be granted to management employees of the Fund
and its subsidiaries at the discretion of the Board of Trustees. A general description of the principal terms of the Unit Option Plan is set forth under the heading "Compensation of Executive
Officers — Unit Option Plan". 

        The
Board of Trustees has approved amendments to the Fund's Unit Option Plan, subject to Voting Unitholder approval, to (i) implement detailed amendment provisions, setting out
the types of amendments to the Unit Option Plan that will require Voting Unitholder approval; (ii) provide for the automatic extension of options that would expire during or shortly after a
blackout period to 10 business days following the end of the blackout period; and (iii) increase the maximum number of Units that may be issued upon the exercise of options granted under
the Unit Option Plan to 4,000,000, an increase of 2,250,000 Units. Currently, options to acquire 1,000,000 Units are outstanding under the Unit Option Plan, and no options have been
exercised. These amendments are described in more detail below. 

 Amendment Providing Specific Amendment Provisions  

        Prior to the amendments for which Voting Unitholder approval is being sought, the Unit Option Plan provided that the Board of Trustees
or a committee of trustees appointed by the Board of Trustees has the power, subject to certain exceptions and regulatory approval, to amend, suspend or terminate the Unit Option Plan at any time
without Voting Unitholder approval, provided that existing rights of participants are not adversely affected. 

        Amendments
to the TSX Company Manual effective January 1, 2005 required listed issuers to implement amendment provisions that specify which amendments can be made to their
security based compensation arrangements without securityholder approval. In TSX Staff Notice 2004-0002, published in 2004, the TSX provided administrative relief which permitted plans
with a general amendment provision, like the Unit Option Plan, to make housekeeping and certain other amendments without unitholder approval. In TSX Staff Notice 2006-0001,
published on June 6, 2006, the TSX withdrew the administrative relief and advised companies that effective June 30, 2007, companies that did not have detailed amendment provisions in
their security based 

9

 

compensation
arrangements could not make amendments to their security based compensation arrangements, including "housekeeping" amendments, except with securityholder approval. 

        In
response to this change in TSX policy, on March 6, 2008, the Board of Trustees approved amendments to the Unit Option Plan, subject to Voting Unitholder approval, to provide
that the Board of Trustees or a committee appointed by the Board of Trustees may make any amendments to the Unit Option Plan, or to awards granted thereunder, except the following amendments which
require Voting Unitholder approval: 

	(a)
	increases
to the number of Units issuable under the Unit Option Plan, including an increase to a fixed maximum number of Units or a change from a fixed
maximum number of Units to a fixed maximum percentage;

	(b)
	amendments
that increase the length of the period after a blackout period during which options, awards, or any rights pursuant thereto may
be exercised;

	(c)
	amendments
that would reduce the exercise price of an option or that would result in the exercise price for any option being lower than the fair market
value of a Unit at the time the option is granted, except a reduction in connection with any stock dividend, stock split, combination or exchange of Units, merger, consolidation, spin-off
or other distribution, or other change in the capital of the Fund affecting the Units;

	(d)
	any
amendment expanding the categories of eligible person which would have the potential of broadening or increasing insider participation;

	(e)
	amendments
to termination provisions providing an extension beyond the original expiry date, except a permitted automatic extension of an option expiring
during a blackout period;

	(f)
	the
addition of any other provision which results in participants receiving Units while no cash consideration is received by the Fund;

	(g)
	amendments
required to be approved by securityholders under applicable law (including, without limitation, the rules, regulations and policies of
the TSX);

	(h)
	amendment
provisions granting additional powers to the Board of Directors to amend the Unit Option Plan or entitlement;

	(i)
	extension
to the term of options held by insiders; and

	(j)
	changes
to the insider participation limits which result in securityholder approval to be required on a disinterested basis. 

        The
Board of Trustees considers that the proposed amendments will allow matters of an administrative or technical nature to be dealt with in a timely and expeditious manner, while
requiring Voting Unitholder approval for amendments that substantially alter the terms of the Unit Option Plan and awards granted pursuant to the Unit Option Plan. 

 Amendment Providing For an Automatic Ten-Day Extension  

        Prior to the amendments for which Voting Unitholder approval is being sought, awards granted pursuant to the Unit Option Plan had a
term of 10 years and vested at the rate of 25% per year, commencing on the anniversary of the date of the grant, or as otherwise determined by the Compensation Committee. Prior to the expiry of
an option, an optionholder generally may exercise an option at any time after the option vests, except during a blackout period or when the optionholder has material undisclosed information. 

        Effective
January 1, 2005, subsection 613(h)(iii) of the TSX Company Manual was amended to require disinterested securityholder approval in order to extend the term of
options benefiting insiders. TSX Staff Notice 2006-0001 recognizes that many listed issuers have self-imposed blackout periods, which the TSX recognizes are an example
of good governance. The TSX stated that subsection 613(h)(iii) was not intended to penalize positive corporate behavior. Accordingly, TSX Staff Notice 2006-0002 provides that
the expiry date of an option which expires during a blackout period may be extended to a date shortly after the end of the blackout period. On March 6, 2008, the Board approved an amendment to
the Unit Option Plan, subject to Voting Unitholder approval, to provide for an automatic extension to 10 business days following the end of a blackout period for the term of options that would
otherwise expire during or shortly after a blackout period. 

10

 

 Amendment Increasing Number of Units Issuable Under Unit Option Plan  

        Prior to the amendments for which Voting Unitholder approval is being sought, the maximum number of Units that could be issued upon the
exercise of options granted under the Unit Option Plan was 1,750,000. Currently, options to acquire 1,000,000 Units are outstanding under the Unit Option Plan, and no options have been
exercised. If approved by the Voting Unitholders, the maximum number of Units that may be issued upon the exercise of options granted under the Amended and Restated Unit Option Plan will
be 4,000,000. 

        There
are currently 57,567,571 Units outstanding, and 11,138,810 Units are issuable upon the exchange of Participating Preferred Shares. As such, the Units reserved for
issuance under the Amended and Restated Unit Option Plan represent approximately 7% of the Fund's currently outstanding capital (6% assuming the conversion of all outstanding Participating Preferred
Shares). Less than 7% of the outstanding Units of the Fund are issuable pursuant to Unit compensation arrangements, including the Amended and Restated Unit Option Plan. In addition, the number of
securities issuable to insiders, at any time, under all security based compensation arrangements, including the Amended and Restated Unit Option Plan, cannot exceed 10% of Fund's issued and
outstanding securities; and the number of securities issued to insiders, within any one-year period, under all of the Fund's security based compensation arrangements, including the Amended
and Restated Unit Option Plan, cannot exceed 10% of the Fund's issued and outstanding securities. 

        The
Board of Trustees unanimously recommends that Voting Unitholders vote FOR the Amended and Restated Unit Option Plan Resolution. In the
absence of contrary instructions, the persons in the accompanying form of proxy intend to vote any Trust Units represented by such proxy FOR the Amended
and Restated Unit Option Plan Resolution set forth in Schedule "A" attached to this Circular. The Amended and Restated Unit Option Plan Resolution requires the approval of the majority of Trust
Units that are voted at the meeting. 

11

 

 

 
 

  COMPENSATION OF EXECUTIVE OFFICERS    
    

        Under applicable securities legislation, the Fund is required to disclose certain financial and other information relating to the
compensation of the chief executive officer, the chief financial officer and the next three most highly compensated executive officers (other than the chief executive officer and the chief financial
officer) of the Fund and its subsidiary entities. During 2007, the executive officers of BFI Canada Newco were responsible for the management of BFI Canada Holdings and IESI. 

        The
tables and descriptive information set forth below present information about compensation of (i) BFI Canada Newco's Chief Executive Officer,
(ii) BFI Canada Newco's Chief Financial Officer, and (iii) the three other most highly compensated executive officers of BFI Canada Newco, or subsidiary entities, whose
salary and bonus earned during the financial year ended December 31, 2007 exceeded $150,000 (the "Named Executive Officers", determined in accordance with applicable rules). Reference is
made to the "Report on Executive Compensation by the BFI Canada Newco Compensation Committee" on pages 16 to 17 of this Circular. 

 Summary Compensation Table  

																										
	 	 
	 
	 	 
	 	Annual Compensation 	 	Long-Term Compensation 	 	 
	 
	 
	 	 
	 	 
	 	 
	 	 
	 	Awards 	 	Payout 	 	 
	 
	Name and Principal Position
	 	Year
	 	Salary

($)
	 	Bonus

($)(1)
	 	Other Annual

Compensation

($)(2)
	 	Securities

Under

Options/

SARS

Granted

(#)(3)
	 	Units

Subject to

Resale

Restrictions

($)
	 	LTIP

Payout

($)(4)
	 	All Other

Compensation

($)(5)
	 
	 	 
	Keith A. Carrigan

Vice Chairman and Chief Executive Officer, BFI Canada Newco	 	 	2007

2006

2005	 	 	464,015

437,500

425,000	 	 	646,015

637,750

425,000	 	 	62,270

40,788

22,202	 	 	—

325,000

—	 	 	—

—

—	 	 	330,458

205,824

356,935	 	 	11,233

10,558

265,174	 
	 	 
	Charles F. Flood

President, BFI Canada Newco	 	 	2007

2006

2005	 	 	422,574

420,872

436,537	(6)
(6)
(6)	 	595,003

348,941

195,225	(6)
(6)
(6)	 	30,633

13,270

—	 	 	—

325,000

—	 	 	—

—

—	 	 	280,290

174,587

86,464	 	 	261,514

533,432

8,260,683	(6)
(6)
(6)(8)
	 	 
	Joseph D. Quarin(9)

Executive Vice President, BFI Canada Newco	 	 	2007

2006

2005	 	 	397,500

375,000

288,986	 	 	547,500

525,000

288,750	 	 	132,277

138,257

15,244	(9)
(9)
	 	—

225,000

—	 	 	—

—

—	 	 	214,277

134,205

164,957	 	 	517,237

514,190

107,266	(9)
(9)

	 	 
	Thomas J. Cowee

Chief Financial Officer, BFI Canada Newco	 	 	2007

2006

2005	 	 	312,963

311,878

308,408	(6)
(6)
(6)	 	420,784

121,160

130,150	(6)
(6)
(6)	 	17,290

7,592

—	 	 	—

125,000

—	 	 	—

—

—	 	 	157,140

98,417

49,468	 	 	180,558

379,225

4,183,526	(6)
(6)
(6)(8)
	 	 
	Thomas L. Brown

Senior Vice President, Chief Operating Officer, IESI Corporation	 	 	2007

2006

2005	 	 	290,583

270,558

280,631	(6)
(6)
(6)	 	214,960

203,019

92,661	(6)
(6)
(6)	 	9,845

4,265

—	 	 	—

—

—	 	 	—

—

—	 	 	106,474

56,117

27,792	 	 	8,086

14,000

1,920,478	(6)
(6)      
(6)(8)
	 	 

	(1)
	The
Company bonus plan entitles the Named Executive Officers to annual cash bonuses based on BFI Canada Newco's success in achieving financial
objectives and on their individual success in accomplishing the personal goals and expectations set out in their objectives for the year.

	(2)
	Includes
distributions received on Units held in the Long-Term Incentive Plan (the "LTIP") as well as distributions received on Units
held pursuant to retention bonus arrangements where applicable (see Note (9)). Also includes all other compensation not properly categorized as salary or bonus, including perquisites and
other personal benefits such as car allowance and club memberships, unless the aggregate value of such other compensation for the recipient is less than $50,000 and 10% of the total of the recipient's
annual salary and bonus for the financial year. Generally, a perquisite is the cost or value of a personal benefit provided that is not available to all employees.

	(3)
	On
February 14, 2006, options for Units in the Fund were awarded to certain executive management employees. Each Unit grant will vest equally over
three years commencing on January 1, 2007. Unit options granted become exercisable when vested and may be exercised in accordance with the terms of the Unit Option plan, on termination of
employment without cause or by reason of the participant's death or disability.

	(4)
	The
LTIP was established in 2003 for Canadian-resident employees and in 2005 for U.S.-resident employees. BFI Canada Newco or a subsidiary
contributes to a trust established under the LTIP the respective amounts set out in the table for the benefit of the Named Executive Officers. In 2005, LTIP Payouts for Mr. Carrigan and
Mr. Quarin included a one time bonus of $255,000 and $97,500, respectively, in relation to Units awarded upon the completion of the Transaction. LTIP Payouts reported for 2007 include amounts
that have vested in 2007 from 2006 LTIP awards and the vested portion of 2007 LTIP awards. See "— Long-Term Incentive Plan".

	(5)
	For
Mr. Carrigan and Mr. Quarin, amounts in this column include contributions made in respect of BFI Canada Holdings' deferred profit
sharing plan (the "DPSP"), premiums paid for life insurance and in 2005 one time bonus amounts paid upon the completion of 

12

 

the
Transaction. Both Mr. Carrigan and Mr. Quarin are also eligible to receive DPSP contributions, and each year BFI Canada Holdings or a subsidiary makes contributions on their
behalf equal to 3% of their earnings under the plan up to the maximum allowable amount under the Income Tax Act (Canada). For Mr. Flood,
Mr. Cowee and Mr. Brown, in 2005 amounts in this column included a one time bonus amount paid upon the completion of the Transaction, matching contributions made under the IESI
Corporation 401(k) Plan and life insurance premiums. The following matching contributions were made under the IESI Corporation 401(k) Plan during 2007: Mr. Flood, US$6,750; Mr. Cowee,
US$6,750; and Mr. Brown, US$6,288. The following life insurance premiums were paid during 2007: Mr. Flood, US$3,564; Mr. Cowee, US$1,242; and Mr. Brown, US$1,235. 

	(6)
	Compensation
values have been converted to Canadian currency using the applicable Bank of Canada rates. For 2007, amounts were converted using the Bank of
Canada 2007 average exchange rate of US$1.00 = $1.0748; and for 2006, amounts were converted using the Bank of Canada 2006 average exchange rate of US$1.00 = $1.1341.

	(8)
	Includes
the total value of the bonus amounts paid to Mr. Flood, Mr. Cowee and Mr. Brown upon the completion of the Transaction and in
2007 as described in "Employment Agreements", below. These amounts were paid by the Retained Interest Holders pursuant to the terms of the Transaction. See "Employment Agreements".

	(9)
	See
"Employment Agreements" for a description of the retention bonus arrangement for Mr. Quarin effective September 14, 2005. Included in
Other Compensation for Mr. Quarin for 2007 is $506,128 received on the sale of 17,311 vested Units under the retention bonus arrangement, and for 2006 is $503,743 received on the sale of
17,310 vested Units under the retention bonus arrangement. 

 Bonus Plan  

        In fiscal 2007, the Named Executive Officers participated in a bonus plan (the "Bonus Plan") which entitles senior officers to
annual cash bonuses based on BFI Canada Newco's success in achieving financial objectives relating to budgeted earnings before interest, taxes, depreciation and amortization ("EBITDA") and on
their individual success in accomplishing the personal goals and
expectations set out in their objectives for the year (see "Employment Agreements"). The Compensation Committee of BFI Canada Newco approved Mr. Carrigan's and Mr. Flood's
annual objectives for 2007 and reviewed their performance during 2007, subject to the approval of the board of directors of BFI Canada Newco. The annual objectives of the other Named Executive
Officers for 2007 were set by the Vice Chairman and Chief Executive Officer, who also reviewed their performance during 2007, subject to the approval of the Compensation Committee. The Compensation
Committee also approved the fiscal 2007 annual plan targets for the Bonus Plan. The Bonus Plan will remain substantially similar for fiscal 2008. 

 Long-Term Incentive Plan  

        The Long-Term Incentive Plan (the "LTIP") is administered by the Compensation Committee, which has the power, among
other things, to determine those directors, officers and employees of BFI Canada Newco and its subsidiaries who will participate in LTIP (the "Participants"). The purpose of the LTIP is
to establish a performance-based incentive plan for directors, officers and employees that will align the interests of senior management with the interests of the Voting Unitholders. 

        Pursuant
to the LTIP, for the year ended December 31, 2007, each Participant's employer contributed funds, determined on the basis of BFI Canada Newco's financial
performance, to a trust established for the purpose of holding Units pursuant to the terms of the LTIP (a "Trust"). Separate Trusts exist for Canadian-resident employees and U.S.-resident
employees. The Trusts purchase Units in the market with such funds and hold such Units in trust for each Participant. Distributions on both vested and non-vested Units are distributed by
the Trusts to the Participants in the year of receipt. 

        In
accordance with the LTIP, Units allocated to a Participant in respect of a calendar year, vest as follows: one-third on the day such Units are allocated to a Participant;
one-third on December 31 of the year such Units are allocated to a Participant; and the balance on December 31 of the year following the year such Units are allocated to a
Participant. Upon the termination of employment of a Participant, without cause, or a Participant's death, disability or retirement, all unvested Units automatically vest. Upon voluntary termination
of employment (resignation) or termination with cause, any Units which have not vested will be forfeited, subject to the discretion of the trustee of the Trust (the "LTIP Trustee"), with the
approval of the Compensation Committee. Upon someone ceasing to be a Participant in the LTIP, the LTIP Trustee will at the request of a Participant, or within one year of that date, sell such number
of vested Units held on behalf of the Participant as may be necessary to fund the payment of any tax deduction or other charges the LTIP Trustee is required to deduct, withhold and remit under
applicable law or for any other cost or charges incurred by the LTIP Trustee, 

13

 

and
will distribute to the Participant the remaining vested Units held on the Participant's behalf. In 2007, the amount allocated to each Participant for the purchase of Units on the Participant's
behalf was approved by the Compensation Committee. 

        Contributions
to the LTIP are computed as 2.25% of free cash flow available for distribution, subject to meeting certain performance thresholds. Individual Participants in the LTIP must
exceed 95% of their respective budgeted EBITDA targets for the year and their respective prior year's actual EBITDA to be eligible in the year for an award pursuant to the LTIP. The Compensation
Committee reserves the right to waive this requirement if circumstances warrant. Free cash flow available for distribution is a term which does not have a standardized meaning prescribed by Canadian
generally accepted accounting principles ("GAAP") and is therefore unlikely to be comparable to similar measures used by other issuers. Please refer to the Fund's Management's Discussion and Analysis
for a detailed description of the term "free cash flow available for distribution", a non-GAAP measure which indicates the amount available for distribution to holders of Units and
Participating Preferred Shares. 

        All
or part of bonuses payable to employees who participated in the Bonus Plan may, at the option of each employee, be contributed to the Trust to be dealt with under the terms of the
LTIP. In addition, all or part of directors' fees payable to the directors of BFI Canada Holdings or BFI Canada Newco may, at the option of each director, be contributed to a Trust to be
invested in Units under the terms of the LTIP. 

 Long-Term Incentive Plans —

Awards In Most Recently Completed Financial Year  

								
	 	 
	Name and Principal Position
	 	Units or Other Rights(1)
	 	Performance or Other Period

Until Maturation or Payout
	 
	 	 
	Keith A. Carrigan

Vice Chairman and Chief Executive Officer, BFI Canada Newco	 	 	$373,900	 	 	Vesting over time	 
	 	 
	Charles F. Flood

President, BFI Canada Newco	 	 	$317,109	 	 	Vesting over time	 
	 	 
	Joseph D. Quarin

Executive Vice President, BFI Canada Newco	 	 	$240,218	 	 	Vesting over time	 
	 	 
	Thomas J. Cowee

Chief Financial Officer, BFI Canada Newco	 	 	$176,169	 	 	Vesting over time	 
	 	 
	Thomas L. Brown

Senior Vice President, Chief Operating Officer, IESI	 	 	$151,070	 	 	Vesting over time	 
	 	 

	(1)
	The
LTIP was established in 2003 for Canadian-resident employees and in 2005 for U.S.-resident employees. BFI Canada Newco, or a subsidiary,
contributes to the applicable Trust the respective amounts set out in the table for the benefit of the Named Executive Officers. LTIP award amounts reported above represent the full amount of the
award for the financial year ended December 31, 2007 including the portion that has not yet vested. 

 Unit Option Plan  

        Effective February 14, 2006, the Compensation Committee adopted the Unit Option Plan, subject to Voting Unitholder and
regulatory approval. The Unit Option Plan is designed to reward certain eligible management employees with compensation opportunities that will encourage ownership of Units, enhance the Fund's ability
to attract, retain and motivate senior employees, and reward them for significant performance. Options may be granted under the Fund's Unit Option Plan to management employees of the Fund and its
subsidiaries as the Board of Trustees may from time to time determine. The following summary describes the principal terms of the Unit Option Plan before giving effect to the proposed amendments
described in "Matters to be Considered at the Meeting — Approval of Amended and Restated Unit Option Plan". 

        The
number of options that may be granted to any one participant or to insiders under the Unit Option Plan is restricted as follows: the number of securities issuable to insiders, at any
time, under all security based 

14

 

arrangements,
including the Unit Option Plan, cannot exceed 10% of the Fund's issued and outstanding securities; and the number of securities issued to insiders, within any one-year
period, under all of the Fund's security based compensation arrangements, including the Unit Option Plan, cannot exceed 10% of the Fund's issued and outstanding securities. The Unit Option Plan
includes Unit appreciation rights which may be granted in connection with the grant of a Unit option. Unit appreciation rights entitle the participant to elect to receive a payment equal to the
difference between the volume weighted average trading price of the Units on the TSX for the five trading days immediately preceding the date of surrender of a Unit and the exercise price of the Unit
option in connection with which it was granted. 

        Under
the Unit Option Plan, options granted have a term of 10 years and vest at the rate of 25% per year, commencing on the anniversary of the date of the grant, or otherwise
determined by the Compensation Committee. The exercise price of an option under the Plan is fixed by the Board of Trustees at the time of grant, but may not be lower than the volume weighted average
trading price of the Units on the TSX for the five trading days immediately preceding the date of grant (calculated by dividing the total value by the total volume of Units traded for such period).
The options are non-assignable. 

        If
a participant ceases to be eligible under the Unit Option Plan due to resignation of employment, all options held by the participant cease to vest and those options which are then
exercisable may be exercised for the following 30 days. If a participant ceases to be eligible under the Unit Option Plan due to termination of employment or services without cause, all options
held by the participant cease to vest and those options which are then exercisable may be exercised for the following 90 days. If a participant ceases to be eligible under the Unit Option Plan
due to termination of employment for cause, all options held by the participant cease to vest and all options which are then exercisable cease to be exercisable. If a participant's employment ceases
by reason of disability or death, all options held by the participant cease to vest and those options which are then exercisable may be exercised for the following 12 months. The Compensation
Committee may provide, at the time of the grant or at any time thereafter, that granted options remain exercisable following such resignation or termination, provided that no option may be exercised
after its stated expiration (which in no case may be later than 10 years after the date of the grant). 

        The
Unit Option Plan may not be amended without Unitholder approval, subject to the adoption of the proposed amendments described in "Matters to be Considered at the
Meeting — Approval of Amended and Restated Unit Option Plan". 

        No
options to acquire Units were granted to the Named Executive Officers during the year ended December 31, 2007. 

 Equity Compensation Plan Information  

											
	 	 
	 
	 	Number of securities

to be issued upon

exercise of

outstanding options,

warrants and rights
	 	Weighted-average

exercise price of

outstanding options,

warrants and rights
	 	Number of securities

remaining available for

future issuance under

equity compensation plans
	 
	 	 
	 Plan Category
	 	 	 	 	 	 	 	 	 	 
	

Equity compensation plans approved by securityholders
	 	 	1,000,000	 	 	$29.15	 	 	750,000	 
	 Equity compensation plans not approved by securityholders
	 	 	—	 	 	—	 	 	—	 
	 	 
	

Total
	 	 	1,000,000	 	 	$29.15	 	 	750,000	 
	 	 

 Employment Agreements  

        The Fund's success depends on the leadership, dedication and experience of its senior management group. Upon the completion of the
Transaction on January 21, 2005, BFI Canada Newco
and IESI entered into new or amended employment agreements with certain senior officers. The agreements contain, among other things, confidentiality, non-solicitation and
non-competition covenants that will apply during the term of each officer's employment and for a specific period of time after termination of their employment. 

15

 

        Mr. Quarin
entered into an employment agreement with BFI Canada Newco effective January 21, 2005, which provided that he would serve as Chief Financial Officer of
BFI Canada Newco. Effective September 14, 2005, the Board of Trustees amended Mr. Quarin's title and position to that of Executive Vice President of BFI Canada Newco and
Chief Operating Officer of BFI Canada Holdings. Pursuant to a revised compensation package, approved by the Board of Trustees on September 14, 2005, in 2007 Mr. Quarin received an
annual salary of $397,500 and participated in the LTIP. In addition, Mr. Quarin may also be eligible to receive an annual bonus of up to 100% of his base salary if certain performance targets
are met (or greater than 100% in the case of exceptional performance). Effective September 14, 2005, Mr. Quarin was granted $2,000,000 in Units, which vested as to 25% on
February 1, 2006, 25% on February 1, 2007, and 50% on February 1, 2008. Mr. Quarin's employment may be terminated for cause or by Mr. Quarin. If terminated without
cause, Mr. Quarin will be entitled to payment of an amount equal to his base salary and an amount in respect of bonus and the LTIP entitlement for the lesser of (i) 24 months
(increased to 36 months after five years) following termination, and (ii) the number of months to Mr. Quarin's 65th birthday, to be paid in equal monthly
installments. If Mr. Quarin's employment is terminated without cause within six months preceding or 24 months following a change of control, the above severance payment will be paid as a
lump sum and all unvested incentive compensation and Unit-based compensation shall vest immediately. 

        Under
his previous employment with IESI and BFI Canada Newco, which became effective on January 21, 2005, Mr. Flood served as Executive Vice President of BFI Canada
Newco, and President and Chief Executive Officer of IESI. Effective January 1, 2006, the Governance and Nominating Committee amended Mr. Flood's title and position with BFI Canada
Newco to that of President. Pursuant to Mr. Flood's previous employment agreement, in 2007 he received an annual salary of $422,574 and participated in the LTIP. In addition, his previous
employment agreement provided that Mr. Flood was eligible to receive an annual bonus of up to 100% of his base salary if certain performance targets were met (or greater than 100% in the
case of exceptional performance). As approved by the shareholders of IESI, Mr. Flood was entitled to receive a bonus consisting of (i) US$700,000 payable upon completion of the
Transaction on January 21, 2005, (ii) US$233,000 payable on each of the dates that is 12 months, 18 months and 24 months following January 21, 2005 and
(iii) that number of consideration units, being Units distributed to certain employees of IESI as management retention bonuses (the "Consideration Units"), having a value equal to the
intrinsic value of unvested options that were forfeited by Mr. Flood. As of the date of this Circular, all such bonus obligations have been satisfied. 

        Effective
January 1, 2008, Mr. Flood entered a new employment arrangement with IESI and BFI Canada Newco which has a term of three years, pursuant to which Mr. Flood
is entitled to a base annual salary of US$413,275. In the second quarter of 2008, Mr. Flood will be granted an incentive bonus of 90,000 restricted Units, which will vest as to
331/3% on the date of grant, 331/3% on January 1, 2009 and the balance on January 1, 2011. On April 9, 2008, Mr. Flood will also be granted an
option to acquire 425,000 Units. Mr. Flood is eligible to participate in the LTIP and other compensation plans. Mr. Flood's employment arrangement may be terminated by IESI for
cause or by Mr. Flood. The arrangement provides that if his employment is
terminated without cause or he resigns for good reason, Mr. Flood will be entitled to payment of an amount equal to his base salary and an amount in respect of bonus and the LTIP entitlement
for 24 months following termination. As well, his options will vest immediately and will continue to be exercisable for their original term and his LTIP entitlements and his restricted Units
will vest immediately. If Mr. Flood's employment is terminated without cause or he resigns for good reason within 24 months following a change of control, the above severance payments
will be paid as a lump sum. If Mr. Flood's employment terminates by expiration of the three year term or by his retirement, his options, restricted Units, LTIP and other incentive entitlements
will vest immediately and will continue to be exercisable until their original expiry date. Mr. Flood has agreed not to compete with BFI Group for 12 months if he resigns or is
terminated for cause and for 24 months if his employment is terminated without cause, he retires or he resigns for good reason and not to solicit customers or employees for 24 months. 

        Mr. Cowee
entered into an employment agreement with IESI and BFI Canada Newco effective January 21, 2005, which provided that he would serve as Vice President,
Integration of BFI Canada Newco, and Senior Vice President and Chief Financial Officer of IESI. Effective September 14, 2005, Mr. Cowee's title and position was amended to Chief
Financial Officer of BFI Canada Newco. Pursuant to Mr. Cowee's employment agreement, in 2007 Mr. Cowee received an annual salary of $312,963 and participated in the LTIP.
Mr. Cowee's employment 

16

 

agreement
also provides that Mr. Cowee may be eligible to receive an annual bonus of up to 100% of his base salary if certain performance targets are met (or greater than 100% in the
case of exceptional performance). As approved by the shareholders of IESI, Mr. Cowee was entitled to receive a bonus consisting of (i) US$480,000 payable upon completion of the
Transaction on January 21, 2005, (ii) US$160,000 payable on each of the dates that is 12 months, 18 months and 24 months following January 21, 2005 and
(iii) that number of Consideration Units, having a value equal to the intrinsic value of unvested options that were forfeited by Mr. Cowee. As of the date of this Circular all such bonus
obligations have been satisfied. Mr. Cowee's employment agreement may be terminated by IESI for cause or by Mr. Cowee. The agreement provides that if his employment is terminated without
cause, Mr. Cowee will be entitled to payment of an amount equal to his base salary and an amount in respect of bonus and the LTIP entitlement for the lesser of (i) 24 months
(increased to 36 months after five years) following termination, and (ii) the number of months to Mr. Cowee's 65th birthday, to be paid in equal
monthly installments. If Mr. Cowee's employment is terminated without cause within six months preceding or 24 months following a change of control, the above severance payment will be
paid as a lump sum and all unvested incentive compensation and Unit-based compensation shall vest immediately. 

        Mr. Brown
entered into an employment agreement with IESI effective January 21, 2005, which provided that he would serve as Senior Vice President and Chief Operating Officer
of IESI. Pursuant to the agreement, in 2007 Mr. Brown received an annual salary of $290,583 and participated in the LTIP. Mr. Brown's employment agreement also provides that
Mr. Brown may be eligible to receive an annual bonus of up to 33% of base salary if certain performance targets are met (or greater than 33% in the case of exceptional performance). The
agreement may be terminated by IESI for cause or by Mr. Brown. The agreement provides that if his employment is terminated without cause, Mr. Brown will be entitled to payment of an
amount equal to his base salary and an amount in respect of bonus and the LTIP entitlement for the lesser of (i) 24 months following termination, and (ii) the number of months to
Mr. Brown's 65th birthday, to be paid in equal monthly installments. If Mr. Brown's employment is terminated without cause within six months preceding or
24 months following a change of control, the above severance payment will be paid as a lump sum and all unvested incentive compensation and Unit-based compensation shall vest
immediately. 

        Any
modification or renewal of the employment agreements between the Fund's subsidiary entities and its executive officers will be subject to the prior review of the Compensation
Committee of the board of BFI Canada Newco, which shall make a recommendation thereon to the full board of directors of BFI Canada Newco or IESI. 

 Composition of the Compensation Committee  

        During the year ended December 31, 2007 the BFI Canada Newco Compensation Committee assisted the board of directors of
BFI Canada Newco in determining and administering the compensation for the senior officers of BFI Canada Newco and its subsidiaries. The following individuals served as the members of
the Compensation Committee during the fiscal year ended December 31, 2007: Mr. Daniel R. Milliard (Chair), Mr. Daniel Dickinson, Mr. T. Iain Ronald, Mr. Joseph H.
Wright and Mr. Douglas Knight. Mr. Ronald was a member of the Compensation Committee until November 11, 2007, when he was replaced by Mr. Knight. 

        None
of the members of the Compensation Committee during 2007 was an officer, employee or former officer or employee of the Fund or BFI Canada Newco or any of their subsidiary
entities or affiliates. The members of the Compensation Committee during 2007 were eligible to have their directors' fees invested under the terms of the LTIP. See "Compensation of Executive
Officers — Long-Term Incentive Plan". 

 Report on Executive Compensation by the BFI Canada Newco Compensation Committee  

        For 2007, the executive compensation program for senior management of the Fund and its subsidiary entities (the "Executive
Compensation Program") was overseen by the Compensation Committee. The Compensation Committee was responsible for reviewing, determining and recommending to the board of directors of BFI Canada
Newco for final approval the annual salary, bonus and other compensation levels of the executive officers of the Fund and its subsidiary entities. 

        The
Compensation Committee's executive compensation philosophy was guided by its objective to enhance unitholder value and obtain and retain executives critical to the success of the
Fund and its subsidiary entities. 

17

 

        The
Executive Compensation Program is composed of base salary, bonus and long-term incentive plan rewards. Compensation is set at competitive market levels, designed to
attract and retain an outstanding executive team, with bonuses based on performance and long-term incentives designed to align the interests of management with the creation of unitholder
value. In 2007, the annual bonus payments were based on the achievement by BFI Canada Newco of financial targets. Senior management also participates in the LTIP described under "Compensation
of Executive Officers — Long-Term Incentive Plan". 

        In
2007, each officer's performance and related salary level, annual bonus target and amount of Units to be purchased under the LTIP were reviewed and approved by the Compensation
Committee. In 2007, the Compensation Committee engaged Mercer Human Resource Consulting to provide market data on executive compensation pay levels including trends in long-term incentive
design, for which it charged the Fund $16,850. Mercer Human Resource Consulting completed a competitive market pay analysis and provided alternative long-term incentive design programs for
the Company's consideration. In 2007, a formal evaluation of performance and executive compensation packages, with reference to packages payable to executives of similar sized Canadian public
companies and the Fund's peers in the waste management industry in the United States, was completed. 

        The
Trustees, on the recommendation of the Compensation Committee, approved compensation matters for 2007 relating to Mr. Keith A. Carrigan, the Vice Chairman and Chief Executive
Officer of BFI Canada Newco. In consideration for his services, Mr. Carrigan received a base salary and various benefits, and was eligible to participate in the Bonus Plan and the LTIP.
The base salary for Mr. Carrigan for fiscal 2007 was determined, based on an assessment by the board of directors of BFI Canada Newco of the total compensation package payable to chief
executives of similar sized Canadian public companies and the Fund's peers in the waste management industry in the United States. 

        Compensation
matters relating to the senior officers for the year ended December 31, 2007 were approved by the board of directors of BFI Canada Newco on the recommendation
of the Compensation Committee. 

 Performance Graph  

        The following graph compares the percentage change in the cumulative unitholder return for $100 invested in Units with the total
cumulative return of the S&P/TSX Composite Index (formerly the TSX 300 Total Return Index) for the period from April 25, 2002, the date when the Fund completed its initial public
offering, until December 31, 2007. Assuming reinvestment of distributions, $100 invested in the Fund on April 25, 2002 was worth $401 on December 31, 2007. 

 Total Return(1) from IPO (April 25, 2002) to December 31, 2007  

  

	(1)
	Assumes distributions paid by the Fund are reinvested in Units. Source: Bloomberg. 

18

 
 
 

  COMPENSATION OF TRUSTEES OF THE FUND AND DIRECTORS OF BFI CANADA NEWCO    
    

        During the year ended December 31, 2007, each non-management Trustee or director of BFI Canada Newco (other
than the Chairman) received an annual retainer of $40,000. The Chairman of the Board of Trustees received an annual retainer of $90,000 for his duties as chair and attendance at committee and ad hoc
meetings in either an official or ex-officio capacity. During the year ended December 31, 2007, there were no directors of BFI Canada Newco who were not also Trustees of the
Fund. The chair of each board committee received an additional annual retainer of $4,000 ($10,000 in the case of the Audit Committee chair) and other members of those committees (other than the
Chairman) received an additional annual retainer of $2,000. Board members received a fee of $1,250 for each board meeting attended, and committee members (other than the Chairman) received a fee of
$1,250 for each committee meeting attended. Trustees and directors were also reimbursed for out-of-pocket expenses for attending board and board committee meetings. During the
year ended December 31, 2007, the non-management directors of the BFI Canada Newco were entitled under the LTIP to elect to receive their compensation for 2007, in whole or
in part, in Units. See "Compensation of Executive Officers — Long-Term Incentive Plan". 

        During
the year ended December 31, 2007, a total of $350,750 was paid, in cash or contributions to the LTIP, in respect of Trustees' and directors' fees. A total of $32,105 was
paid in respect of reimbursement of expenses incurred by the Trustees and directors relating to travel and other expenses attributable to attending board and board committee meetings. Keith A.
Carrigan, the Vice Chairman and Chief Executive Officer of BFI Canada Newco, and Charles F. Flood, the President of BFI Canada Newco, were not entitled to compensation for acting in the
capacity of Trustee and director; however, all their expenses were paid by the Fund or a subsidiary. For the year ended December 31, 2007, 70% of the aforementioned fees were allocated in
respect of services provided to BFI Canada Newco, and 30% were allocated in respect of services provided to the Fund. The Chairman of the Fund's Board of Trustees also received a fee of $1,250
per day on which he traveled on business for the Fund or BFI Canada Newco. Where meetings were held concurrently for both the Fund and BFI Canada Newco members did not receive double
compensation. 

        On
August 3, 2006 Trustees approved a Unit Ownership Program for Trustees. The program provides that within five years of May 11, 2006 (or upon becoming a Trustee),
each Trustee will be required to own Units in the Fund having a value equivalent to three times his or her annual retainer. 

 
 

  INDEBTEDNESS    
    

        None of the Trustees of the Fund or the directors, executive officers or senior officers of its subsidiary entities, or any associate
of any of the foregoing, is, or has been at any time since January 1, 2007, indebted to the Fund or any of its subsidiary entities. None of the indebtedness of any such person to another entity
is, or has been at any time since January 1, 2006, the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Fund or any of
its subsidiaries. 

19

 

 
 

  STATEMENT OF CORPORATE GOVERNANCE PRACTICES    
    

        The following table describes the Fund's governance practices. For convenience, these are organized by reference to the requirements
set out in National Instrument 58-101 of the Canadian Securities Administrators ("NI 58-101"). 

											
	NI 58-101 Required Disclosure

 
	 	Status* 	 	Comments regarding the Fund's Corporate Governance Practices 
	1.	 	Board of Directors/Trustees	 	Yes	 	A majority of the Fund's Board of Trustees are independent. The independent Trustees are as follows:
	 	 	 	 	 	 	 	 	•	 	Joseph H. Wright
	 	 	 	 	 	 	 	 	•	 	Daniel Milliard
	 	 	 	 	 	 	 	 	•	 	James J. Forese
	 	 	 	 	 	 	 	 	•	 	Daniel M. Dickinson
	 	 	 	 	 	 	 	 	•	 	Douglas Knight
	

 	
 	

 	
 	

 	
 	

The following directors are not independent:
	 	 	 	 	 	 	 	 	•	 	Keith Carrigan
	 	 	 	 	 	 	 	 	•	 	Charles F. Flood
	

 	
 	

 	
 	

 	
 	

The Trustees have determined that Mr. Carrigan and Mr. Flood are related by virtue of their employment with BFI Canada Newco.
	

 	
 	

 	
 	

 	
 	

The following directors are presently a director of another reporting issuer or public company in a foreign jurisdiction:
	

 	
 	

 	
 	

 	
 	

 	
 	

•	
 	

James J. Forese serves on the board of directors of Spherion Corporation and Anheuser-Busch Companies, Inc.
	 	 	 	 	 	 	 	 	•	 	Joseph H. Wright serves on the board of directors of President's Choice Bank, OutdoorPartner Media Corporation and ROC Pref Corp.
	 	 	 	 	 	 	 	 	•	 	Daniel M. Dickinson serves on the board of directors of Caterpillar Inc.
	

 	
 	

 	
 	

 	
 	

The attendance record of each Trustee for board meetings is as follows:
	 	 	 	 	 	 	 	 	•	 	Joseph H. Wright: 7 of 8 meetings
	 	 	 	 	 	 	 	 	•	 	Daniel Milliard: 7 of 8 meetings
	 	 	 	 	 	 	 	 	•	 	James J. Forese: 6 of 8 meetings
	 	 	 	 	 	 	 	 	•	 	Daniel M. Dickinson: 8 of 8 meetings
	 	 	 	 	 	 	 	 	•	 	Keith Carrigan: 8 of 8 meetings
	 	 	 	 	 	 	 	 	•	 	Charles F. Flood: 8 of 8 meetings
	 	 	 	 	 	 	 	 	•	 	Iain Ronald: 5 of 6 meetings(1)
	 	 	 	 	 	 	 	 	•	 	Douglas Knight: 2 of 2 meetings(1)
	

 	
 	

 	
 	

 	
 	

Following each meeting of the Board of Trustees, the independent Trustees hold a separate meeting at which non-independent Trustees and members of management do not attend. There have been 8 such meetings held in the financial year ended
December 31, 2007.
	

 	
 	

 	
 	

 	
 	

The Chairman's role is to facilitate open and candid discussion among the independent trustees. The Fund's non-executive Chairman, Joseph H. Wright, is an independent Trustee.

20

 

											
	NI 58-101 Required Disclosure

 
	 	Status* 	 	Comments regarding the Fund's Corporate Governance Practices 
	 	 	 	 	 	 	The attendance record for members of the Audit Committee is as follows:
	 	 	 	 	 	 	 	 	•	 	James J. Forese: 4 of 4 meetings
	 	 	 	 	 	 	 	 	•	 	Joseph H. Wright: 4 of 4 meetings
	 	 	 	 	 	 	 	 	•	 	Daniel Milliard: 4 of 4 meetings
	 	 	 	 	 	 	 	 	•	 	Iain Ronald: 2 of 3 meetings(1)
	 	 	 	 	 	 	 	 	•	 	Douglas Knight: 1 of 1 meeting(1)
	

 	
 	

 	
 	

 	
 	

The attendance record for members of the Governance and Nominating Committee as well as the Compensation Committee is as follows:(2)
	 	 	 	 	 	 	 	 	•	 	Daniel Milliard: 10 of 10 meetings
	 	 	 	 	 	 	 	 	•	 	Joseph H. Wright: 10 of 10 meetings
	 	 	 	 	 	 	 	 	•	 	Daniel M. Dickinson: 10 of 10 meetings
	 	 	 	 	 	 	 	 	•	 	Iain Ronald: 4 of 6 meetings(1)
	 	 	 	 	 	 	 	 	•	 	Douglas Knight: 4 of 4 meetings(1)
	

2.	
 	

Board Mandate	
 	

Yes	
 	

The Fund's Board of Trustees has a written mandate, which is attached hereto as Schedule "B".
	

3.	
 	

Position Descriptions	
 	

Yes	
 	

In 2006, the Board of Trustees finalized written position descriptions for the chair of the Board of Trustees and the chair of each committee.
	

 	
 	

 	
 	

 	
 	

Given the recent separation of the President and Chief Executive Officer positions, a written position description for the Chief Executive Officer was also finalized and approved in 2006.
	

4.	
 	

Orientation and Continuing Education	
 	

Yes	
 	

Orientation materials relating to the Fund's business and affairs are provided to new trustees regarding (i) the role of the board, its committees and its directors, and (ii) the nature and operation of the business carried on by the Fund
and its subsidiaries. A general orientation package including materials with respect to the Board of Trustees' mandate and the mandate of each committee of the Fund's Board of Trustees and BFI Canada Newco's board of directors, the Fund's
disclosure policy, the Fund's code of conduct, an overview of the Fund's approvals policy and an overview on landfills and landfill development is provided to Trustees.
	

5.	
 	

Ethical Business Conduct	
 	

Yes	
 	

A Code of Conduct applicable to all employees, officers and Trustees was implemented by the Trustees in 2005, and amended in 2007. A Code of Ethics for Senior Executives was implemented by the Trustees in 2005 (together with the Code of Conduct, the
"Code"). A copy of the Code of Conduct is available at www.SEDAR.com and a copy of the Code of Ethics is available from the Director, Investor and Employee Relations via phone or email: Phone: (416) 401-7729,
Email: investorrelations@bficanada.com. To facilitate compliance with the Code, the Code of Conduct includes mandatory procedures with respect to the reporting of conflicts of interest.
	

 	
 	

 	
 	

 	
 	

No reports have been filed pertaining to any conduct of a Trustee, director or executive officer that constitutes a departure form the Code.

21

 

											
	NI 58-101 Required Disclosure

 
	 	Status* 	 	Comments regarding the Fund's Corporate Governance Practices 
	 	 	 	 	 	 	The Code includes requirements with respect to the avoidance of self-dealing conflicts of interests. The Code provides for a complaint procedure which allows employees to report (anonymously, if they wish) any conduct that
does not comply with the Code.
	

 	
 	

 	
 	

 	
 	

Through the Code, the Board encourages and promotes a culture of ethical business conduct.
	

6.	
 	

Nomination of Directors/Trustees	
 	

Yes	
 	

The Governance and Nominating Committee is composed of four members and all of them are independent.
	

 	
 	

 	
 	

 	
 	

The Governance and Nominating Committee is responsible for the nomination of Trustees and directors, and examines the size, composition and structure of the Board and makes recommendations with respect to individuals qualified for appointment. The
Governance and Nominating Committee is also responsible for, among other things, the following:
	

 	
 	

 	
 	

 	
 	

 	
 	

•	
 	

establishing and implementing procedures to review the contributions of individual Trustees and directors;
	 	 	 	 	 	 	 	 	•	 	evaluating the effectiveness of the Board and committees;
	 	 	 	 	 	 	 	 	•	 	assessing that adequate structures and procedures are in place to permit the Board to effectively discharge its duties and responsibilities; and
	 	 	 	 	 	 	 	 	•	 	evaluating organizational structures and plans for the succession of senior executives.
	

7.	
 	

Compensation	
 	

Yes	
 	

The process, by which the board determines the compensation of directors and officers involves a determination on an annual basis by the Compensation Committee, composed entirely of independent Trustees, which reviews and recommends to the Trustees,
for approval, the remuneration of directors and senior management. See "Compensation of Executive Officers — Report on Executive Compensation by the BFI Canada Newco Compensation Committee."
	

 	
 	

 	
 	

 	
 	

In 2005, the Compensation Committee engaged Mercer Human Resource Consulting to provide market data on executive compensation pay levels including trends in long-term incentive design. Mercer Human Resource Consulting completed a competitive market
pay analysis and provided alternative long-term incentive design programs for the Company's consideration. In 2007, a formal evaluation of performance and executive compensation packages, with reference to packages for executives of the Fund's peers
in the waste management industry in the United States, was completed.
	

8.	
 	

Other Board Committees	
 	

Yes	
 	

BFI Canada Newco also has an Environmental Health & Safety Committee. This Committee's purpose is to review and monitor safety, health and environmental policies and practices, monitor compliance with standards for environmental, health
and safety practices and matters and advise the Board of Directors of BFI Canada Newco on the adequacy thereof and receive updates from management with respect to health, safety and environmental performance.

22

 

											
	NI 58-101 Required Disclosure

 
	 	Status* 	 	Comments regarding the Fund's Corporate Governance Practices 
	9.	 	Trustee/Board Assessments	 	Yes	 	The Board of Trustees with the assistance of Mercer Delta conducted an evaluation of its effectiveness and contributions in 2006. Mercer Delta coordinated the preparation, completion and analysis of a Board self-assessment
evaluation.

	*
	"Yes"
indicates that the corporate governance practices of the Fund and its subsidiaries, as applicable, generally comply with the
NI 58-101 requirement.

	(1)
	Iain
Ronald was a member of the Board of Trustees until November 11, 2007, when he was replaced by Douglas Knight.

	(2)
	Messrs. Milliard,
Wright, Dickinson and Knight are each members of the Governance and Nominating Committee and the Compensation Committee. 

 
 

  DIRECTORS' AND OFFICERS' LIABILITY INSURANCE    
    

        The Fund has policies of insurance for the Trustees of the Fund and the directors and officers of its subsidiary entities, including
BFI Canada Newco. 

        The
aggregate limit of liability applicable to those insured directors and officers under the policies is $20 million, inclusive of costs to defend claims. Under the policies,
BFI Canada Newco will have reimbursement coverage to the extent that it has indemnified the directors and officers in excess of the deductible of $150,000 for each loss. The policies include
coverage for claims under securities laws and insurance against any legal obligations to pay on account of any such claims. 

        For
the period from January 1, 2007 to December 31, 2007, the total premium paid on the policies was $164,500. Because the policies are subject to aggregate limits of
liability, the amount of coverage may be diminished or exhausted by any claims made thereon. Also, continuity of coverage is contingent upon the availability of renewal insurance, or of replacement
insurance without a retroactive date so as not to limit coverage for prior wrongful acts. 

 
 

  ADDITIONAL INFORMATION    
    

        Financial information for the financial year ended December 31, 2007 is provided in the Fund's comparative financial statements
and management's discussion and analysis (MD&A) which are included in the Annual Report. Voting Unitholders who wish to be added to the mailing list for the annual and interim financial statements and
MD&A should contact the Fund at 135 Queens Plate Drive, Suite 300, Toronto, Ontario, M9W 6V1. 

        The
Annual Report (including the financial statements and MD&A), the AIF and other information relating to the Fund are available on SEDAR at www.sedar.com. 

 
 

  OTHER MATTERS    
    

        The Trustees know of no other amendment, variation or other matter to come before the Meeting other than the matters referred to in the
Notice. However, if any other matter properly comes before the Meeting, the accompanying proxy will be voted on such matter in accordance with the best judgment of the person or persons voting
the proxy. 

23

 
 
 

  APPROVAL OF TRUSTEES    
    

        The contents of this Circular and its sending to Voting Unitholders of the Fund have been approved by the Trustees of the Fund. 

			
	 	 	BY ORDER OF THE BOARD OF TRUSTEES
	

 	
 	

 
	

 	
 	

WILLIAM CHYFETZ

4264126 Canada Limited, in its capacity as attorney for BFI Canada Income Fund

Toronto,
Ontario

April 3, 2008 

24

 

 
 

  SCHEDULE A    
    

 
    AMENDED AND RESTATED UNIT OPTION PLAN RESOLUTION    
    

 Special Resolution of the Unitholders of BFI Canada Income Fund  

        RESOLVED, that the amendments to the Unit Option Plan of BFI Canada Income Fund
(the "Fund") adopted by the Board of Trustees, as summarized in the Management Information Circular to which this resolution is attached as Schedule A, is hereby approved
and adopted. 

        RESOLVED, that any Trustee of the Fund or any director or officer of 4264126 Canada Limited, in its capacity as attorney for the
Fund, is hereby authorized and directed in the name of and on behalf of the Fund, to execute and deliver or cause to be delivered all such documents and to do all such other acts and things as such
person may consider necessary or desirable in order to carry out the intent of the foregoing and the matters authorized hereby. 

A-1

 

 
 

  SCHEDULE B
  
    MANDATE OF THE TRUSTEES OF BFI CANADA INCOME FUND    
    

        The purpose of this document is to summarize the governance and management roles and responsibilities of the Trustees of the BFI Canada
Income Fund (the "Fund"). 

1.     Accountability  

        The Trustees are responsible to Unitholders of the Fund. 

2.     Role  

        The role of the Trustees is to focus on governance and stewardship. Their role is to review corporate direction (strategy), assign responsibility to management
for achievement of that direction, establish executive limitations, and monitor performance against those objectives. In fulfilling this role, the Trustees will regularly review management's strategic
plans so that they continue to be responsive to the changing business environment in which the Fund operates. 

3.     Responsibilities  

        To fulfill their role, the Trustees will: 

	(a)
	Define Unitholder Expectations for Corporate Performance Through Effective Communication with
Unitholders

	•
	Satisfy itself that there is effective communication between the Trustees and the Fund's unitholders, other stakeholders,
and the public. 

 
	•
	Determine, from time to time, the appropriate criteria against which to evaluate performance, and set strategic goals and
objectives within this context.

	(b)
	Establish Strategic Goals, Performance Objectives and Operational Policies

The
Trustees will review and approve broad strategic objectives for the Fund and establish values against which the Fund's performance will be measured. In this regard, the
Trustees will:

	•
	Approve long-term strategies. 

 
	•
	Review and approve management's strategic and operational plans so that they are consistent
with long-term
goals. 

 
	•
	Approve strategic and operational policies within which management will operate.

 
	•
	Set targets against which to measure executive performance. 

 
	•
	Satisfy itself that a portion of executive
compensation is linked appropriately to the Fund's performance.

 
	•
	Satisfy itself that a process is in place with respect to the appointment, development, evaluation and succession of
senior management.

	(c)
	Monitor Fund Performance

	•
	Understand, assess and monitor the principal risks of all aspects of the business in which the Fund is engaged.

 
	•
	Monitor Fund performance against both short-term and long-term strategic plans and annual
performance targets, and monitor compliance with Trustee's policies and the effectiveness of risk management practices. 

B-1

 

	(d)
	Develop Trustee Processes

	•
	Develop procedures relating to the conduct of the Trustees and the fulfillment of the Trustee's responsibilities. In this
regard the Trustees will:

 
	•
	Ensure the Audit Committee of the Fund puts in place procedures to receive and handle complaints or concerns received by
the Fund about accounting or audit matters including those submitted anonymously by an employee of the Fund. 

 
	•
	To the extent feasible, satisfy itself as to the integrity of
the Chief Executive Officer (CEO) and other executive
officers and that the CEO and other executive officers create a culture of integrity throughout the organization. 

 
	•
	Establish expectations and responsibilities of Trustees,
including basic duties and responsibilities with respect to
attendance at board meetings and advance review of meeting materials. 

B-2

QuickLinks

Exhibit 4.2

NOTICE OF ANNUAL AND SPECIAL MEETING OF UNITHOLDERS

MANAGEMENT INFORMATION CIRCULAR

THE FUND AND BFI CANADA NEWCO

PROXY SOLICITATION AND VOTING AT THE ANNUAL AND SPECIAL MEETING

TRUST UNITS AND THE RETAINED INTEREST

MATTERS TO BE CONSIDERED AT THE MEETING

COMPENSATION OF EXECUTIVE OFFICERS

COMPENSATION OF TRUSTEES OF THE FUND AND DIRECTORS OF BFI CANADA NEWCO

INDEBTEDNESS

STATEMENT OF CORPORATE GOVERNANCE PRACTICES

DIRECTORS' AND OFFICERS' LIABILITY INSURANCE

ADDITIONAL INFORMATION

OTHER MATTERS

APPROVAL OF TRUSTEES

SCHEDULE A

AMENDED AND RESTATED UNIT OPTION PLAN RESOLUTION

SCHEDULE B MANDATE OF THE TRUSTEES OF BFI CANADA INCOME FUNDQuickLinks
 -- Click here to rapidly navigate through this document
 

 
 

  Exhibit 4.3    
    

 
 

  MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS    
    

        The consolidated financial statements of BFI Canada Income Fund are the responsibility of management and have been approved by
the Trustees. 

        The
consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. The consolidated financial statements include
some amounts that are based on estimates and judgments. Management has determined such amounts on a reasonable basis to ensure that the consolidated financial statements are presented fairly, in all
material respects. 

        BFI
Canada Income Fund maintains systems of internal accounting and administrative controls. These systems are designed to provide reasonable assurance that the financial information is
relevant, reliable and accurate and that the Fund's assets are properly accounted for and adequately safeguarded. 

        The
Trustees are responsible for ensuring that management fulfills its responsibilities for financial reporting and are ultimately responsible for reviewing and approving the
consolidated financial statements. The Trustees carry out this responsibility principally through their Audit Committee. 

        The
Audit Committee is appointed by the Trustees and is comprised entirely of non-management Trustees. The Audit Committee meets periodically with management and the external
auditors to discuss auditing, internal controls, accounting policy, and financial reporting matters. The Audit Committee reviews the consolidated financial statements with both management and the
external auditors and reports its findings to the Trustees before such statements are approved by the Trustees. 

        The
consolidated financial statements have been audited by Deloitte & Touche LLP, the external auditors, in accordance with Canadian generally accepted auditing standards. 

			
	/s/ Keith Carrigan

Vice Chairman and Chief Executive Officer

October 8, 2008	 	/s/ Thomas Cowee

Chief Financial Officer

October 8, 2008

1

 

 
 

  REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS    
    

To
the Unitholders of BFI Canada Income Fund 

        We
have audited the consolidated balance sheets of BFI Canada Income Fund as at December 31, 2007 and 2006 and the consolidated statements of operations and comprehensive (loss)
income and cash flows and unitholders' equity, deficit and accumulated other comprehensive loss for the years then ended. These financial statements are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements based on our audits. 

        We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance
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. 

        In
our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Fund as at December 31, 2007 and 2006 and the
results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. 

        The
Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over
financial reporting as a basis of designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal
control over financial reporting. Accordingly we express no such opinion. 

        On
February 29, 2008 and March 1, 2007, we reported separately to the Fund's unitholders on our audits of the Fund's consolidated financial statements as at and for the
years ended December 31, 2007 and 2006, respectively, prepared in accordance with Canadian generally accepted accounting principles but did not include Note 24, subsequent events, and
Note 25, reconciliation of the consolidated financial statements with United States generally accepted accounting principles. 

/s/
Deloitte & Touche LLP

Independent Registered Chartered Accountants

Licensed Public Accountants

Toronto, Ontario

February 29, 2008, except as to Notes 24 and 25 which are as of October 8, 2008 

2

 

 

 
    BFI CANADA INCOME FUND    
      
    CONSOLIDATED BALANCE SHEETS    
      
    December 31, 2007 and December 31, 2006    
      
    (in thousands of dollars)
  
        
    

									
	 
	 	December 31,

2007 	 	December 31,

2006 	 
	 ASSETS
	 	 	 	 	 	 	 
	 CURRENT
	 	 	 	 	 	 	 
	 	 Cash and cash equivalents
	 	$	13,359	 	$	9,275	 
	 	 Accounts receivable
	 	 	115,851	 	 	102,350	 
	 	 Due from non-controlling interest (Note 12)
	 	 	—	 	 	6,638	 
	 	 Other receivables
	 	 	457	 	 	1,737	 
	 	 Prepaid expenses
	 	 	15,001	 	 	11,665	 
	 	 	 	 	 	 
	
	 	 	144,668	 	 	131,665	 
	 OTHER RECEIVABLES
	 	 	761	 	 	1,517	 
	 FUNDED LANDFILL POST-CLOSURE COSTS (Note 10)
	 	 	5,976	 	 	4,142	 
	 INTANGIBLES (Note 5)
	 	 	144,686	 	 	77,204	 
	 GOODWILL
	 	 	616,534	 	 	481,334	 
	 DEFERRED COSTS
	 	 	7,306	 	 	4,051	 
	 DEFERRED FINANCING COSTS
	 	 	—	 	 	7,015	 
	 CAPITAL ASSETS (Note 6)
	 	 	404,900	 	 	322,372	 
	 LANDFILL ASSETS (Note 7)
	 	 	644,711	 	 	730,290	 
	 OTHER ASSETS (Notes 8 & 19)
	 	 	1,670	 	 	7,070	 
	 	 	 	 	 	 
	
	 	$	1,971,212	 	$	1,766,660	 
	 	 	 	 	 	 
	 LIABILITIES
	 	 	 	 	 	 	 
	 CURRENT
	 	 	 	 	 	 	 
	 	 Accounts payable
	 	$	66,815	 	$	64,284	 
	 	 Accrued charges
	 	 	75,355	 	 	57,318	 
	 	 Distribution and dividends payable
	 	 	10,409	 	 	9,907	 
	 	 Income taxes payable
	 	 	2,515	 	 	1,280	 
	 	 Deferred revenues
	 	 	12,018	 	 	10,212	 
	 	 Current portion of long-term debt (Note 9)
	 	 	—	 	 	50	 
	 	 Landfill closure and post-closure costs (Note 10)
	 	 	2,900	 	 	5,824	 
	 	 	 	 	 	 
	
	 	 	170,012	 	 	148,875	 
	 LONG-TERM DEBT (Note 9)
	 	 	801,973	 	 	543,454	 
	 LANDFILL CLOSURE AND POST-CLOSURE COSTS (Note 10)
	 	 	55,943	 	 	58,711	 
	 OTHER LIABILITIES (Notes 8 & 19)
	 	 	5,056	 	 	383	 
	 FUTURE INCOME TAX LIABILITIES (Note 11)
	 	 	57,668	 	 	31,922	 
	 	 	 	 	 	 
	
	 	 	1,090,652	 	 	783,345	 
	 	 	 	 	 	 
	 NON-CONTROLLING INTEREST (Note 12)
	 	 	251,371	 	 	282,026	 
	 UNITHOLDERS' EQUITY (Note 13)
	 	 	629,189	 	 	701,289	 
	 	 	 	 	 	 
	
	 	$	1,971,212	 	$	1,766,660	 
	 	 	 	 	 	 

3

 
 
    BFI CANADA INCOME FUND    
      
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME    
      
    For the years ended December 31, 2007 and 2006    

    
    (in thousands of dollars, except net income per trust unit amounts)    
        
    

									
	 
	 	2007 	 	2006 	 
	 REVENUES
	 	$	917,357	 	$	771,819	 
	 	 	 	 	 	 
	 EXPENSES
	 	 	 	 	 	 	 
	 	 OPERATING
	 	 	531,614	 	 	436,311	 
	 	 SELLING, GENERAL AND ADMINISTRATION
	 	 	110,208	 	 	99,591	 
	 	 	 	 	 	 
	 INCOME BEFORE THE FOLLOWING
	 	 	275,535	 	 	235,917	 
	 AMORTIZATION
	 	 	161,006	 	 	148,128	 
	 INTEREST ON LONG-TERM DEBT
	 	 	42,964	 	 	34,307	 
	 FINANCING COSTS (Note 15)
	 	 	7,192	 	 	79	 
	 NET GAIN ON SALE OF CAPITAL ASSETS
	 	 	(1,434	)	 	(443	)
	 NET LOSS ON FINANCIAL INSTRUMENTS (Note 19)
	 	 	9,384	 	 	3,363	 
	 NET FOREIGN EXCHANGE LOSS (GAIN) (Note 16)
	 	 	13,671	 	 	(2,578	)
	 OTHER EXPENSES
	 	 	48	 	 	210	 
	 	 	 	 	 	 
	 INCOME BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST
	 	 	42,704	 	 	52,851	 
	 	 	 	 	 	 
	 INCOME TAX EXPENSE (RECOVERY) (Note 11)
	 	 	 	 	 	 	 
	 	 Current
	 	 	8,779	 	 	5,610	 
	 	 Future
	 	 	(4,082	)	 	7,307	 
	 	 	 	 	 	 
	
	 	 	4,697	 	 	12,917	 
	 	 	 	 	 	 
	 INCOME BEFORE NON-CONTROLLING INTEREST
	 	 	38,007	 	 	39,934	 
	 NON-CONTROLLING INTEREST (Note 12)
	 	 	6,320	 	 	7,191	 
	 	 	 	 	 	 
	 NET INCOME
	 	 	31,687	 	 	32,743	 
	 	 	 	 	 	 
	 OTHER COMPREHENSIVE (LOSS) INCOME
	 	 	 	 	 	 	 
	 	 Foreign currency translation adjustment
	 	 	(95,859	)	 	(421	)
	 	 	 	 	 	 
	 COMPREHENSIVE (LOSS) INCOME
	 	$	(64,172	)	$	32,322	 
	 	 	 	 	 	 
	 Net income per trust unit, basic and diluted
	 	$	0.56	 	$	0.61	 
	 Weighted average number of trust units outstanding (thousands), basic (Note 13)
	 	 	56,564	 	 	53,506	 
	 Weighted average number of trust units outstanding (thousands), diluted (Note 13)
	 	 	67,803	 	 	65,391	 

4

 

 
    BFI CANADA INCOME FUND    
      
    CONSOLIDATED STATEMENTS OF CASH FLOWS    
      
    For the years ended December 31, 2007 and 2006    
      
    (in thousands
of dollars)    
        
    

										
	 
	 	2007 	 	2006 	 
	 NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES
	 	 	 	 	 	 	 
	 OPERATING
	 	 	 	 	 	 	 
	 	 Net income
	 	$	31,687	 	$	32,743	 
	 	 Items not affecting cash
	 	 	 	 	 	 	 
	 	 	 Write-off of deferred costs
	 	 	129	 	 	847	 
	 	 	 Accretion of landfill closure and post-closure costs
	 	 	3,086	 	 	2,932	 
	 	 	 Amortization of intangibles
	 	 	25,443	 	 	19,851	 
	 	 	 Amortization of deferred financing costs
	 	 	—	 	 	1,380	 
	 	 	 Amortization of capital assets
	 	 	66,295	 	 	56,874	 
	 	 	 Amortization of landfill assets
	 	 	69,268	 	 	70,023	 
	 	 	 Write-off of deferred financing costs
	 	 	—	 	 	79	 
	 	 	 Net gain on sale of capital assets
	 	 	(1,434	)	 	(443	)
	 	 	 Net loss on financial instruments
	 	 	9,384	 	 	3,363	 
	 	 	 Net unrealized foreign exchange loss
	 	 	9,683	 	 	96	 
	 	 	 Future income taxes
	 	 	(4,082	)	 	7,307	 
	 	 	 Non-controlling interest
	 	 	6,320	 	 	7,191	 
	 	 Landfill closure and post-closure expenditures
	 	 	(4,541	)	 	(13,016	)
	 	 	 	 	 	 
	
	 	 	211,238	 	 	189,227	 
	 	 Changes in non-cash working capital items
	 	 	6,177	 	 	(3,529	)
	 	 	 	 	 	 
	 Cash generated from operating activities
	 	 	217,415	 	 	185,698	 
	 	 	 	 	 	 
	 INVESTING
	 	 	 	 	 	 	 
	 	 Acquisitions (Note 4 & 17)
	 	 	(366,244	)	 	(33,578	)
	 	 Investment in other receivables
	 	 	(610	)	 	(2,095	)
	 	 Proceeds from other receivables
	 	 	2,596	 	 	1,633	 
	 	 Funded landfill post-closure costs
	 	 	(1,472	)	 	(2,525	)
	 	 Purchase of capital assets
	 	 	(96,176	)	 	(74,334	)
	 	 Purchase of landfill assets
	 	 	(59,693	)	 	(55,051	)
	 	 Proceeds from the sale of capital assets
	 	 	1,996	 	 	1,183	 
	 	 Investment in deferred costs
	 	 	(3,385	)	 	(1,910	)
	 	 	 	 	 	 
	 Cash utilized in investing activities
	 	 	(522,988	)	 	(166,677	)
	 	 	 	 	 	 
	 FINANCING
	 	 	 	 	 	 	 
	 	 Payment of deferred financing costs
	 	 	—	 	 	(1,890	)
	 	 Proceeds from long-term debt
	 	 	562,415	 	 	215,406	 
	 	 Repayment of long-term debt
	 	 	(218,644	)	 	(123,774	)
	 	 Trust units issued, net of issue costs
	 	 	87,562	 	 	(46	)
	 	 Distributions and dividends paid to unitholders and participating preferred shareholders
	 	 	(122,824	)	 	(113,649	)
	 	 	 	 	 	 
	 Cash generated from (utilized in) financing activities
	 	 	308,509	 	 	(23,953	)
	 	 	 	 	 	 
	 Effect of foreign exchange changes on foreign cash and cash equivalents
	 	 	1,148	 	 	65	 
	 	 	 	 	 	 
	 NET CASH INFLOW (OUTFLOW)
	 	 	4,084	 	 	(4,867	)
	 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
	 	 	9,275	 	 	14,142	 
	 	 	 	 	 	 
	 CASH AND CASH EQUIVALENTS, END OF YEAR
	 	$	13,359	 	$	9,275	 
	 	 	 	 	 	 
	 SUPPLEMENTAL CASH FLOW INFORMATION:
	 	 	 	 	 	 	 
	 	 Cash and cash equivalents are comprised of:
	 	 	 	 	 	 	 
	 	 	 Cash
	 	$	12,612	 	$	9,269	 
	 	 	 Cash equivalents
	 	 	747	 	 	6	 
	 	 	 	 	 	 
	
	 	$	13,359	 	$	9,275	 
	 	 	 	 	 	 
	 	 Cash paid during the year for:
	 	 	 	 	 	 	 
	 	 	 Income taxes
	 	$	6,210	 	$	4,014	 
	 	 	 Interest
	 	$	45,055	 	$	32,619	 

5

 
 
    BFI CANADA INCOME FUND    
      
    CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY,
  DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS    
      
    For the years ended
December 31, 2007 and 2006    
      
    (in thousands of dollars)    
        
    

									
	 
	 	2007 	 	2006 	 
	 CONTRIBUTED EQUITY
	 	 	 	 	 	 	 
	 	 Trust units, beginning of year
	 	$	908,221	 	$	891,070	 
	 	 Trust units issued, net of issue costs and related tax effect, during the year (Note 13)
	 	 	89,414	 	 	(46	)
	 	 Trust units issued on exchange of participating preferred shares ("PPSs"), during the year
	 	 	9,116	 	 	17,197	 
	 	 	 	 	 	 
	 	 Trust units, end of year
	 	 	1,006,751	 	 	908,221	 
	 	 	 	 	 	 
	 	 Class A units, beginning of year
	 	 	—	 	 	—	 
	 	 Class A units issued, during the year
	 	 	—	 	 	—	 
	 	 	 	 	 	 
	 	 Class A units, end of year
	 	 	—	 	 	—	 
	 	 	 	 	 	 
	 	 Treasury units, beginning of year
	 	 	—	 	 	—	 
	 	 Trust units acquired by the U.S. LTIP, during the year
	 	 	(1,698	)	 	(1,281	)
	 	 Deferred compensation obligation, during the year
	 	 	1,698	 	 	1,281	 
	 	 	 	 	 	 
	 	 Treasury units, end of year
	 	 	—	 	 	—	 
	 	 	 	 	 	 
	 TOTAL CONTRIBUTED EQUITY
	 	 	1,006,751	 	 	908,221	 
	 	 	 	 	 	 
	 DEFICIT
	 	 	 	 	 	 	 
	 	 Accumulated net income, beginning of year
	 	 	86,947	 	 	54,204	 
	 	 Accumulated distributions, beginning of year
	 	 	(260,991	)	 	(167,270	)
	 	 	 	 	 	 
	 	 Deficit, beginning of year
	 	 	(174,044	)	 	(113,066	)
	 	 	 	 	 	 
	 	 Net income, during the year
	 	 	31,687	 	 	32,743	 
	 	 Transition adjustment, during the year (Note 3)
	 	 	(3,570	)	 	—	 
	 	 Distributions declared, during the year
	 	 	(102,888	)	 	(93,721	)
	 	 	 	 	 	 
	 	 Accumulated net income, end of year
	 	 	115,064	 	 	86,947	 
	 	 	 	 	 	 
	 	 Accumulated distributions, end of year
	 	 	(363,879	)	 	(260,991	)
	 	 	 	 	 	 
	 DEFICIT, END OF YEAR
	 	 	(248,815	)	 	(174,044	)
	 	 	 	 	 	 
	 ACCUMULATED OTHER COMPREHENSIVE LOSS
	 	 	 	 	 	 	 
	 	 Accumulated other comprehensive loss, beginning of year
	 	 	(32,888	)	 	(32,467	)
	 	 Foreign currency translation adjustment, during the year
	 	 	(95,859	)	 	(421	)
	 	 	 	 	 	 
	 ACCUMULATED OTHER COMPREHENSIVE LOSS, END OF YEAR
	 	 	(128,747	)	 	(32,888	)
	 	 	 	 	 	 
	 DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS, END OF YEAR
	 	 	(377,562	)	 	(206,932	)
	 	 	 	 	 	 
	 UNITHOLDERS' EQUITY
	 	$	629,189	 	$	701,289	 
	 	 	 	 	 	 

6

 

 

 
    BFI CANADA INCOME FUND
  
  
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
      
    For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated)    
        
    

 1.     ORGANIZATION  

BFI
Canada Income Fund (the "Fund") is an open ended, limited purpose trust established under the laws of the province of Ontario and governed by a Second Amended and Restated Declaration of
Trust dated January 21, 2005, as supplemented from time to time. The Fund, through its operating subsidiaries, provides vertically integrated non-hazardous solid waste ("waste")
services to commercial, industrial, municipal and residential customers in Canada and the south and northeast United States ("U.S."). The Fund makes cash distributions to unitholders based on
all amounts received by the Fund, and IESI Corporation ("IESI"), an indirect subsidiary of the Fund, pays equivalent dividends to participating preferred shareholders ("non-controlling
interest"), as determined by the Trustees. The declaration of trust provides that monthly cash distributions are to be paid on or about the fifteenth day of the succeeding month. 

 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  

These
consolidated financial statements have been prepared in conformity with Canadian generally accepted accounting principles ("GAAP"), are stated in Canadian dollars, and reflect the following
significant accounting policies. 

 Basis of presentation  

The
consolidated financial statements include the accounts of the Fund and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation. 

 Use of estimates  

The
preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates and
assumptions include the following: estimates of the Fund's allowance for doubtful accounts receivable; realization of future income tax assets; future earnings, income tax and other estimates used in
the determination of the fair value of goodwill for the Fund's annual test of impairment; deferred costs recoverability assumptions; the useful life of capital and intangible assets; estimates and
assumptions used in the determination of the fair value of contingent acquisition payments; accrued accident claims reserves; projected landfill construction and development costs and estimated
permitted airspace capacity consumed in the determination of landfill asset amortization; estimated landfill remediation costs; estimated closure and post-closure costs; various economic
estimates used in the development of fair value estimates; and future income tax assets and liabilities. 

Effective
February 10, 2004, BFI Usine de Triage Lachenaie Ltd ("Lachenaie"), an indirect subsidiary of the Fund, received approval to expand its landfill by an additional
6.5 million cubic metres which, depending on the annual volume of waste entering the site, is the
equivalent of approximately 5 years of operation. The Fund has commenced the process to obtain expansion approvals for this permit, which if not successful would result in a material
adjustment, at December 31, 2007, to the following assets: goodwill $19,859 (December 31, 2006 — $19,859) and landfill assets $85,136
(December 31, 2006 — $86,239). 

Management
remains confident that approval for the Lachenaie expansion will be obtained prior to the expiry of the current operating permit. Accordingly no provision for impairment has
been recorded. 

The
Fund makes various estimates in the determination of estimated permitted airspace capacity. These estimates, if not realized, could result in material adjustments to landfill assets, goodwill, and
landfill closure and post-closure costs. 

 Cash and cash equivalents  

Cash
and cash equivalents include cash and short-term, highly liquid money market investments that have an original term to maturity of three months or less. 

 Other receivables  

Other
receivables include direct finance lease and long-term finance receivables. 

Assets
leased under terms that transfer substantially all of the benefits and risks and rewards of ownership to customers are accounted for as direct finance lease receivables. Direct finance lease
receivables are carried at cost and discounted at the underlying rate implicit in the receivable. 

Long-term
finance receivables are carried at cost plus unearned finance revenues. 

7

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 

The
fair value of other receivables is estimated using a discounted cash flow analysis applying interest rates that management considers consistent with the credit quality of the borrower. Other
receivables are periodically reviewed for impairment and any resulting write-down to the net recoverable amount is recorded in the period in which the impairment occurs. 

 Intangibles  

Intangible
assets include customer collection contracts, customer lists, non-competition agreements, transfer station permits, and trade-names, and all are deemed to have finite lives.
Finite life intangibles are amortized on a straight-line basis as follows: 

			
	 Customer collection contracts
	 	Estimated contract term net of attrition
	 Customer lists
	 	2-12 years
	 Non-competition agreements
	 	2-5 years
	 Transfer station permits
	 	10-25 years
	 Trade-names
	 	2-13 years

 Goodwill  

Goodwill
is not amortized and is tested at least annually for impairment or more frequently if an event or circumstance occurs that more likely than not reduces the fair value of a reporting unit
below its carrying amount. Any resulting write-down, representing the difference between fair value and the carrying amount, is recorded in the period in which the impairment occurs. The
annual impairment test was completed on April 30, 2007 and did not result in the recognition of an impairment loss. 

 Deferred costs  

Deferred
costs relate to the development of landfills, including landfill permitting costs, capital projects, acquisition and transaction related costs for acquisitions which have not yet been
consummated and other costs which are deferred to a future period. Management periodically reviews the carrying values of deferred costs for impairment and any resulting write-down to the
net recoverable amount is recorded in the period in which the impairment occurs. 

 Capital assets  

Capital
assets are recorded at cost and are amortized over their estimated useful lives on a straight-line basis as follows: 

			
	 Buildings and improvements
	 	10-40 years
	 Vehicles and equipment
	 	3-10 years
	 Containers and compactors
	 	5-10 years
	 Furniture, fixtures and computer equipment
	 	3-10 years

 Landfill assets  

Landfill
assets represent the cost of landfill airspace, including original acquisition cost, incurred landfill construction and development costs, including gas collection systems installed during
the operating life of the site, and capitalized landfill closure and post-closure costs. 

The
cost of landfill assets, together with projected landfill construction and development costs, is amortized on a per unit basis as landfill airspace is consumed. 

Management
annually updates landfill capacity estimates, based on survey information provided by independent engineers, and projected landfill construction and development costs. The impact on annual
amortization expense of changes in estimated capacity and construction costs is accounted for prospectively. 

8

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Total
available disposal capacity for the purpose of amortizing landfill assets represents the sum of estimated permitted airspace capacity (having received the final permit from the governing
authorities) plus future permitted airspace capacity, which represents an estimate of airspace capacity that management believes is probable of being permitted based on the following
criteria:

	•
	Personnel are actively working to obtain the permit or permit modifications necessary for expansion of an existing
landfill, and progress is being made on the project; 

 
	•
	It is probable that the required approvals will be received within the normal application and processing time periods
for
approvals in the jurisdiction in which the landfill is located; 

 
	•
	The Fund has a legal right to use or obtain land associated with the expansion plan;

 
	•
	There are no significant known political, technical, legal or business restrictions or issues that could impair the success
of the expansion effort; 

 
	•
	Management is committed to pursuing the expansion; and 

 
	•
	Additional airspace
capacity and related costs have been estimated based on the conceptual design of the proposed
expansion. 

The
Fund and its predecessors have been successful in receiving approvals for expansions pursued; however, there can be no assurance that the Fund will be successful in obtaining approvals for
landfill expansions in the future. 

 Landfill closure and post-closure costs  

Costs
associated with capping, closing and monitoring the landfill after it ceases to accept waste are recognized at fair value over the landfill's operating life which is the period over which the
landfill accepts waste. 

The
Fund develops estimates for closure and post-closure costs with input from its engineers, and landfill and accounting personnel. Estimates are reviewed at least once annually and
consider the various regulations that govern each facility. Revenues derived from the Fund's landfill gas to energy facilities do not reduce the Fund's closure and post-closure cost
estimates for periods during or post waste acceptance. The Fund's landfill closure and post-closure cost estimates approximate fair value, as quoted market prices are generally not
available. Accordingly, the Fund develops its fair value estimates using present value techniques that considers and incorporates assumptions marketplace participants would use in the determination of
these estimates, including inflation, markups, inherent uncertainties due to the timing of work performed, information obtained from third parties, quoted and actual prices paid for similar work and
engineering estimates. Inflation assumptions are based on management's understanding of current and future economic conditions and the expected timing of expenditures. An inflation factor of 3.0% and
2.5% has been used in the derivation of fair value estimates for the Fund's Canadian and U.S. landfills, respectively. Fair value estimates are then discounted back to their present value using
the credit adjusted risk free rate, which is the rate of interest that is essentially free of default risk, plus an adjustment for the Fund's credit standing. The credit adjusted risk free rate is
based on management's understanding of current and future economic conditions and the expected timing of expenditures. Accordingly, the Fund has discounted landfill closure and
post-closure costs using a credit adjusted risk free rate of 5.6% and 7.2% for its Canadian and U.S. landfills, respectively. Due to the inherent uncertainty in making these
estimates, actual results could differ. Future changes in the Fund's credit standing do not change previously recorded closure and post-closure costs, but impact subsequent fair value
calculations. 

Reliable
estimates of market risk premiums are not available as there is no existing market for selling the responsibility of landfill closure and post-closure activities. Accordingly, the
Fund has excluded any estimate of market risk premiums in the determination of fair value for landfill closure and post-closure costs. 

Upward
revisions to estimated closure and post-closure costs are discounted using the current credit adjusted risk free rate. Downward revisions to estimated closure and
post-closure costs are discounted using the credit adjusted risk free rate when the estimated closure and post-closure costs were originally recorded or a weighted average
credit adjusted risk free rate if the period of original recognition cannot be identified. 

The
Fund records the estimated fair value of landfill closure and post-closure costs as airspace is consumed. The total obligation will be fully accrued at the time these facilities cease
to accept waste and are closed. 

Maintenance
activities including: environmental monitoring, mowing and fertilizing, leachate management, well monitoring, buffer maintenance, landfill gas to energy collection and flaring systems, and
other activities, are charged to operating expenses during the operating life of the landfill. These same costs are estimated and included in the Fund's landfill closure and post-closure
accruals for all 

9

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 

activities
that occur post the landfill's operating life. Maintenance activities are generally required for a period of 30 years post waste acceptance. 

Accretion,
representing an increase in the carrying amount of landfill closure and post-closure cost accruals due to the passage of time, is recognized as an operating expense in the
consolidated statement of operations and comprehensive (loss) income and continues post waste acceptance. 

 Income taxes  

Future
income taxes are calculated using the liability method of accounting for income taxes. Future income tax assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities, and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect
of a change in tax rates on future income tax assets and liabilities is recorded to operations in the period in which the change occurs. Unutilized tax loss carryforwards that are not more likely than
not to be realized are reduced by a valuation allowance in the determination of future income tax assets. 

 Revenues  

Revenues
consist primarily of waste collection fees from commercial, industrial, municipal and residential customers, and transfer and landfill disposal fees charged to third parties. For waste
collection and disposal activities, revenue is recognized when service is provided, persuasive evidence of an arrangement exists, and the price is determinable. 

Deferred
revenue relates to long-term collection contracts, under which advanced billing occurs or cash is received prior to the services being performed. 

 Acquisitions  

The
Fund accounts for acquisitions using the purchase method of accounting and allocates the purchase price to the fair value of assets and liabilities acquired. Acquired assets are amortized over the
remaining useful life of the underlying asset. The allocation of the purchase price may require adjustment when information is absent and fair value allocations are presented on an estimated or
preliminary basis. Subsequent adjustments to estimated or preliminary amounts are recorded to the purchase price allocation. 

Certain
of the Fund's purchase and sale agreements contain contingent consideration provisions. Contingent consideration which can be reasonably estimated at the date of acquisition and the outcome of
which can be determined beyond reasonable doubt, is recognized at fair value in the purchase price allocation. Consideration which is contingent on maintaining or achieving specified revenue or
earning levels, satisfying representations and warranties, achieving specified tonnage thresholds, in the case of acquired landfills, or receiving approval from regulatory authorities for landfill
expansion, is recognized as an adjustment to the purchase price allocation when the contingency is resolved and the additional consideration is issued or becomes issuable. Additional consideration
paid in respect of compensation for services, use of property, or profit sharing is recognized as an expense in the consolidated statement of operations and comprehensive (loss) income. 

 Royalties  

Certain
of the Fund's purchase and sale agreements contain provisions to make royalty payments. Royalty payments are recorded to operating expenses on the consolidated statement of operations and
comprehensive (loss) income as amounts are paid or become payable. 

 Impairment of long-lived assets  

An
impairment loss is recognized when events or circumstances indicate that the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. Any resulting
impairment loss is recorded in the period in which the impairment occurs. 

 Non-controlling interest  

Non-controlling
interest represents a direct non-controlling equity interest in the Fund through IESI's PPS holdings. The non-controlling interest is entitled to
dividends that are economically equivalent to distributions of the Fund. PPSs are recorded at their exchange amount, which is measured at the weighted average trading price of the Fund's trust units
at the date of issuance. The 

10

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 

weighted
average trading price represents the average price of the Fund's trust units for a reasonable period before and after the terms of the IESI acquisition were announced and agreed to. Exchanges
of PPSs into trust units of the Fund are recorded at the carrying value of the PPSs at issuance net of net income (loss) and dividends attributable to PPSs to the date of exchange. 

 Trust unit based compensation  

Trust
unit based compensation is recognized as compensation expense and is measured at the fair value of trust units issued on the date of grant. Trust unit options issued with trust unit appreciation
rights give the holder the right to surrender to the Fund all or a portion of a trust unit option in exchange for cash equal to the excess of the fair market value, defined as the five day volume
weighted average trading price of a trust unit, over the trust unit option exercise price. Trust unit appreciation rights, and changes thereto, are recorded as selling, general and administration
expenses when the quoted market price of the trust units exceeds the trust unit option exercise price with an offset to other liabilities. If the holder of the trust unit option elects to purchase
trust units, the accrued liability is credited to contributed surplus. 

 Financial instruments  

Derivatives,
including derivatives that are embedded in financial or non-financial contracts that are not closely related to the host contract, subject to certain exceptions, are measured
at fair value, even when they are part of a hedging relationship. Non-derivative financial assets and liabilities are measured at fair value, with the exception of the following: loans and
receivables; held-to-maturity investments; investments in equity instruments, classified as available for sale, that do not have a quoted market price in an active market; and
financial liabilities measured at amortized cost. 

Gains
or losses on financial instruments measured at fair value are recognized in the consolidated statement of operations and comprehensive (loss) income in the periods in which they arise, with the
exception of the following: gains and losses on financial assets classified as available for sale and certain financial instruments that are part of a designated hedging relationship. 

Classifications
of financial instruments are as follows: 

Held for trading — is a financial asset or liability that meets any of the following conditions: it is acquired or
incurred principally for the purpose of sale or repurchase in the near term, part of a portfolio of identified financial instruments that are
managed together, and is a derivative not designated for hedge accounting or it is designated by the Fund upon initial recognition as held for trading. Held for trading financial instruments are
measured at fair value. Upon initial recognition, the Fund has designated the following financial assets as held for trading: cash and cash equivalents and funded landfill post-closure
costs. Reclassification of financial instruments while held or issued is prohibited. Gains or losses on funded landfill post-closure costs are recorded in the consolidated statement of
operations and comprehensive (loss) income as a gain or loss on financial instruments with an offset to funded landfill post-closure costs on the Fund's consolidated balance sheet. 

Loans and receivables — are non-derivative financial assets resulting from the delivery of cash or other
assets by a lender to a borrower in return for a promise to repay on a specified date or dates, or on demand, typically with interest. Loans and receivables exclude debt securities and loans and
receivables designated as held for trading or available for sale upon initial recognition. Loans and receivables are measured at amortized cost. The Fund has classified accounts receivable and other
receivables as loans and receivables. 

Held-to-maturity investments — are non-derivative financial assets with fixed or
determinable payments and fixed maturity that the Fund has a positive intention and ability to hold to maturity. Exclusions include those financial assets that upon initial recognition are designated
as held for trading, designated as available for sale, and those financial assets that meet the definition of loans and receivables. Held-to-maturity investments are measured
at amortized cost, subsequent to initial recognition. The Fund has no financial assets designated as held-to-maturity. 

Available for sale — are non-derivative financial assets that are designated as available for sale, or
that are not classified as loans and receivables, held-to-maturity investments, or held for trading. Available for sale financial assets are measured at fair value. The Fund
has no financial assets designated as available for sale. 

Other financial liabilities — includes all financial liabilities which are not classified as held for trading. Other
financial liabilities are measured at amortized cost, subsequent to initial recognition. The Fund has classified accounts payable, accrued charges, current portion of and long-term debt,
and other liabilities (contingent acquisition payables), as other financial liabilities. 

11

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Derivatives
are financial instruments or other contracts that embody all of the following characteristics:

	•
	its value changes in response to the change in a specified interest rate, financial instrument price, commodity price,
foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable (sometimes called the "underlying"), provided that, in the case of a non-financial
variable, the variable is not specific to a party to the contract; 

 
	•
	it requires no initial net investment or an initial net investment that is smaller than would be required
for other types
of contracts that would be expected to have a similar response to changes in market factors; and 

 
	•
	it is settled at a future date. 

The
Fund has three types of derivative financial instruments, classified as held for trading, which include the following: interest rate swaps, foreign currency exchange agreements, and old corrugated
cardboard ("OCC") hedges. Gains or losses on these derivative instruments are recorded in the consolidated statement of operations and comprehensive (loss) income, as a component of net income, as a
gain or loss on financial instruments with an offset to other assets or other liabilities on the Fund's consolidated balance sheet. 

Embedded
derivatives are components of a hybrid (combined) instrument that also includes a non-derivative host contract. The result is that some of the cash flows of the combined
instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash flows that would otherwise be required by the contract to be modified according to a
specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable, provided that, in the case of
a non-financial variable, the variable is not specific to a party to the contract. An embedded derivative is separated from its host contract when all of the following conditions
are met:

	•
	the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics
and risks of the host contract; 

 
	•
	the separated instrument would meet the definition of a derivative; and

 
	•
	the hybrid (combined) instrument is not measured at fair value with changes in fair value recognized in net income. 

The
Fund has a redemption option on its senior secured series A and B debentures, an embedded derivative, which is not closely related to the debt host contract and is classified as held
for trading. The fair value of the embedded derivative is $nil. Any gains or losses on this embedded derivative will be recorded in the consolidated statement of operations and comprehensive (loss)
income as a gain or loss on financial instruments with an offset to other assets or other liabilities on the Fund's consolidated balance sheet. The Fund has only recognized embedded derivatives
existing in contracts that were acquired or substantially modified on or subsequent to January 1, 2003. 

Transaction
costs incurred for the acquisition or issue of all financial assets or liabilities are recorded in the consolidated statement of operations and comprehensive (loss) income
when incurred. 

 Foreign currency translation  

Self-sustaining
foreign operations are translated using the current rate method. Under this method, assets and liabilities are translated to Canadian dollars from their functional currency
using the exchange rate in effect at the consolidated balance sheet date. Revenues and expenses are translated to Canadian dollars at the monthly average exchange rates. The resulting translation
adjustments are included in other comprehensive (loss) income and are only included in the determination of net income when a reduction in the investment in these foreign operations is realized. Gains
or losses on foreign currency balances or transactions that are designated as hedges of a net investment in self-sustaining foreign operations are offset against exchange losses or gains
included in other comprehensive (loss) income. 

 Disposal of long-lived assets and discontinued operations  

Long-lived
assets, to be disposed of other than by sale, such as abandonment or exchange for similar productive long-lived assets, are classified as held and used until the
disposal transaction occurs. Long-lived assets held for sale are carried at the lower of their carrying amount or fair value less cost to sell. 

12

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 

 Employee future benefits  

The
costs of retirement benefits, other than pensions and certain post-employment benefits, are recognized over the period in which the employee renders services in return for those
benefits. Other post-employment benefits are recognized when the event giving rise to the obligation occurs. 

The
Fund maintains both defined contribution and defined benefit pension plans and accrues its obligations under employee benefit plans and the related costs, net of plan assets. The Fund has adopted
the following policies:

	•
	The cost of pensions earned by employees is actuarially determined using the projected unit credit cost method prorated on
service and management's best estimate of expected plan investment performance for funded plans, salary escalation, and retirement ages of employees.

 
	•
	For the purpose of calculating the expected return on plan assets, those assets are valued at fair value.

 
	•
	The excess of net actuarial gain (loss) over 10% of the greater of the benefit obligation and the fair value of plan assets
is amortized over the remaining average service period of active employees. The average remaining service period of the active employees covered by the defined benefit pension plan is
7.8 years. 

 
	•
	The initial transition asset is amortized over a period of 11.9 years. 

 Variable interest entities  

Variable
interest entities ("VIE's") are consolidated when the Fund is deemed to be the primary beneficiary of the VIE. The primary beneficiary is the party that is either exposed to a majority of the
expected losses from the VIE's activities or is entitled to receive a majority of the VIE's residual returns or both. The Fund has determined that it is not the primary beneficiary of any VIE. 

 Long-term incentive plan ("LTIP") — U.S.  

Trust
units of the Fund acquired for the benefit of its U.S. LTIP participants are held in a rabbi trust. A rabbi trust, as a grantor trust, requires that the assets held in the trust be
available to satisfy the claims of general creditors in the event of bankruptcy. Trust units of the Fund acquired by the trust are recorded to unitholders' equity. The deferred compensation obligation
is classified as a trust unitholders' equity instrument and subsequent changes in the fair value of the trust units are not recognized in either treasury stock or deferred compensation obligations. As
U.S. LTIP participants draw trust units of the Fund from the rabbi trust, both the deferred compensation obligation and trust units acquired by the U.S. LTIP reduce by a
similar amount. 

 New Accounting Policies Requiring Adoption  

 Financial instruments  

Canadian
Institute of Chartered Accountants ("CICA") accounting standards, Financial Instruments — Disclosures (section 3862), Financial
Instruments — Presentation (section 3863), and Capital Disclosures (section 1535) require additional disclosures with respect to the significance
and risks, and management, of financial instruments and capital disclosures as they relate to the Fund's objectives, policies and process for managing capital. The standards are applicable to annual
and interim financial statements for fiscal years beginning on or after October 1, 2007. The Fund is currently evaluating the impact of adopting these new standards and does not expect their
adoption to have a material impact on the Fund's consolidated financial statements. 

 Goodwill and intangible assets  

CICA
accounting standard, Goodwill and Intangibles (section 3064), replaces Goodwill and Other Intangibles (section 3062) and Research and Development Costs (section 3450).
The primary changes to CICA 3064 establish standards for the recognition, measurement, presentation and disclosure of internally generated goodwill and intangible assets. This section applies
to annual and interim financial statements relating to fiscal years beginning on or after October 1, 2008, with early adoption encouraged. Adopting this section is not expected to have any
impact on the Fund's consolidated financial statements. 

13

 

  BFI CANADA INCOME FUND  

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated)  

 3.     CHANGE IN ACCOUNTING POLICY  

On
January 1, 2007, the Fund adopted revisions to the CICA accounting standard for Accounting Changes (section 1506). The revised standard sets forth expanded disclosures for changes in
accounting policies, accounting estimates, and accounting errors. The standard requires that accounting changes be applied retrospectively unless otherwise permitted or where it is deemed impractical.
The standard also requires that the Fund disclose new primary sources of GAAP that have been issued, but are not yet effective, and have not been adopted. 

On
January 1, 2007, the Fund adopted the following CICA accounting standards: Financial Instruments — Recognition and Measurement (section 3855),
Financial Instruments — Disclosure and Presentation (section 3861), Hedges (section 3865), Comprehensive Income (section 1530), Investments
(section 3051), and Equity (section 3251). The Fund adopted these standards retrospectively without restatement, with the exception of the presentation of accumulated gains and
losses on the translation of self-sustaining foreign operations. 

The
transitional provisions for CICA section 3855 do not require the recognition, de-recognition and measurement of policies for periods prior to the Fund's effective date of
adopting these standards to be reversed or restated. At the date of adoption, the Fund is required to recognize and re-measure, as required, all financial assets and liabilities, based on
their classifications. All adjustments to previously recorded carrying amounts, with the exception of financial assets classified as available for sale, are recognized as an adjustment to accumulated
net income. 

The
Fund selected January 1, 2003 as the transition date for its embedded derivatives. Accordingly, only embedded derivatives included in contracts which were issued, acquired or substantively
modified on or subsequent to January 1, 2003 have been recognized as a financial asset or liability. 

The
effect of adopting these sections is as follows: 

												
	 	Consolidated Balance Sheet

 
	 	January 1, 2007

before change

in accounting

policy 	 	Change in

accounting

policy 	 	January 1, 2007

after change in

accounting

policy 	 
	 	 Funded landfill post-closure costs
	 	$	4,142	 	$	144	 	$	4,286	 
	 	 Deferred financing costs
	 	 	7,015	 	 	(7,015	)	 	—	 
	 	 Future income tax liabilities
	 	 	31,922	 	 	(2,518	)	 	29,404	 
	 	 Non-controlling interest
	 	 	282,026	 	 	(783	)	 	281,243	 
	 	 Unitholders' equity
	 	$	701,289	 	$	(3,570	)	$	697,719	 

 4.     ACQUISITIONS  

Effective
August 31, 2007, the Fund acquired all of the issued and outstanding common shares of Winters Bros. Waste Systems, Inc. ("Winters Bros."), an integrated waste
services provider based in New York. Total cash consideration, including acquisition and related costs and net of acquired cash and cash equivalents, amounted to $306,253. 

The
preliminary purchase price is allocated as follows: 

							
	 	 Current assets (excluding cash and cash equivalents of $1,521)
	 	$	20,535	 
	 	 Intangibles
	 	 	89,752	 
	 	 Goodwill
	 	 	178,912	 
	 	 Capital assets
	 	 	71,170	 
	 	 Deferred costs
	 	 	42	 
	 	 Current liabilities
	 	 	(17,695	)
	 	 Other liabilities
	 	 	(510	)
	 	 Future income tax liabilities
	 	 	(35,953	)
	 	 	 	 	 
	 	
	 	$	306,253	 
	 	 	 	 	 
	 	 Consideration
	 	 	 	 
	 	 	 Cash (net of acquired cash and cash equivalents)
	 	$	305,148	 
	 	 	 Acquisition and related costs
	 	 	1,105	 
	 	 	 	 	 
	 	
	 	$	306,253	 
	 	 	 	 	 

14

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 4.     ACQUISITIONS (Continued) 

The
allocation of the purchase price is subject to final fair value and working capital adjustments. Final fair value or working capital adjustments that increase or decrease the fair value of certain
assets or liabilities will be recorded to the purchase price allocation. Results for the Winters Bros. acquisition have been included in the Fund's consolidated statement of operations and
comprehensive (loss) income, and U.S. northeast segment, since the date of acquisition. Goodwill is not deductible for tax purposes. 

For
the year ended December 31, 2007, and excluding the Winters Bros. acquisition, the Fund acquired all of the outstanding common shares and solid waste collection assets of one waste
management company in each of Canada and the U.S., and acquired the solid waste collection assets, including various current assets, and assumed various liabilities of five waste management companies
in Canada and ten in the U.S. Aggregate consideration, including consideration in respect of liabilities assumed amounted to $60,557 and is allocated to the U.S. northeast,
U.S. south and Canadian segments as follows: $1,482, $42,030, and $17,045, respectively. The allocation of purchase prices is as follows: intangibles $18,682, goodwill $23,752, capital assets
$24,256, future income tax liabilities ($6,537), and net current assets $404. Aggregate cash consideration amounting to $56,123 excludes holdbacks and cash payments due to sellers for achieving
various business performance targets. The allocation of certain purchase prices are absent final fair value adjustments and adjustments for the payment of contingent consideration for achieving
various business performance targets. Final fair value and contingent consideration adjustments that increase or decrease the fair value of certain assets or liabilities will be recorded against the
respective purchase price allocation. Goodwill amounting to $9,264 is not deductible for tax purposes. 

For
the year ended December 31, 2006, the Fund acquired all of the outstanding common shares of two waste management companies, one in each of the U.S. and Canada, and acquired the solid waste
collection assets, various current assets, and assumed various liabilities of seven waste management companies in the U.S. and three in Canada. Aggregate consideration, including consideration in
respect of liabilities assumed amounted to $38,077 and is allocated to the U.S. northeast, U.S. south and Canadian segments as follows: $2,541, $28,055, and $7,481, respectively. The
allocation of the purchase prices resulted in the Fund recognizing total intangibles, goodwill, capital assets and other net liabilities of $12,392, $15,734, $12,557 and ($2,606), respectively.
Aggregate cash consideration amounted to $33,578 at that time. Goodwill amounting to $7,810 is not deductible for tax purposes. 

The
results of these acquisitions have been included in the consolidated financial statements from their respective closing dates. 

 5.     INTANGIBLES  

															
	 	 
	 	December 31, 2007 	 
	 	 
	 	Cost 	 	Accumulated

Amortization 	 	Net Book Value 	 	Additions 	 
	 	 Customer collection contracts
	 	$	110,655	 	$	76,590	 	$	34,065	 	$	770	 
	 	 Customer lists
	 	 	104,103	 	 	13,920	 	 	90,183	 	 	91,585	 
	 	 Non-competition agreements
	 	 	14,631	 	 	3,131	 	 	11,500	 	 	12,600	 
	 	 Transfer station permits
	 	 	7,457	 	 	1,495	 	 	5,962	 	 	1,185	 
	 	 Trade-names
	 	 	4,351	 	 	1,375	 	 	2,976	 	 	2,294	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	$	241,197	 	$	96,511	 	$	144,686	 	$	108,434	 
	 	 	 	 	 	 	 	 	 	 	 

 

															
	 	 
	 	December 31, 2006 	 
	 	 
	 	Cost 	 	Accumulated

Amortization 	 	Net Book Value 	 	Additions 	 
	 	 Customer collection contracts
	 	$	110,353	 	$	62,780	 	$	47,573	 	$	855	 
	 	 Customer lists
	 	 	28,066	 	 	7,207	 	 	20,859	 	 	10,341	 
	 	 Non-competition agreements
	 	 	3,990	 	 	1,796	 	 	2,194	 	 	1,196	 
	 	 Transfer station permits
	 	 	6,272	 	 	1,146	 	 	5,126	 	 	—	 
	 	 Trade-names
	 	 	2,300	 	 	848	 	 	1,452	 	 	—	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	$	150,981	 	$	73,777	 	$	77,204	 	$	12,392	 
	 	 	 	 	 	 	 	 	 	 	 

15

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 6.     CAPITAL ASSETS  

												
	 	 
	 	December 31, 2007 	 
	 	 
	 	Cost 	 	Accumulated

Amortization 	 	Net Book Value 	 
	 	 Land and improvements
	 	$	48,932	 	$	—	 	$	48,932	 
	 	 Buildings and improvements
	 	 	87,016	 	 	15,143	 	 	71,873	 
	 	 Vehicles and equipment
	 	 	312,473	 	 	121,383	 	 	191,090	 
	 	 Containers and compactors
	 	 	143,570	 	 	54,501	 	 	89,069	 
	 	 Furniture, fixtures and computer equipment
	 	 	12,726	 	 	8,790	 	 	3,936	 
	 	 	 	 	 	 	 	 	 
	 	
	 	$	604,717	 	$	199,817	 	$	404,900	 
	 	 	 	 	 	 	 	 	 

 

												
	 	 
	 	December 31, 2006 	 
	 	 
	 	Cost 	 	Accumulated

Amortization 	 	Net Book Value 	 
	 	 Land and improvements
	 	$	34,934	 	$	—	 	$	34,934	 
	 	 Buildings and improvements
	 	 	64,200	 	 	10,754	 	 	53,446	 
	 	 Vehicles and equipment
	 	 	248,021	 	 	90,310	 	 	157,711	 
	 	 Containers and compactors
	 	 	113,151	 	 	41,199	 	 	71,952	 
	 	 Furniture, fixtures and computer equipment
	 	 	12,071	 	 	7,742	 	 	4,329	 
	 	 	 	 	 	 	 	 	 
	 	
	 	$	472,377	 	$	150,005	 	$	322,372	 
	 	 	 	 	 	 	 	 	 

 7.     LANDFILL ASSETS  

												
	 	 
	 	December 31, 2007 	 
	 	 
	 	Cost 	 	Accumulated

Amortization 	 	Net Book Value 	 
	 	 Landfill assets
	 	$	875,423	 	$	230,712	 	$	644,711	 
	 	 	 	 	 	 	 	 	 

 

												
	 	 
	 	December 31, 2006 	 
	 	 
	 	Cost 	 	Accumulated

Amortization 	 	Net Book Value 	 
	 	 Landfill assets
	 	$	906,508	 	$	176,218	 	$	730,290	 
	 	 	 	 	 	 	 	 	 

Effective
February 10, 2004, Lachenaie received approval to expand its landfill by an additional 6.5 million cubic metres which, depending on the annual volume of waste entering the
site, is the equivalent of approximately 5 years of operation. Future approval to continue operating the Lachenaie landfill is expected to increase its capacity, and accordingly its operating
life, by an additional 27.2 million cubic metres. Management expects to receive the necessary permits prior to the expiry of the current permit. Consequently, Lachenaie landfill costs are
amortized over total estimated airspace of approximately 33.2 million cubic metres. The net book value of the Lachenaie landfill at December 31, 2007 is $85,136 (December 31,
2006 — $86,239). 

Effective
August 28, 2007, the Fund received all required approvals to expand the Seneca Meadows landfill. Accordingly, Seneca Meadows landfill costs are amortized over total estimated
airspace, which is the equivalent of approximately 18 years of operation. The net book value of the Seneca Meadows landfill at December 31, 2007 is $224,689 (December 31,
2006 — $264,094). 

16

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 8.     OTHER ASSETS AND OTHER LIABILITIES  

										
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 Other assets
	 	 	 	 	 	 	 
	 	 	 Fair value of foreign currency exchange agreements
	 	$	1,670	 	$	3,216	 
	 	 	 Fair value of interest rate swaps
	 	 	—	 	 	3,812	 
	 	 	 Fair value of OCC hedges
	 	 	—	 	 	42	 
	 	 	 	 	 	 	 
	 	
	 	$	1,670	 	$	7,070	 
	 	 	 	 	 	 	 
	 	 Other liabilities
	 	 	 	 	 	 	 
	 	 	 Fair value of interest rate swaps
	 	$	4,394	 	$	—	 
	 	 	 Fair value of OCC hedges
	 	 	76	 	 	—	 
	 	 	 Contingent acquisition payables
	 	 	586	 	 	383	 
	 	 	 	 	 	 	 
	 	
	 	$	5,056	 	$	383	 
	 	 	 	 	 	 	 

 9.     LONG-TERM DEBT  

									
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 Term loan
	 	$	192,680	 	$	227,234	 
	 	 Senior secured debentures, series A
	 	 	47,000	 	 	47,000	 
	 	 Senior secured debentures, series B
	 	 	58,000	 	 	58,000	 
	 	 Revolving credit facilities
	 	 	401,531	 	 	132,563	 
	 	 Other
	 	 	102,762	 	 	78,707	 
	 	 	 	 	 	 	 
	 	
	 	 	801,973	 	 	543,504	 
	 	 Less current portion of long-term debt
	 	 	—	 	 	50	 
	 	 	 	 	 	 	 
	 	
	 	$	801,973	 	$	543,454	 
	 	 	 	 	 	 	 

 Term loan and U.S. revolving credit facility  

Effective
August 31, 2007, the Fund entered into a third amendment to its Amended and Restated Revolving Credit and Term Loan Agreement. The amendment makes available an additional
U.S. $320,000 bringing the total available capacity under the U.S. revolving credit facility to U.S. $575,000. As a condition of lending, IESI is required to enter into and
maintain not less than 40% of total funded debt, as defined therein, on a fixed rate basis within 30 days from the third amendment date (Note 19). 

The
revolving credit facility is available to finance working capital requirements, qualifying capital expenditures, acquisitions, and for general corporate purposes. At December 31, 2007,
U.S. $333,500    •    (2006 — U.S. $76,000) is drawn on the revolving credit facility and U.S. $195,000
(2006 — U.S. $195,000) is drawn on the term loan. The term loan and revolving credit facility bear interest at various interest rates plus an applicable
margin, interest is payable quarterly in arrears, and unutilized portions of the revolving credit facility are subject to a commitment fee. The term loan and revolving credit facility mature on
January 21, 2012 and January 21, 2010, respectively. The term loan and revolving credit facility are secured by a first priority perfected security interest over all assets of IESI and
its subsidiaries and includes all of the equity interests of IESI's direct and indirect subsidiaries and all of IESI's common shares. 

 Senior secured debentures, series A and B ("debentures")  

On
June 25, 2004, BFI Canada Holdings Inc. ("Holdings"), a subsidiary of the Fund, issued $47,000 senior secured, series A debentures, bearing interest at 6.123% and $58,000
senior secured, series B debentures, bearing interest at 7.015%. Interest on each series of debenture is payable quarterly in arrears, commencing on September 26, 2004. The
series A and B debentures are payable in full on June 26, 2009 and June 26, 2014, respectively. The debentures are redeemable in whole or in part from time to time at a
price equal to the greater of par and the net present value of all scheduled payments of interest and principal using a discount rate equivalent to the sum of the Government of Canada Yield plus a
margin on either series of debenture. The debentures are secured by a charge over all 

17

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 9.     LONG-TERM DEBT (Continued) 

the
personal and real property of Holdings and Ridge Landfill Trust, a wholly-owned subsidiary of the Fund, and their subsidiaries, the shares and intercompany indebtedness held by
4264126 Canada Limited, a subsidiary of the Fund, and the Fund, respectively. The debentures rank equally with the Fund's Canadian revolving credit facility. 

 Canadian revolving credit facility  

Effective
March 21, 2007, the Fund entered into a Second Amending Agreement to its Fourth Amended and Restated Credit Agreement. The second amendment increases the total committed Canadian
segment credit to $150,000 from $80,000 and the total available credit from this facility, subject to lender consent, to $200,000 from $120,000. The maturity date was extended to May 30, 2011
from June 30, 2010, and the maturity date remains subject to one year extensions. 

The
revolving credit facility is available to finance working capital requirements, qualifying capital expenditures, and acquisitions. At December 31, 2007, $72,000
(2006 — $44,000) is drawn on the revolving credit facility. The revolving credit facility bears interest at various interest rates plus an applicable margin, is
payable monthly in arrears and unutilized portions of the facility are subject to a commitment fee. The facility is secured by a first priority perfected security interest over all personal and real
property of Holdings and its subsidiaries, the shares and intercompany indebtedness held by 4264126 Canada Limited, and the Fund, respectively. The facility ranks equally with the senior
secured, series A and B debentures. 

 Other  

In
October 2005, IESI entered into a 30 year agreement which permits it access to variable rate demand solid waste disposal revenue bonds ("IRBs"). The IRBs are made available, to a
maximum of U.S. $45,000, to fund a portion of Seneca Meadows landfill construction and equipment expenditures. The IRBs bear interest at LIBOR less an applicable discount, and interest is
payable monthly
in arrears, commencing on November 1, 2005. The IRBs mature on October 1, 2035 and are secured by a letter of credit in the amount of the drawn facility. At December 31, 2007,
U.S. $45,000 (2006 — U.S. $45,000) of IRBs have been drawn under this facility. 

In
November 2006, IESI entered into a 22 year agreement for additional IRBs. The IRBs are made available, to a maximum of U.S. $35,000, and are available to fund a portion of
landfill construction, equipment, vehicle, and container expenditures in the Fund's Pennsylvania operations. The IRBs bear interest at LIBOR less an applicable discount, and interest is payable
monthly in arrears, commencing on December 1, 2006. The IRBs mature on November 1, 2028 and are secured by a letter of credit in the amount of the drawn facility. At December 31,
2007 U.S. $35,000 (2006 — U.S. $22,500) has been drawn under this facility and U.S. $nil
(2006 — U.S. $685) of cash, included in cash and cash equivalents at December 31, 2007, is restricted for the purpose of funding future landfill
construction and equipment expenditures in the U.S. northeast. 

In
March 2007, the Fund entered into a new 15 year agreement for IRBs in the state of Texas. The IRBs are made available, to a maximum of U.S. $24,000 and are available to fund a
portion of landfill construction activities, and equipment, vehicle, and container expenditures in the Fund's Texas operations. The IRBs bear interest at LIBOR less an applicable discount, and
interest is payable monthly in arrears, commencing on May 1, 2007. The IRBs mature on April 1, 2022 and are secured by a letter of credit in the amount of the drawn facility. At
December 31, 2007 U.S. $24,000 (2006 — U.S. $nil) has been drawn under this facility and U.S. $1,619
(2006 — U.S. $nil) of cash, included in cash and cash equivalents at December 31, 2007, is restricted for the purpose of funding future landfill
construction and equipment expenditures in the state of Texas. 

Entreprise
Sanitaire F.A. Lteé ("F.A."), an indirect subsidiary of the Fund, had a bank loan due March 12, 2007 which bore interest at 7.0%. A city in the province of Quebec was
providing security on the bank loan. The purpose of this loan was for F.A. to acquire containers which were furnished to the city. This loan was repaid directly by the city to the lender in monthly
amounts of principal and interest. Included in the current portion of other receivables for the year ended December 31, 2006 is a note due from this city having the same terms and conditions as
the underlying bank loan. 

Interest
on long-term debt amounted to $42,964 (2006 — $34,307). 

18

 

  BFI CANADA INCOME FUND  

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated)  

 9.     LONG-TERM DEBT (Continued)  

Principal
repayments required in each of the next five years ending December 31 and thereafter are as follows: 

						
	 	 2008
	 	$	—	 
	 	 2009
	 	 	47,000	 
	 	 2010
	 	 	329,531	 
	 	 2011
	 	 	72,000	 
	 	 2012
	 	 	192,680	 
	 	 Thereafter
	 	 	160,762	 
	 	 	 	 	 
	 	
	 	$	801,973	 
	 	 	 	 	 

 10.   LANDFILL CLOSURE AND POST-CLOSURE COSTS  

The
following tables outline key assumptions used to determine the fair value of landfill closure and post-closure costs, the expected timing of landfill closure and
post-closure expenditures, and reconcile beginning and ending landfill closure and post-closure costs: 

						
	 	 
	 	December 31,

2007 	 
	 	 Fair value of legally restricted assets
	 	$	5,976	 
	 	 Undiscounted closure and post-closure costs
	 	$	373,364	 
	 	 Credit adjusted risk free rate — Canadian segment landfills
	 	 	5.6%	 
	 	 Credit adjusted risk free rate — U.S. segment landfills
	 	 	7.2%	 
	 	 	 	 	 
	 	 Expected timing of undiscounted landfill closure and post-closure expenditures
	 	 	 	 
	 	 2008
	 	$	2,900	 
	 	 2009
	 	 	9,184	 
	 	 2010
	 	 	8,892	 
	 	 2011
	 	 	4,984	 
	 	 2012
	 	 	9,471	 
	 	 Thereafter
	 	 	337,933	 
	 	 	 	 	 
	 	
	 	$	373,364	 
	 	 	 	 	 

 

									
	 	 
	 	2007 	 	2006 	 
	 	 Landfill closure and post-closure costs, beginning of year
	 	$	64,535	 	$	66,405	 
	 	 Provision for landfill closure and post-closure costs, during the year
	 	 	9,554	 	 	8,180	 
	 	 Accretion expense, during the year
	 	 	3,086	 	 	2,932	 
	 	 Landfill closure and post-closure expenditures, during the year
	 	 	(4,541	)	 	(13,016	)
	 	 Revisions to estimated cash flows, during the year
	 	 	(5,430	)	 	177	 
	 	 Foreign currency translation adjustment, during the year
	 	 	(8,361	)	 	(143	)
	 	 	 	 	 	 	 
	 	 Landfill closure and post-closure costs, end of year
	 	$	58,843	 	$	64,535	 
	 	 	 	 	 	 	 

Effective
February 10, 2004, the Fund received approval to expand the Lachenaie landfill's airspace capacity. As a condition of this approval, the Fund is required to deposit monies into a
social utility trust for the purpose of settling post-closure costs. The funding amount is established by the Quebec Government based on each cubic metre of waste accepted at the Lachenaie
landfill and payment is due quarterly. At December 31, 2007, funded landfill post-closure costs, representing the fair value of legally restricted assets, total $5,976
(December 31, 2006 — $4,142). At December 31, 2007, $5,586 (December 31, 2006 — $3,794) was deposited
into the social utility trust with the balance, $390 (December 31, 2006 — $348) remaining unfunded and included in accounts payable. 

At
December 31, 2007, the Fund has an accrued environmental liability of $10,712 (December 31, 2006 — $13,002). The accrued environmental liability
is included in landfill closure and post-closure costs and relates principally to an inactive landfill which the Fund acquired on the acquisition of IESI. These estimated costs have a
total undiscounted value amounting to $8,459 (December 31, 2006 — $11,553). 

19

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 11.   INCOME TAXES  

The
Fund is taxed as a "mutual fund trust" for income tax purposes. Pursuant to the Second Amended and Restated Declaration of Trust, the Fund distributes all taxable income it earns to its
unitholders and deducts these distributions for income tax purposes. Canadian and U.S. based corporate subsidiaries are subject to tax on their taxable income at a rate of approximately
34% and 38% (2006 — 34% and 38%), respectively. 

On
October 31, 2006, the Minister of Finance (Canada) announced proposed changes to the income tax treatment of distributions and allocations to and from the Fund. On June 12, 2007, the
proposed legislation, with certain modifications, passed third reading and received royal assent on June 22, 2007. The proposals, which are effective for the 2011 taxation year, subject to
certain conditions, make certain income earned by the Fund taxable in a manner similar to income earned by a corporation. 

The
following table reconciles the difference between income taxes that would result solely by applying statutory rates to the Fund's pre-tax income and income tax expense (recovery)
recorded in the consolidated statement of operations and comprehensive (loss) income. 

									
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 Income before income taxes and non-controlling interest
	 	$	42,704	 	$	52,851	 
	 	 	 	 	 	 	 
	 	 Income tax expense at the combined basic rate
	 	 	14,821	 	 	17,689	 
	 	 Tax on income attributable to trust unitholders and non-controlling interest
	 	 	(15,531	)	 	(12,660	)
	 	 Large corporations and state tax
	 	 	4,285	 	 	3,413	 
	 	 Withholding tax on foreign dividends and interest
	 	 	1,755	 	 	2,348	 
	 	 Tax on other non-deductible expenses
	 	 	781	 	 	4,466	 
	 	 Revision to unutilized tax loss carryforwards and tax base of capital assets
	 	 	(273	)	 	773	 
	 	 Other
	 	 	(1,141	)	 	(3,112	)
	 	 	 	 	 	 	 
	 	 Income tax expense at the combined basic rate
	 	$	4,697	 	$	12,917	 
	 	 	 	 	 	 	 

 

									
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 Future income tax assets
	 	 	 	 	 	 	 
	 	 Unutilized tax loss carryforwards, net of valuation allowances
	 	$	40,646	 	$	40,123	 
	 	 Tax value of deferred costs in excess of carrying value
	 	 	953	 	 	—	 
	 	 Deferred financing costs and offering expenses
	 	 	611	 	 	5,613	 
	 	 Accounting provisions not currently deductible for tax
	 	 	27,733	 	 	26,275	 
	 	 Accounting losses not currently deductible for tax
	 	 	—	 	 	897	 
	 	 Other
	 	 	1,088	 	 	—	 
	 	 	 	 	 	 	 
	 	
	 	 	71,031	 	 	72,908	 
	 	 	 	 	 	 	 
	 	 Future income tax liabilities
	 	 	 	 	 	 	 
	 	 Carrying value of capital assets in excess of tax value
	 	 	27,994	 	 	25,503	 
	 	 Carrying value of intangibles and landfill assets in excess of tax value
	 	 	99,166	 	 	76,391	 
	 	 Carrying value of deferred costs in excess of tax value
	 	 	—	 	 	2,251	 
	 	 Other
	 	 	1,539	 	 	685	 
	 	 	 	 	 	 	 
	 	
	 	 	128,699	 	 	104,830	 
	 	 	 	 	 	 	 
	 	 Net future income tax liabilities
	 	$	57,668	 	$	31,922	 
	 	 	 	 	 	 	 

Net
future income tax liabilities, totaling $57,668 (2006 — $31,922), is comprised of net future income tax liabilities in Canada amounting to $2,129
(2006 — $1,343) and net future income tax liabilities in the U.S. amounting to $55,539 (2006 — $30,579). 

Subsidiaries
of the Fund have unutilized tax losses amounting to $98,532 (2006 — $116,818) which expire 2009 to 2027. The realization of the resulting future
income tax assets, net of a $3,085 valuation allowance on certain U.S. unutilized tax loss carryforwards, totaling $40,646 (2006 — $40,123) is dependent on
the generation of future taxable income during the years in which those temporary 

20

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 11.   INCOME TAXES (Continued) 

differences
become deductible. Based on management's estimate of projected future taxable income and tax planning strategies, management expects to realize these future income tax assets in advance
of expiry. 

On
the Fund's acquisition of IESI, IESI issued a U.S. $160,000 note payable ("U.S. note"). Effective August 28, 2007, the U.S. note was cancelled. For the purposes of
determining taxable income, IESI has taken the position that the note and its related interest was commercially reasonable and has deducted the interest paid on its note on this basis. Management has
taken steps to ensure that the U.S. note was commercially reasonable, however, there can be no assurance that U.S. taxation authorities will not seek to challenge the treatment of the
U.S. note as debt or the amount of interest expense deducted, which could increase IESI's taxable income and accordingly its U.S. federal income tax liability. If the
U.S. taxation authorities were successful in their challenge, IESI's after tax income available for distribution would be reduced which would affect the Fund's ability to make distributions and
dividend payments to its unitholders and non-controlling interest. 

 12.   NON-CONTROLLING INTEREST  

On
the closing of the IESI acquisition, IESI issued 22,266 PPSs which represent a direct non-controlling interest in the Fund. PPSs are exchangeable into trust units of the Fund,
subject to various conditions, on a one-to-one basis. The non-controlling interest is entitled to dividends that are economically equivalent to distributions of the
Fund. The PPSs were initially recorded at their exchange amount, which is measured at the weighted average trading price of trust units of the Fund. The weighted average trading price represents the
average price of the Fund's trust units for a reasonable period before and after the terms of the IESI acquisition were announced and agreed to. Exchanges of PPSs are recorded at the carrying value of
the PPSs at issuance net of net income and dividends attributable to PPSs to the date of exchange. For the year ended December 31, 2007, 386 (2006 — 695)
PPSs were exchanged for trust units of the Fund. 

															
	 	 
	 	December 31 	 
	 	 
	 	PPSs 	 	2007 	 	PPSs 	 	2006 	 
	 	 Non-controlling interest, beginning of year
	 	 	11,774	 	$	282,026	 	 	12,469	 	$	312,614	 
	 	 PPSs exchanged for trust units, during the year
	 	 	(386	)	 	(9,116	)	 	(695	)	 	(17,197	)
	 	 PPSs cancelled, during the year
	 	 	(250	)	 	(6,638	)	 	—	 	 	—	 
	 	 Net income attributable to PPSs, during the year
	 	 	 	 	 	6,320	 	 	 	 	 	7,191	 
	 	 Dividends attributable to PPSs, during the year
	 	 	 	 	 	(20,438	)	 	 	 	 	(20,582	)
	 	 Transition adjustment (Note 3)
	 	 	 	 	 	(783	)	 	 	 	 	—	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 Non-controlling interest, end of year
	 	 	11,138	 	$	251,371	 	 	11,774	 	$	282,026	 
	 	 	 	 	 	 	 	 	 	 	 

On
the acquisition of IESI, a portion of PPSs issued to various IESI selling shareholders were held in escrow to settle various representations and warranties. The settlement of these representations
and warranties in February 2007 resulted in the cancellation of 250 PPSs totaling $6,638 which were recorded at the exchange amount. 

 13.   UNITHOLDERS' EQUITY  

 Trust units  

An
unlimited number of trust units may be issued. Each trust unit is transferable, voting and represents an equal and undivided beneficial interest in any distributions from the Fund whether of
income, net realized capital gains or other amounts, and in any net assets of the Fund in the event of termination or wind-up. 

Effective
April 5, 2007, the Fund closed its offering of 3,565 trust units, including the exercised over-allotment option, for gross proceeds of $93,047. Trust unit issue
costs and the related tax effect amounted to $5,447 and $1,852, respectively. 

At
December 31, 2007, 108 (December 31, 2006 — 45) trust units were held by the U.S. LTIP plan rabbi trust. 

 Class A unit  

Pursuant
to the Second Amended and Restated Declaration of Trust one Class A unit was issued to IESI. The Class A unit provides its holder the right to vote with trust units of the Fund
on all matters on the basis of one vote for each trust unit receivable on exercise of the exchange rights for each PPS. The Class A unit will generally vote together with trust units of the
Fund at all unitholder meetings or in respect of any written resolutions of unitholders. The holder of the Class A unit has the right to designate up to two Trustees of the 

21

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 13.   UNITHOLDERS' EQUITY (Continued) 

Fund.
The entitlement to designate Trustees is dependent on the ownership interest of the non-controlling interest and the right to designate two Trustees is conditional on the
non-controlling interest holding an ownership interest in the Fund, on a fully diluted basis, in excess of 20%. If the ownership interest of the non-controlling interest falls
below 20%, but is greater than 10%, the Class A unitholder has the right to designate one Trustee of the Fund. If the ownership interest of the non-controlling interest falls below
10%, the Class A unitholder has no right to designate any Trustees of the Fund. At December 31, 2007, the indirect ownership interest held by the non-controlling interest is
approximately 16.2% (2006 — 18.0%). 

The
Second Amended and Restated Declaration of Trust provides that for so long as any PPSs remain outstanding, the Trustees shall not declare payable or pay or make any distribution of distributable
cash flow, as defined therein, or other distribution of cash or property on a trust unit of the Fund unless IESI declares a payment or dividend to holders of the PPSs in an amount equal to the per
trust unit distribution payable to unitholders of the Fund. The Class A unit is redeemable at the option of the holder at any time or at the option of the Fund at any time after the date that
no PPSs are outstanding and the Class A unit rights against the Fund have ceased. The redemption price of the Class A unit will be for a nominal amount. 

 Normal course issuer bid  

On
November 6, 2006, the Fund received approval to commence a normal course issuer bid for up to 2% of the trust units outstanding in any 30 day period and not more than 10% of trust
units outstanding in any 365 day period, where total trust units outstanding is equal to 53,617. The normal course issuer bid has terminated and no trust units were repurchased. 

Details
of issued trust, and Class A units for the year ended December 31, 2007 are as follows: 

									
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 Trust units issued and outstanding, beginning of year
	 	 	53,617	 	 	52,922	 
	 	 Trust units issued, during the year
	 	 	3,565	 	 	—	 
	 	 Trust units issued on exchange of PPSs, during the year
	 	 	386	 	 	695	 
	 	 	 	 	 	 	 
	 	 Trust units issued and outstanding, end of year
	 	 	57,568	 	 	53,617	 
	 	 	 	 	 	 	 
	 	 Class A units issued and outstanding, beginning of year
	 	 	—	 	 	—	 
	 	 Class A units issued, during the year
	 	 	—	 	 	—	 
	 	 	 	 	 	 	 
	 	 Class A units issued and outstanding, end of year
	 	 	—	 	 	—	 
	 	 	 	 	 	 	 

Accumulated
other comprehensive loss, representing accumulated foreign currency translation adjustments, is comprised principally of accumulated exchange losses on goodwill and capital and landfill
assets, partially offset by accumulated exchange gains on long-term debt, landfill closure and post-closure costs, and future income tax liabilities. 

The
basic weighted average trust units outstanding for the year ended December 31, 2007 totaled 56,564 (2006 — 53,506). The calculation of net income per
trust unit, basic, is net of the non-controlling interest's share of net income, and amounts to $0.56 (2006 — $0.61). The diluted weighted average
trust units outstanding include the exchange of all PPSs, 11,239 (2006 — 11,885), into trust units of the Fund and totals 67,803
(2006 — 65,391). The calculation of net income per diluted trust unit amounts to $0.56 (2006 — $0.61). 

 14.   TRUST UNIT BASED COMPENSATION  

Trust
unit options, subject to unitholder approval, are granted to certain directors, officers or management employees at the discretion of the Board of Trustees of the Fund, or its designate. Trust
unit options, in the absence of any other determination, are exercisable equally on the first, second, third and fourth anniversary and expire on the 10th anniversary of the grant
date. The Fund has reserved 1,750 trust units for issuance under the trust unit option plan. The exercise date of trust unit options may be accelerated, at the discretion of the Board of
Trustees of the Fund, or its designate. Trust unit options are not transferable or assignable. 

On
February 14, 2006, the Board of Trustees issued 1,000 trust unit options, all of which have trust unit appreciation rights, to certain executive management of the Fund. Trust unit
options issued on February 14, 2006 are exercisable equally on January 1, 2007, 

22

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 14.   TRUST UNIT BASED COMPENSATION (Continued) 

January 1, 2008
and January 1, 2009 and have an exercise price of $29.15. The market value of the trust units on the grant date was $28.35. On termination of employment or death,
the trust unit options will be immediately exercisable. 

															
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 
	 	Number of trust

unit options 	 	Weighted average

exercise price 	 	Number of trust

unit options 	 	Weighted average

exercise price 	 
	 	 Outstanding, beginning of year
	 	 	1,000	 	$	29.15	 	 	—	 	$	—	 
	 	 Granted, during the year
	 	 	—	 	 	—	 	 	1,000	 	 	29.15	 
	 	 Exercised, during the year
	 	 	—	 	 	—	 	 	—	 	 	—	 
	 	 Forfeited, during the year
	 	 	—	 	 	—	 	 	—	 	 	—	 
	 	 Expired, during the year
	 	 	—	 	 	—	 	 	—	 	 	—	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 Outstanding, end of year
	 	 	1,000	 	$	29.15	 	 	1,000	 	$	29.15	 
	 	 	 	 	 	 	 	 	 	 	 

Compensation
expense recorded in selling, general and administration expenses amounted to $nil (2006 — $nil) for the year ended December 31, 2007. The
weighted average remaining contractual life of the trust unit options is 8.0 years and at December 31, 2007, 333 trust unit options are exercisable. 

 15.   FINANCING COSTS  

With
the adoption of CICA section 3855, financing costs are recorded in the consolidated statement of operations and comprehensive (loss) income when incurred. Accordingly, amendments to the
Fund's Amended and Restated Revolving Credit and Term Loan Agreement in the U.S. and Fourth Amended and Restated Credit Agreement in Canada resulted in financing costs totaling $7,042 and $150,
respectively, for the year ended December 31, 2007 (2006 — $nil). 

 16.   NET FOREIGN EXCHANGE LOSS (GAIN)  

As
a condition of the Fund entering into a third amendment to its Amended and Restated Revolving Credit and Term Loan Agreement in the U.S., the Fund's U.S. note due from IESI was cancelled,
effective August 31, 2007. Prior to cancellation, the U.S. note was eliminated on the consolidation and was not included in the net investment of IESI, a self sustaining foreign
operation. Accordingly, the U.S. note was translated as if it was a third-party foreign currency trade balance. The resulting foreign exchange loss on the cancellation and translation of this
note for the year ended December 31, 2007 amounted to $17,390 (2006 — $96). The balance of the foreign exchange loss (gain) is due principally to changes
in the foreign exchange rate from the date interest is due on notes receivable to the date interest is received from IESI and realized gains on the settlement of derivative financial instruments. 

 17.   COMMITMENTS AND CONTINGENCIES  

	(i)
	The
Fund leases buildings and equipment under various operating leases. Future lease payments for the next five years ending December 31 and
thereafter are as follows: 

						
	 	 2008
	 	$	5,520	 
	 	 2009
	 	 	5,015	 
	 	 2010
	 	 	3,157	 
	 	 2011
	 	 	2,143	 
	 	 2012
	 	 	1,802	 
	 	 Thereafter
	 	 	10,617	 
	 	 	 	 	 
	 	
	 	$	28,254	 
	 	 	 	 	 

	(ii)
	The
Fund is the successor to a license agreement to use the trade name "BFI" and the related logo, subject to certain restrictions. The agreement was
amended on February 22, 2002, whereby a one-time payment of $2,000 was made on April 25, 2002 in full satisfaction of all royalty obligations under the license agreement
payable through June 1, 2015 (effectively the initial 15-year term). The Fund has two additional 10 year extension options at a cost of $600 and $1,500, respectively,
per annum. 

23

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 17.   COMMITMENTS AND CONTINGENCIES (Continued) 

	(iii)
	Effective
February 10, 2004, the Fund received approval to expand the capacity of the Lachenaie landfill by an additional 6.5 million cubic
metres which, depending on the annual volume of waste entering the site, is the equivalent of approximately 5 years of operation (see Note 7). As a result, the Fund is required to
pay a royalty of $1.50 per tonne for each tonne of waste accepted in the expansion area to a maximum of $1,500 per annum. This royalty agreement has a life of 4 years and a maximum cumulative
payment of $6,000. To December 31, 2007, the Fund has either accrued or paid royalties amounting to $5,500.

	(iv)
	The
Fund enters into various commitments in the normal course of business. At December 31, 2007, the Fund has issued letters of credit amounting to
$189,484 (2006 — $171,878) and performance bonds totaling $172,504 (2006 — $141,696).

	(v)
	On
the acquisition of IESI, the Fund assumed various obligations which require payment of additional amounts for achieving certain negotiated events or
business performance targets, including landfill expansion approval or target disposal volumes. Upon approval of the Seneca Meadow's landfill expansion, the Fund is obligated to pay the original
seller approximately U.S. $15,000. At December 31, 2007, the Fund has received all necessary permits and exhausted the normal course appeals process. Accordingly, the Fund has recognized
its obligation and recorded such amounts to accrued charges and goodwill at December 31, 2007. In addition, the Fund is also obligated to pay certain other sellers various amounts for achieving
certain negotiated disposal volumes to a maximum of approximately U.S. $14,800. Amounts are accrued monthly, and paid from time to time in accordance with underlying agreements, until certain
threshold negotiated disposal volume targets are achieved, and the maximum obligation is satisfied. Monthly accrued amounts, which are paid up to the date the disposal volume threshold targets are
met, reduce the threshold payment by a similar amount. The Fund will record an adjustment to the purchase price allocation when the contingency is resolved and consideration is issued or becomes
issuable. For the year ended December 31, 2007, the Fund paid cash consideration or has accrued consideration payable to the original sellers in respect of meeting negotiated disposal volume
targets at landfills in the U.S. south amounting to $3,868 (2006 — $2,668). Landfill permits acquired on the acquisition of IESI were recorded at their
fair values. Accordingly, all contingent amounts paid, and all future contingent payments, in respect of the receipt of landfill expansion approval or fulfilling disposal volume targets, are recorded
to goodwill.

	(vi)
	The
Fund has a disposal contract that requires it to meet specific disposal volume targets. The volume requirements are measured based on an annual
average. In the event the Fund does not meet the required volume targets, the Fund is required to make additional payments on the disposal volume shortfall. At December 31, 2007, the Fund
expects to meet its disposal volume target and accordingly is not accruing for a shortfall.

	(vii)
	The
Fund has an accrued environmental liability of $10,712 recorded in landfill closure and post-closure costs on the consolidated balance
sheet, related principally to an inactive landfill (hereinafter referred to as "Tantalo"), which the Fund assumed as part of the IESI acquisition. The Tantalo environmental liability consists of
remediation and 30 years of post-closure monitoring totalling approximately $8,400. The initial remediation work commenced in 2004, and the post-closure monitoring
commenced in 2007. Tantalo is a 26 acre landfill that stopped accepting waste in 1976 and has been identified by the State of New York as an "Inactive Hazardous Waste Disposal Site".
During its period of operation, Tantalo received both municipal and industrial waste, some of which has been found to exhibit "hazardous" characteristics as defined by the U.S. Resource
Conservation and Recovery Act. Past activities at Tantalo have resulted in the release of hazardous wastes into the groundwater. A remediation program has been developed for Tantalo in conjunction
with the New York State Department of Environmental Conservation. The remediation program includes: installation of groundwater barriers, protective liner caps, leachate and gas collection
systems, and storm-water drainage controls, as well as methods to accelerate the decontamination process. In addition, IESI purchased a "Cleanup Cost Cap Insurance Policy," with a ten-year
policy period, which provides U.S. $25,000 of coverage in excess of the remediation portion of the liability. The total estimated future undiscounted remediation costs amounting to $8,732 are
included in the Fund's landfill closure and post-closure costs at December 31, 2007. 

The
cost of remediation requires a number of assumptions and estimates which are inherently difficult to estimate, and the outcome may differ materially from current estimates. However, management
believes that its experience, together with its use of independent engineers and consultants provides a reasonable basis for estimating its liability. As additional information becomes available,
estimates are adjusted as applicable. It is possible that technological, regulatory or enforcement developments, the results of environmental studies, or other factors could necessitate the recording
of additional liabilities which could be material. The estimated environmental remediation liabilities have not been reduced for possible recoveries from other potentially responsible
third parties.  

	(viii)
	The
Fund is subject to certain lawsuits and other claims arising in the ordinary course of business. The outcome of these matters is subject to future
resolution. Management's evaluation and analysis of such matters indicates that the resolution thereof will not have a material effect on the Fund's consolidated financial statements. 

24

 

  BFI CANADA INCOME FUND  

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated)  

 18.   EMPLOYEE FUTURE BENEFITS  

The
net pension expense for the defined contribution and defined benefit pension plans for the year ended December 31, 2007 amounted to $1,796
(2006 — $1,611). 

 Defined contribution pension plan  

The
Fund's defined contribution pension plan is non-contributory and requires all eligible employees to join the plan following one year of service. 

 Defined benefit pension plan  

The
Fund has 10 active members in its defined benefit pension plan. Plan assets and the accrued benefit obligation were measured at December 31, 2007. Contributions to the defined
benefit pension plan by members of the plan are neither required nor permitted and the Fund makes contributions to the plan based on the advice of the plan's actuary. Subject to applicable provincial
legislation, benefits vest after two years of continuous employment. If a member terminates employment for reasons other than death or retirement, the member will receive a pension commencing on their
normal retirement date, equal to the pension earned at the date of termination. 

An
actuarial valuation for funding purposes is performed every three years. The most recent actuarial valuation was completed on December 31, 2006. Information on the Fund's defined benefit
pension plan is as follows: 

									
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 Plan Assets
	 	 	 	 	 	 	 
	 	 Fair value of plan assets, beginning of year
	 	$	654	 	$	539	 
	 	 Expected return on plan assets
	 	 	50	 	 	42	 
	 	 Employer contributions
	 	 	42	 	 	43	 
	 	 Actuarial (loss) gain
	 	 	(46	)	 	30	 
	 	 	 	 	 	 	 
	 	 Fair value of plan assets, end of year
	 	$	700	 	$	654	 
	 	 	 	 	 	 	 
	 	 Accrued Benefit Obligation
	 	 	 	 	 	 	 
	 	 Accrued benefit obligation, beginning of year
	 	$	763	 	$	641	 
	 	 Current service cost
	 	 	66	 	 	57	 
	 	 Interest cost
	 	 	43	 	 	37	 
	 	 Actuarial (gain) loss
	 	 	(97	)	 	28	 
	 	 Actuarial revision to opening accrued benefit obligations
	 	 	37	 	 	—	 
	 	 	 	 	 	 	 
	 	 Accrued benefit obligation, end of year
	 	$	812	 	$	763	 
	 	 	 	 	 	 	 
	 	 Net Benefit Plan Expense
	 	 	 	 	 	 	 
	 	 Current service cost
	 	$	66	 	$	57	 
	 	 Expected return on plan assets
	 	 	(50	)	 	(42	)
	 	 Interest cost
	 	 	43	 	 	37	 
	 	 Amortization of transition asset
	 	 	(3	)	 	(3	)
	 	 Net actuarial losses
	 	 	21	 	 	10	 
	 	 	 	 	 	 	 
	 	 Net benefit plan expense
	 	$	77	 	$	59	 
	 	 	 	 	 	 	 
	 	 (Accrued) Prepaid Pension Benefit Expense
	 	 	 	 	 	 	 
	 	 Funded status — plan deficit
	 	$	(112	)	$	(109	)
	 	 Unamortized transitional asset
	 	 	(10	)	 	(13	)
	 	 Unamortized actuarial losses
	 	 	91	 	 	126	 
	 	 	 	 	 	 	 
	 	 (Accrued) prepaid pension benefit expense, end of year
	 	$	(31	)	$	4	 
	 	 	 	 	 	 	 

25

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 18.   EMPLOYEE FUTURE BENEFITS (Continued) 

The
significant actuarial assumptions are as follows: 

									
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 Discount rate
	 	 	5.0%	 	 	5.0%	 
	 	 Expected long-term rate of return on plan assets
	 	 	7.5%	 	 	7.5%	 
	 	 Rate of compensation increase
	 	 	4.5%	 	 	4.0%	 
	 	 Average remaining service period of active employees, in years
	 	 	7.8	 	 	12.3	 

 19.   FINANCIAL INSTRUMENTS  

 Risk management objectives  

The
Fund's financial risk management objective is to mitigate risk exposures to a level consistent with its risk tolerance. Derivative financial instruments are evaluated against the exposures they
are expected to mitigate and the selection of a derivative financial instrument may not increase the net exposure of the Fund to risk. Derivative financial instruments may expose the Fund to other
types of risk, which may include, but is not limited to, credit risk. The exposure to other types of risk is evaluated against the selected derivative financial instrument and is subject to a cost
versus benefit review and analysis. The Fund's use of derivative financial instruments for speculative or trading purposes is prohibited and the value of the derivative financial instrument cannot
exceed the risk exposure of the underlying asset, liability or cash flow it expects to mitigate. 

The
Fund has identified interest rate, foreign currency exchange rate and commodity price fluctuations as areas of risk exposure which are not influenced by the Fund's normal course operations.
Accordingly, the Fund uses the following derivative financial instruments to mitigate its identified risks: interest rate swaps, used to fix a portion of the floating component of the Fund's
U.S. term loan and revolving credit facility, single rate foreign currency hedge agreements, used to mitigate the effect of changes in the U.S./Canadian foreign currency exchange rate, and
commodity price hedges for OCC. 

 Exposure risks  

As
a condition of borrowing, the Fund is required to enter into and maintain interest rate swaps, on a fixed rate basis, for not less than 40% of total funded debt on its
U.S. long-term debt facility. The U.S. term loan and revolving credit facility are secured by a first priority perfected security interest over all assets of IESI and its
subsidiaries and includes all of the equity interests of IESI's direct and indirect subsidiaries and all of IESI's common shares. The Fund has entered into interest rate swaps with various financial
institutions, details of which are as follows: 

												
	 	Interest rate swaps at December 31, 2007

 
	 	Amount

(stated in

thousands of

U.S. dollars) 	 	Maturity 	 	Rate 	 
	 	
	 	$	25,000	 	 	January 21, 2009	 	 	3.57%	 
	 	
	 	 	25,000	 	 	January 21, 2009	 	 	3.47%	 
	 	
	 	 	25,000	 	 	January 21, 2009	 	 	3.60%	 
	 	
	 	 	2,000	 	 	March 30, 2009	 	 	4.98%	 
	 	
	 	 	75,000	 	 	October 4, 2010	 	 	4.72%	 
	 	
	 	 	25,000	 	 	October 2, 2011	 	 	4.73%	 
	 	
	 	 	50,000	 	 	October 3, 2011	 	 	4.79%	 
	 	
	 	 	35,000	 	 	October 2, 2012	 	 	4.89%	 
	 	 	 	 	 	 	 	 	 
	 	
	 	$	262,000	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 

All
interest rate swaps are subject to a bank margin ranging from 1.75% to 3.50%. 

PPS
dividends and a portion of the Fund's Canadian dollar distributions to unitholders are supported by U.S. denominated amounts. The Fund has three single rate hedge agreements with various
financial institutions through February 2008 to purchase 4,500 Canadian dollars monthly at an average foreign currency exchange rate of approximately $1.222. 

26

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 19.   FINANCIAL INSTRUMENTS (Continued) 

The
Fund is party to an OCC hedge agreement through January 2008 to swap approximately 1.4 short tons monthly at a fixed price of eighty-two U.S. dollars per
short ton. 

Pursuant
to the terms of the Fund's Third Amended and Restated Trust Indenture for its debentures, the Fund, at its option, may redeem at any time prior to maturity all or any portion of its
debentures, subject to certain restrictions. The redemption price is the greater of the debentures' value calculated using the current Government of Canada yield, plus an applicable spread, as defined
therein, and the then current principal amount outstanding, plus accrued interest outstanding in either instance. The fair value of the redemption option, an embedded derivative, is $nil. The
debentures mature on June 26, 2009 and 2014. 

The
Fund has not designated any of its derivatives in a hedge accounting relationship. Accordingly, changes in the fair value of these derivatives, non-cash items, are recorded in the
consolidated statement of operations and comprehensive (loss) income as a net loss or gain on financial instruments. The fair value of derivatives is recorded in other assets and other liabilities on
the consolidated balance sheet. 

 Interest rate price and cash flow risk  

The
Fund has various financial instruments which are exposed to interest rate price and cash flow risk, as follows: 

The
Fund's debentures and a portion of the Fund's U.S. term loan bear interest at fixed rates of interest and are subject to interest rate price risk. Although fluctuations in the variable
interest rate have no effect on the Fund's current interest expense on long-term debt, the Fund is exposed to interest rate price risk on renegotiation of its fixed interest rate
instruments. The Fund is also subject to interest rate price risk on other receivables. 

A
portion of the Fund's term loan, its two revolving credit facilities, and its IRBs are subject to interest rate cash flow risk. An increase or decrease in the underlying variable interest rate
results in a corresponding increase or decrease to interest expense on long-term debt. The Fund is also subject to interest rate cash flow risk on funded landfill post-closure
costs. Funded landfill post-closure costs are invested in interest rate sensitive short-term investments. An increase or decrease in the return on invested amounts results in
either a decrease or increase in the Fund's funding obligation. 

 Credit risk  

The
Fund is subject to credit risk on various financial instruments. The Fund's maximum exposure to credit risk on its interest rate swaps, foreign currency exchange agreements and hedge agreements
for OCC is equal to the fair value of the respective financial instruments included in other assets or other liabilities on the Fund's consolidated balance sheet (Note 8). 

The
Fund is subject to credit risk from its exposure to a single customer in the U.S. which accounts for approximately 6.0% of the Fund's accounts receivable at December 31, 2007
(December 31, 2006 — 13.8%). The Fund is also subject to credit risk from exposure to its syndicated lenders who are party to the Fund's
long-term debt facilities. The Fund does not consider these exposures to be significant. 

 Estimated fair value  

The
carrying value of accounts receivable, due from non-controlling interest, accounts payable, and accrued charges approximates fair value due to the relatively short-term
maturities of these instruments. Cash and cash equivalents, funded landfill post-closure costs and derivative and embedded derivative financial instruments are recorded on the consolidated
balance sheet at fair value. 

At
December 31, 2007, the estimated fair value of the direct finance lease receivables applying an interest rate consistent with the credit quality of the instrument is $1,321
(2006 — $2,671), compared to the carrying amount of $1,218 (2006 — $2,469). 

At
December 31, 2007, the estimated fair value of long-term finance receivables applying an interest rate consistent with the credit quality of the instrument is $nil
(2006 — $714), compared to the carrying amount of $nil (2006 — $735). 

At
December 31, 2007, the debentures estimated fair value is approximately $120,000 (2006 — $119,000) compared to the carrying amount of $105,000
(2006 — $105,000). 

At
December 31, 2007, the estimated fair value of long-term debt bearing interest at variable rates approximates its carrying amount. 

27

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 19.   FINANCIAL INSTRUMENTS (Continued) 

 Fair value methods and assumptions  

Financial
assets and liabilities recorded at fair value and included in other assets and other liabilities on the Fund's consolidated balance sheet are as follows: cash and cash equivalents, funded
landfill post-closure costs, interest rate swaps, foreign currency exchange agreements, and OCC hedges. Statements of cash and cash equivalents are supplied by the Fund's financial
institutions and reflect current cash balances and quoted market prices, respectively. Deposits made to the social utility trust, and recorded as funded landfill post-closure costs on the
consolidated balance sheet, are invested by the social utility trust trustee. Statements of invested amounts are supplied to the Fund by the social utility trust trustee and are prepared from quoted
market prices for the underlying investments. The fair value of interest rate swaps, foreign currency exchange agreements and OCC hedges are prepared by third parties applying valuation techniques and
using market inputs. 

The
total change in the fair value of financial assets and liabilities, recorded in the Fund's consolidated statement of operations and comprehensive (loss) income as net loss on financial instruments
for the year ended December 31, 2007, amounts to $9,384 (2006 — $3,363), in aggregate. The total change is comprised of the following fair value changes:
funded landfill post-closure costs ($176) (2006 — $nil), interest rate swaps $8,290 (2006 — $nil), foreign
currency exchange agreements $1,149 (2006 — $2,946), and OCC hedges $121 (2006 — $417). 

The
fair value of financial assets and liabilities disclosed in the notes to the consolidated financial statements include direct finance leases, long-term finance lease receivables and
debentures and are valued applying a discount rate adjustment approach. 

 20.   SEGMENTED REPORTING  

The
Fund carries on business through three separate geographic segments: Canada, U.S. south and U.S. northeast. The business segments are vertically integrated and principally include
landfills and landfill gas to energy facilities, collection and disposal of waste and
recyclable products, transfer station operations, and material recovery facilities. The geographic location of each business segment limits the volume and amount of transactions between
each segment. 

The
accounting policies applied by the business segments are the same as those described in the summary of significant accounting policies (Note 2). U.S. corporate selling, general and
administration expenses are allocated to the U.S. south and U.S. northeast segments based on various factors, including income before the following(1). The Fund evaluates
segment performance based on gross revenues, less operating and selling, general and administration expenses. 

										
	 	 
	 	December 31 	 
	 	 
	 	2007 	 	2006 	 
	 	 Gross Revenues
	 	 	 	 	 	 	 
	 	 	 Canada
	 	$	336,527	 	$	288,640	 
	 	 	 U.S. South
	 	 	314,690	 	 	267,121	 
	 	 	 U.S. Northeast
	 	 	266,140	 	 	216,058	 
	 	 	 	 	 	 	 
	 	
	 	$	917,357	 	$	771,819	 
	 	 	 	 	 	 	 
	 	 Income before the following(1)
	 	 	 	 	 	 	 
	 	 	 Canada
	 	$	119,718	 	$	101,989	 
	 	 	 U.S. South
	 	 	69,624	 	 	53,288	 
	 	 	 U.S. Northeast
	 	 	86,193	 	 	80,640	 
	 	 	 	 	 	 	 
	 	
	 	$	275,535	 	$	235,917	 
	 	 	 	 	 	 	 
	 	 Amortization
	 	 	 	 	 	 	 
	 	 	 Canada
	 	$	57,538	 	$	56,215	 
	 	 	 U.S. South
	 	 	50,561	 	 	45,193	 
	 	 	 U.S. Northeast
	 	 	52,907	 	 	46,720	 
	 	 	 	 	 	 	 
	 	
	 	$	161,006	 	$	148,128	 
	 	 	 	 	 	 	 

	(1)
	Income
before the following represents net income before amortization, interest on long-term debt, financing costs, net gain on sale of capital
assets, net loss on financial instruments, net foreign exchange loss (gain), other expenses, income taxes, and non-controlling interest. 

28

 

  BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated)  

 20.   SEGMENTED REPORTING (Continued)  

															
	 	 
	 	 
	 	 
	 	 
	 	December 31,

2007 	 
	 	 
	 	Canada 	 	U.S. South 	 	U.S. Northeast 	 	Total 	 
	 	 Capital assets
	 	$	144,681	 	$	148,720	 	$	111,499	 	$	404,900	 
	 	 Goodwill
	 	$	61,461	 	$	162,714	 	$	392,359	 	$	616,534	 
	 	 Total Assets
	 	$	505,129	 	$	498,005	 	$	968,078	 	$	1,971,212	 

															
	 	 
	 	 
	 	 
	 	 
	 	December 31,

2006 	 
	 	 
	 	Canada 	 	U.S. South 	 	U.S. Northeast 	 	Total 	 
	 	 Capital assets
	 	$	124,418	 	$	145,409	 	$	52,545	 	$	322,372	 
	 	 Goodwill
	 	$	53,760	 	$	171,307	 	$	256,267	 	$	481,334	 
	 	 Total Assets
	 	$	493,459	 	$	515,768	 	$	757,433	 	$	1,766,660	 

 21.   GUARANTEES  

In
the normal course of business, the Fund enters into agreements that meet the definition of a guarantee. The Fund's primary guarantees are as follows: 

The
Fund has provided indemnities under lease agreements for the use of various operating facilities. Under the terms of these agreements the Fund agrees to indemnify the counterparties for various
items including, but not limited to, all liabilities, loss, suits, damage and existence of hazardous substances arising during, on or after the term of the agreement. Changes in environmental laws or
in the interpretation thereof may require the Fund to compensate the counterparties. The maximum amount of any potential future payment cannot be reasonably estimated. 

Indemnity
has been provided to all Trustees and directors and or officers of the Fund and its subsidiaries for various items including, but not limited to, all costs to settle suits or actions due to
association with the Fund and its subsidiaries, subject to certain restrictions. The Fund has purchased directors' and officers' liability insurance to mitigate the cost of any potential future suits
or actions. The term of the indemnification is not explicitly defined, but is limited to the period over which the indemnified party serves as a Trustee, director or officer of the Fund or its
subsidiaries. The maximum amount of any potential future payment cannot be reasonably estimated. 

The
Fund has received indemnities for the receipt of hazardous, toxic or radioactive wastes or substances and the Fund has issued indemnities for the disposal thereof at third party landfills.
Applicable federal, provincial, state or local laws and regulations define hazardous, toxic or radioactive wastes or substances. Changes in environmental laws or in the interpretation thereof may
require the Fund to compensate or be compensated by the counterparties. The term of the indemnity is not explicitly defined and the maximum amount of any potential future reimbursement or payment
cannot be reasonably estimated. 

As
part of a Host Community Agreement ("HCA") between the Fund and the Town of Seneca Falls, New York in which the Seneca Meadows Landfill is located, the Fund has agreed to guarantee the
market value of certain homeowners' properties within a certain distance of the landfill based on a Property Value Protection Program ("PVPP") incorporated into the HCA. Under the PVPP, the Fund would
be responsible for the difference between the sale value and the hypothetical market value of the homeowners' properties assuming a previously approved expansion of the landfill had not been approved,
if any. The Fund does not believe it is possible to determine the contingent obligation associated with the PVPP guarantees, but does not believe it would have a material effect on the Fund's
financial position or results of operations. As of December 31, 2007, the Fund has not been required to compensate any homeowner under the PVPP. 

In
the normal course of business, the Fund has entered into agreements that include indemnities in favour of third parties, such as purchase and sale agreements, confidentiality agreements, engagement
letters with advisors and consultants, outsourcing agreements, leasing contracts, underwriting and agency agreements, information technology agreements and service agreements. These indemnification
agreements may require the Fund to compensate counterparties for losses incurred by the counterparties as a result of breaches in representation and regulations or as a result of litigation claims or
statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of these indemnities are not explicitly defined and the maximum amount of any potential
reimbursement cannot be reasonably estimated. 

The
nature of these indemnification agreements prevents the Fund from making a reasonable estimate of the maximum exposure due to the difficulties in assessing the amount of liability which stems from
the unpredictability of future events and the unlimited coverage offered to counterparties. Historically, the Fund and its predecessor have not made any significant payments under such or similar 

29

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 21.   GUARANTEES (Continued) 

indemnification
agreements and therefore no amount has been accrued in the consolidated balance sheet with respect to these agreements. 

The
Fund has been indemnified for various environmental and real property and other matters, including taxes and various other items that existed on or prior to June 30, 2000. The term and
potential reimbursement varies with the matter indemnified. 

 22.   LONG-TERM INCENTIVE PLAN  

Effective
January 1, 2003, Holdings entered into a trust (the "Trust") agreement to establish a long-term incentive plan on behalf of certain Canadian employees, officers and
directors of Holdings and its subsidiaries. The purpose of the Trust is to receive monies from Holdings and its subsidiaries on behalf of certain Canadian employees, officers and directors to purchase
units of the Fund in the open market and to hold those units acquired for the benefit of its participants. Units will remain registered in the name of Holdings, the Trustee, or its nominee(s), until
the units are redeemed, sold or distributed to the participant for whom they are held. Distributions received by the Trust are to be distributed to the participants in proportion to their
pro-rata entitlement. The Fund's maximum exposure to loss is limited to its obligation to fund the administration of the Trust and its indemnity to Holdings', officers, directors,
employees, agents or unitholders for various items including, but not limited to, all costs to settle suits or actions due to association with the Trust, subject to certain restrictions. The risk of
fluctuations in the price of the Fund's trust units is borne by its participants. In February 2006, the Fund amended and restated its long-term incentive plan and established a
long-term incentive plan on behalf of certain U.S. employees, officers and directors of IESI and its subsidiaries. With the exception of changes to the vesting period, the terms of
the long-term incentive plan remain principally unchanged. Trust units acquired by the Trust in respect of fiscal year ending December 31, 2004 for the benefit of its participants
have vested. Trust units acquired by the Trust in respect of fiscal year ending December 31, 2005, and thereafter, will vest as follows: one third on the day such trust units are allocated to
the participant, one third on December 31 of the year such trust units are allocated to the participant, and the balance on December 31 of the subsequent year. Trust units that are
forfeited by participants to the long-term incentive plan are allocated to the remaining participants in accordance with their proportional entitlement to all of the trust units held by
the Trust and the Trust will abstain from voting on all matters related to the Fund. The purpose and terms of the U.S. long-term incentive plan are consistent with those outlined
for the Fund's amended and restated Canadian plan. Contributions to the long-term incentive plan are calculated at a rate of 2.25% of free cash flow available for distribution as presented
in management's discussion and analysis. Included in selling, general and administration expenses are $3,809 (2006 — $3,195) of accrued amounts payable to the
Trust on behalf of certain Canadian and U.S. employees, officers and directors at December 31, 2007. 

 23.   COMPARATIVE FINANCIAL STATEMENTS  

Certain
prior year amounts have been reclassified to conform to the current year's presentation. 

 24.   SUBSEQUENT EVENTS  

Effective
August 18, 2008, the Fund announced that its Board of Trustees approved the conversion of the Fund from an income trust to a corporation and concurrently announced a reduction in
monthly cash distributions to $0.04166 per trust unit, commencing with the distribution payable January 15, 2009 to holders of record on December 31, 2008. 

Effective
September 19, 2008, the Fund announced that the Board of Directors for 1768248 Ontario Limited, a wholly owned subsidiary of the Fund prior to conversion and the parent company
of the Fund post conversion ("BFI Canada Ltd."), approved a special quarterly dividend payable in four equal amounts of $0.125 per share commencing on March 31, 2009. 

Effective
September 25, 2008, unitholders voted in favour of the Fund's conversion from an income trust to a corporation. The conversion received approval from the Ontario Superior Court of
Justice on September 30, 2008 and is effective October 1, 2008. The common shares of BFI Canada Ltd. commenced trading on the Toronto Stock Exchange, under the symbol "BFC", on
October 2, 2008. Concurrently, trust units of the Fund have been delisted from the Toronto Stock Exchange and the Fund has submitted an application to cease to be a reporting issuer. 

Effective
October 1, 2008, the Fund entered into a Fourth Amending Agreement to its Fourth Amended and Restated Credit Agreement and a Sixth Amending Agreement to its Amended and Restated
Revolving Credit and Term Loan Agreement. The amending agreements simply recognize the Fund's structural change and had no impact on the Fund's committed amounts, maturity dates or pricing. 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP  

The
consolidated financial statements have been prepared in accordance with Canadian GAAP, which differs in certain respects from accounting principles generally accepted in the
U.S. ("U.S. GAAP"). The effects of significant accounting differences and certain 

30

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

disclosure
differences on the Fund's consolidated financial statements are quantified and described in the following tables and notes for the years ended December 31, 2007 and 2006: 

															
	
 	

Consolidated Balance Sheet

December 31, 2007

(in thousands of Canadian dollars)

	
 
	 	 
	 	Stated in

accordance with

Canadian GAAP 	 	Adjustments

from Canadian

to U.S. GAAP 	 	Note 	 	Stated in

accordance with

U.S. GAAP 	 
	 	 ASSETS
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 CURRENT
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Cash and cash equivalents
	 	$	13,359	 	$	(1,600	)	D	 	$	11,759	 
	 	 	 Accounts receivable
	 	 	115,851	 	 	—	 	 	 	 	115,851	 
	 	 	 Other receivables
	 	 	457	 	 	—	 	 	 	 	457	 
	 	 	 Prepaid expenses
	 	 	15,001	 	 	—	 	 	 	 	15,001	 
	 	 	 Restricted cash
	 	 	—	 	 	1,600	 	D	 	 	1,600	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	 	144,668	 	 	—	 	 	 	 	144,668	 
	 	 OTHER RECEIVABLES
	 	 	761	 	 	—	 	 	 	 	761	 
	 	 FUNDED LANDFILL POST-CLOSURE COSTS
	 	 	5,976	 	 	—	 	 	 	 	5,976	 
	 	 INTANGIBLES
	 	 	144,686	 	 	—	 	 	 	 	144,686	 
	 	 GOODWILL
	 	 	616,534	 	 	—	 	 	 	 	616,534	 
	 	 DEFERRED COSTS
	 	 	7,306	 	 	—	 	 	 	 	7,306	 
	 	 DEFERRED FINANCING COSTS
	 	 	—	 	 	10,375	 	B	 	 	10,375	 
	 	 CAPITAL ASSETS
	 	 	404,900	 	 	72	 	A	 	 	404,972	 
	 	 LANDFILL ASSETS
	 	 	644,711	 	 	10,304	 	A	 	 	655,015	 
	 	 OTHER ASSETS
	 	 	1,670	 	 	—	 	 	 	 	1,670	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	$	1,971,212	 	$	20,751	 	 	 	$	1,991,963	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 LIABILITIES
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 CURRENT
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Accounts payable
	 	$	66,815	 	$	—	 	 	 	$	66,815	 
	 	 	 Accrued charges
	 	 	75,355	 	 	4,380	 	E,G	 	 	79,735	 
	 	 	 Distribution and dividends payable
	 	 	10,409	 	 	—	 	 	 	 	10,409	 
	 	 	 Income taxes payable
	 	 	2,515	 	 	—	 	 	 	 	2,515	 
	 	 	 Deferred revenues
	 	 	12,018	 	 	—	 	 	 	 	12,018	 
	 	 	 Landfill closure and post-closure costs
	 	 	2,900	 	 	—	 	 	 	 	2,900	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	 	170,012	 	 	4,380	 	 	 	 	174,392	 
	 	 LONG-TERM DEBT
	 	 	801,973	 	 	—	 	 	 	 	801,973	 
	 	 LANDFILL CLOSURE AND POST-CLOSURE COSTS
	 	 	55,943	 	 	—	 	 	 	 	55,943	 
	 	 OTHER LIABILITIES
	 	 	5,056	 	 	—	 	 	 	 	5,056	 
	 	 FUTURE INCOME TAX LIABILITIES
	 	 	57,668	 	 	3,784	 	A	 	 	65,236	 
	 	
	 	 	 	 	 	3,776	 	B	 	 	 	 
	 	
	 	 	 	 	 	8	 	G	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	 	1,090,652	 	 	11,948	 	 	 	 	1,102,600	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 NON-CONTROLLING INTEREST
	 	 	251,371	 	 	(251,371	)	G	 	 	—	 
	 	 MEZZANINE EQUITY
	 	 	—	 	 	1,561,334	 	G	 	 	1,561,334	 
	 	 UNITHOLDERS' EQUITY (DEFICIENCY)
	 	 	629,189	 	 	6,592	 	A	 	 	(671,971	)
	 	
	 	 	 	 	 	6,599	 	B	 	 	 	 
	 	
	 	 	 	 	 	(1,404	)	E	 	 	 	 
	 	
	 	 	 	 	 	(1,312,947	)	G	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	$	1,971,212	 	$	20,751	 	 	 	$	1,991,963	 
	 	 	 	 	 	 	 	 	 	 	 

31

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

															
	
 	

Consolidated Balance Sheet

December 31, 2006

(in thousands of Canadian dollars)

	
 
	 	 
	 	Stated in

accordance with

Canadian GAAP 	 	Adjustments

from Canadian

to U.S. GAAP 	 	Note 	 	Stated in

accordance with

U.S. GAAP 	 
	 	 ASSETS
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 CURRENT
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Cash and cash equivalents
	 	$	9,275	 	$	(798	)	D	 	$	8,477	 
	 	 	 Accounts receivable
	 	 	102,350	 	 	—	 	 	 	 	102,350	 
	 	 	 Due from non-controlling interest (participating preferred shareholders)
	 	 	6,638	 	 	—	 	 	 	 	6,638	 
	 	 	 Other receivables
	 	 	1,737	 	 	—	 	 	 	 	1,737	 
	 	 	 Prepaid expenses
	 	 	11,665	 	 	—	 	 	 	 	11,665	 
	 	 	 Restricted cash
	 	 	—	 	 	798	 	D	 	 	798	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	 	131,665	 	 	—	 	 	 	 	131,665	 
	 	 OTHER RECEIVABLES
	 	 	1,517	 	 	—	 	 	 	 	1,517	 
	 	 FUNDED LANDFILL POST-CLOSURE COSTS
	 	 	4,142	 	 	144	 	C	 	 	4,286	 
	 	 INTANGIBLES
	 	 	77,204	 	 	—	 	 	 	 	77,204	 
	 	 GOODWILL
	 	 	481,334	 	 	—	 	 	 	 	481,334	 
	 	 DEFERRED COSTS
	 	 	4,051	 	 	—	 	 	 	 	4,051	 
	 	 DEFERRED FINANCING COSTS
	 	 	7,015	 	 	—	 	 	 	 	7,015	 
	 	 CAPITAL ASSETS
	 	 	322,372	 	 	5	 	A	 	 	322,377	 
	 	 LANDFILL ASSETS
	 	 	730,290	 	 	8,361	 	A	 	 	738,651	 
	 	 OTHER ASSETS
	 	 	7,070	 	 	—	 	 	 	 	7,070	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	$	1,766,660	 	$	8,510	 	 	 	$	1,775,170	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 LIABILITIES
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 CURRENT
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Accounts payable
	 	$	64,284	 	$	—	 	 	 	$	64,284	 
	 	 	 Accrued charges
	 	 	57,318	 	 	1,894	 	E,G	 	 	59,212	 
	 	 	 Distribution and dividends payable
	 	 	9,907	 	 	—	 	 	 	 	9,907	 
	 	 	 Income taxes payable
	 	 	1,280	 	 	—	 	 	 	 	1,280	 
	 	 	 Deferred revenues
	 	 	10,212	 	 	—	 	 	 	 	10,212	 
	 	 	 Current portion of long-term debt
	 	 	50	 	 	—	 	 	 	 	50	 
	 	 	 Landfill closure and post-closure costs
	 	 	5,824	 	 	—	 	 	 	 	5,824	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	 	148,875	 	 	1,894	 	 	 	 	150,769	 
	 	 LONG-TERM DEBT
	 	 	543,454	 	 	—	 	 	 	 	543,454	 
	 	 LANDFILL CLOSURE AND POST-CLOSURE COSTS
	 	 	58,711	 	 	—	 	 	 	 	58,711	 
	 	 OTHER LIABILITIES
	 	 	383	 	 	—	 	 	 	 	383	 
	 	 FUTURE INCOME TAX LIABILITIES
	 	 	31,922	 	 	250	 	A	 	 	32,246	 
	 	
	 	 	 	 	 	46	 	C	 	 	 	 
	 	
	 	 	 	 	 	28	 	G	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	 	783,345	 	 	2,218	 	 	 	 	785,563	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 NON-CONTROLLING INTEREST
	 	 	282,026	 	 	(282,026	)	G	 	 	—	 
	 	 MEZZANINE EQUITY
	 	 	—	 	 	1,637,449	 	G	 	 	1,637,449	 
	 	 UNITHOLDERS' EQUITY (DEFICIENCY)
	 	 	701,289	 	 	8,116	 	A	 	 	(647,842	)
	 	
	 	 	 	 	 	98	 	C	 	 	 	 
	 	
	 	 	 	 	 	(688	)	E	 	 	 	 
	 	
	 	 	 	 	 	(1,356,657	)	G	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	$	1,766,660	 	$	8,510	 	 	 	$	1,775,170	 
	 	 	 	 	 	 	 	 	 	 	 

32

 

  BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated)  

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued)  

Consolidated Statement of Operations and Comprehensive (Loss) Income
  

 For the year ended December 31, 2007

(in thousands of Canadian dollars, except net income per trust unit amounts)

															
	
 	

 
	
 	

Stated in

accordance with

Canadian GAAP 	
 	

Adjustments

from Canadian

to U.S. GAAP 	
 	

Note 	
 	

Stated in

accordance with

U.S. GAAP 	
 
	 	 REVENUES
	 	$	917,357	 	$	—	 	 	 	$	917,357	 
	 	 EXPENSES
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 OPERATING
	 	 	531,614	 	 	—	 	 	 	 	531,614	 
	 	 	 SELLING, GENERAL AND ADMINISTRATION
	 	 	110,208	 	 	768	 	E,G	 	 	110,976	 
	 	 	 AMORTIZATION
	 	 	161,006	 	 	644	 	A	 	 	161,650	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 OPERATING INCOME
	 	 	114,529	 	 	(1,412	)	 	 	 	113,117	 
	 	 INTEREST ON LONG-TERM DEBT
	 	 	42,964	 	 	(4,063	)	A	 	 	41,493	 
	 	
	 	 	 	 	 	2,592	 	B	 	 	 	 
	 	 FINANCING COSTS
	 	 	7,192	 	 	(7,192	)	B	 	 	—	 
	 	 NET GAIN ON SALE OF CAPITAL ASSETS
	 	 	(1,434	)	 	—	 	 	 	 	(1,434	)
	 	 NET LOSS ON FINANCIAL INSTRUMENTS
	 	 	9,384	 	 	—	 	 	 	 	9,384	 
	 	 NET FOREIGN EXCHANGE LOSS
	 	 	13,671	 	 	—	 	 	 	 	13,671	 
	 	 OTHER EXPENSES
	 	 	48	 	 	—	 	 	 	 	48	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 INCOME BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST
	 	 	42,704	 	 	7,251	 	 	 	 	49,955	 
	 	 INCOME TAX EXPENSE (RECOVERY)
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Current
	 	 	8,779	 	 	—	 	 	 	 	8,779	 
	 	 	 Future
	 	 	(4,082	)	 	3,837	 	A	 	 	1,453	 
	 	
	 	 	 	 	 	1,718	 	B	 	 	 	 
	 	
	 	 	 	 	 	(20	)	G	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	 	4,697	 	 	5,535	 	 	 	 	10,232	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 INCOME BEFORE NON-CONTROLLING INTEREST
	 	 	38,007	 	 	1,716	 	 	 	 	39,723	 
	 	 NON-CONTROLLING INTEREST
	 	 	6,320	 	 	(6,320	)	G	 	 	—	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 NET INCOME
	 	 	31,687	 	 	8,036	 	 	 	 	39,723	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 OTHER COMPREHENSIVE (LOSS) INCOME
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Foreign currency translation adjustment
	 	 	(95,859	)	 	(1,886	)	A,B	 	 	(97,745	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 COMPREHENSIVE (LOSS) INCOME
	 	$	(64,172	)	$	6,150	 	 	 	$	(58,022	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Net income per trust unit, basic and diluted
	 	$	0.56	 	 	 	 	 	 	$	0.59	 
	 	 Weighted average number of trust units outstanding (thousands), basic
	 	 	56,564	 	 	 	 	G	 	 	67,803	 
	 	 Weighted average number of trust units outstanding (thousands), diluted
	 	 	67,803	 	 	 	 	 	 	 	67,803	 

33

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued)  

Consolidated Statement of Operations and Comprehensive (Loss) Income
  

 For the year ended December 31, 2006

(in thousands of Canadian dollars, except net income per trust unit amounts)

															
	
 	

 
	
 	

Stated in

accordance with

Canadian GAAP 	
 	

Adjustments

from Canadian

to U.S. GAAP 	
 	

Note 	
 	

Stated in

accordance with

U.S. GAAP 	
 
	 	 REVENUES
	 	$	771,819	 	$	—	 	 	 	$	771,819	 
	 	 EXPENSES
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 OPERATING
	 	 	436,311	 	 	—	 	 	 	 	436,311	 
	 	 	 SELLING, GENERAL AND ADMINISTRATION
	 	 	99,591	 	 	613	 	E,G	 	 	100,204	 
	 	 	 AMORTIZATION
	 	 	148,128	 	 	375	 	A	 	 	147,123	 
	 	
	 	 	 	 	 	(1,380	)	B	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 OPERATING INCOME
	 	 	87,789	 	 	392	 	 	 	 	88,181	 
	 	 INTEREST ON LONG-TERM DEBT
	 	 	34,307	 	 	(4,463	)	A	 	 	31,224	 
	 	
	 	 	 	 	 	1,380	 	B	 	 	 	 
	 	 FINANCING COSTS
	 	 	79	 	 	—	 	 	 	 	79	 
	 	 NET GAIN ON SALE OF CAPITAL ASSETS
	 	 	(443	)	 	—	 	 	 	 	(443	)
	 	 NET LOSS ON FINANCIAL INSTRUMENTS
	 	 	3,363	 	 	(121	)	C	 	 	3,242	 
	 	 NET FOREIGN EXCHANGE GAIN
	 	 	(2,578	)	 	—	 	 	 	 	(2,578	)
	 	 OTHER EXPENSES
	 	 	210	 	 	—	 	 	 	 	210	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 INCOME BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST
	 	 	52,851	 	 	3,596	 	 	 	 	56,447	 
	 	 INCOME TAX EXPENSE (RECOVERY)
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Current
	 	 	5,610	 	 	—	 	 	 	 	5,610	 
	 	 	 Future
	 	 	7,307	 	 	84	 	A	 	 	7,454	 
	 	
	 	 	 	 	 	35	 	C	 	 	 	 
	 	
	 	 	 	 	 	28	 	G	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	 	12,917	 	 	147	 	 	 	 	13,064	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 INCOME BEFORE NON-CONTROLLING INTEREST
	 	 	39,934	 	 	3,449	 	 	 	 	43,383	 
	 	 NON-CONTROLLING INTEREST
	 	 	7,191	 	 	(7,191	)	G	 	 	—	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 NET INCOME
	 	 	32,743	 	 	10,640	 	 	 	 	43,383	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 OTHER COMPREHENSIVE (LOSS) INCOME
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Foreign currency translation adjustment
	 	 	(421	)	 	102	 	A	 	 	(319	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 COMPREHENSIVE (LOSS) INCOME
	 	$	32,322	 	$	10,742	 	 	 	$	43,064	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 Net income per trust unit, basic and diluted
	 	$	0.61	 	 	 	 	 	 	$	0.66	 
	 	 Weighted average number of trust units outstanding (thousands), basic
	 	 	53,506	 	 	 	 	G	 	 	65,391	 
	 	 Weighted average number of trust units outstanding (thousands), diluted
	 	 	65,391	 	 	 	 	 	 	 	65,391	 

34

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued)  

Consolidated Statement of Cash Flows
  

 For the year ended December 31, 2007

(in thousands of Canadian dollars)

																
	
 	

 
	
 	

Stated in

accordance with

Canadian GAAP 	
 	

Adjustments

from Canadian

to U.S. GAAP 	
 	

Note 	
 	

Stated in

accordance with

U.S. GAAP 	
 
	 	 NET INFLOW (OUTFLOW) OF CASH RELATED TO THE

FOLLOWING ACTIVITIES
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 OPERATING
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Net income
	 	$	31,687	 	$	8,036	 	 	 	$	39,723	 
	 	 	 Items not affecting cash
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 Write-off of deferred costs
	 	 	129	 	 	—	 	 	 	 	129	 
	 	 	 	 Accretion of landfill closure and post-closure costs
	 	 	3,086	 	 	—	 	 	 	 	3,086	 
	 	 	 	 Amortization of intangibles
	 	 	25,443	 	 	—	 	 	 	 	25,443	 
	 	 	 	 Amortization of capital assets
	 	 	66,295	 	 	—	 	 	 	 	66,295	 
	 	 	 	 Amortization of landfill assets
	 	 	69,268	 	 	644	 	A	 	 	69,912	 
	 	 	 	 Interest on long-term debt
	 	 	—	 	 	2,592	 	B	 	 	2,592	 
	 	 	 	 Net gain on sale of capital assets
	 	 	(1,434	)	 	—	 	 	 	 	(1,434	)
	 	 	 	 Net loss on financial instruments
	 	 	9,384	 	 	—	 	 	 	 	9,384	 
	 	 	 	 Net unrealized foreign exchange loss
	 	 	9,683	 	 	—	 	 	 	 	9,683	 
	 	 	 	 Future income taxes
	 	 	(4,082	)	 	5,535	 	A,B,G	 	 	1,453	 
	 	 	 	 Non-controlling interest
	 	 	6,320	 	 	(6,320	)	G	 	 	—	 
	 	 	 Landfill closure and post-closure expenditures
	 	 	(4,541	)	 	—	 	 	 	 	(4,541	)
	 	 	 Changes in non-cash working capital items
	 	 	6,177	 	 	768	 	E,G	 	 	6,945	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash generated from operating activities
	 	 	217,415	 	 	11,255	 	 	 	 	228,670	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 INVESTING
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Acquisitions
	 	 	(366,244	)	 	—	 	 	 	 	(366,244	)
	 	 	 Restricted cash deposits
	 	 	—	 	 	(6,485	)	D	 	 	(6,485	)
	 	 	 Restricted cash withdrawals
	 	 	—	 	 	5,482	 	D	 	 	5,482	 
	 	 	 Investment in other receivables
	 	 	(610	)	 	—	 	 	 	 	(610	)
	 	 	 Proceeds from other receivables
	 	 	2,596	 	 	—	 	 	 	 	2,596	 
	 	 	 Funded landfill post-closure costs
	 	 	(1,472	)	 	—	 	 	 	 	(1,472	)
	 	 	 Purchase of capital assets
	 	 	(96,176	)	 	(67	)	A	 	 	(96,243	)
	 	 	 Purchase of landfill assets
	 	 	(59,693	)	 	(3,996	)	A	 	 	(63,689	)
	 	 	 Proceeds from the sale of capital assets
	 	 	1,996	 	 	—	 	 	 	 	1,996	 
	 	 	 Investment in deferred costs
	 	 	(3,385	)	 	—	 	 	 	 	(3,385	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash utilized in investing activities
	 	 	(522,988	)	 	(5,066	)	 	 	 	(528,054	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 FINANCING
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Payment of deferred financing costs
	 	 	—	 	 	(7,192	)	B	 	 	(7,192	)
	 	 	 Proceeds from long-term debt
	 	 	562,415	 	 	—	 	 	 	 	562,415	 
	 	 	 Repayment of long-term debt
	 	 	(218,644	)	 	—	 	 	 	 	(218,644	)
	 	 	 Trust units issued, net of issue costs
	 	 	87,562	 	 	—	 	 	 	 	87,562	 
	 	 	 Distributions and dividends paid to unitholders and

participating preferred shareholders
	 	 	(122,824	)	 	—	 	 	 	 	(122,824	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash generated from (utilized in) financing activities
	 	 	308,509	 	 	(7,192	)	 	 	 	301,317	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 Effect of foreign exchange changes on foreign cash and

cash equivalents
	 	 	1,148	 	 	201	 	 	 	 	1,349	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 NET CASH INFLOW (OUTFLOW)
	 	 	4,084	 	 	(802	)	 	 	 	3,282	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
	 	 	9,275	 	 	(798	)	 	 	 	8,477	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 CASH AND CASH EQUIVALENTS, END OF YEAR
	 	$	13,359	 	$	(1,600	)	 	 	$	11,759	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 SUPPLEMENTAL CASH FLOW INFORMATION:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Cash and cash equivalents are comprised of:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 Cash
	 	$	12,612	 	$	(1,600	)	 	 	$	11,012	 
	 	 	 	 Cash equivalents
	 	 	747	 	 	—	 	 	 	 	747	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	
	 	$	13,359	 	$	(1,600	)	 	 	$	11,759	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Cash paid during the year for:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 Income taxes
	 	$	6,210	 	$	—	 	 	 	$	6,210	 
	 	 	 	 Interest
	 	$	45,055	 	$	—	 	 	 	$	45,055	 

35

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued)  

Consolidated Statement of Cash Flows
  

 For the year ended December 31, 2006

(in thousands of Canadian dollars)

																
	 	 
	 	Stated in

accordance with

Canadian GAAP 	 	Adjustments

from Canadian

to U.S. GAAP 	 	Note 	 	Stated in

accordance with

U.S. GAAP 	 
	 	 NET INFLOW (OUTFLOW) OF CASH RELATED TO THE

FOLLOWING ACTIVITIES
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 OPERATING
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Net income
	 	$	32,743	 	$	10,640	 	 	 	$	43,383	 
	 	 	 Items not affecting cash
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 Write-off of deferred costs
	 	 	847	 	 	—	 	 	 	 	847	 
	 	 	 	 Accretion of landfill closure and post-closure costs
	 	 	2,932	 	 	—	 	 	 	 	2,932	 
	 	 	 	 Amortization of intangibles
	 	 	19,851	 	 	—	 	 	 	 	19,851	 
	 	 	 	 Amortization of deferred financing costs
	 	 	1,380	 	 	(1,380	)	B	 	 	—	 
	 	 	 	 Amortization of capital assets
	 	 	56,874	 	 	—	 	 	 	 	56,874	 
	 	 	 	 Amortization of landfill assets
	 	 	70,023	 	 	375	 	A	 	 	70,398	 
	 	 	 	 Interest on long-term debt
	 	 	—	 	 	1,380	 	B	 	 	1,380	 
	 	 	 	 Write-off of deferred financing costs
	 	 	79	 	 	—	 	 	 	 	79	 
	 	 	 	 Net gain on sale of capital assets
	 	 	(443	)	 	—	 	 	 	 	(443	)
	 	 	 	 Net loss on financial instruments
	 	 	3,363	 	 	(121	)	C	 	 	3,242	 
	 	 	 	 Net unrealized foreign exchange loss
	 	 	96	 	 	—	 	 	 	 	96	 
	 	 	 	 Future income taxes
	 	 	7,307	 	 	147	 	A,C,G	 	 	7,454	 
	 	 	 	 Non-controlling interest
	 	 	7,191	 	 	(7,191	)	G	 	 	—	 
	 	 	 Landfill closure and post-closure expenditures
	 	 	(13,016	)	 	—	 	 	 	 	(13,016	)
	 	 	 Changes in non-cash working capital items
	 	 	(3,529	)	 	613	 	E,G	 	 	(2,916	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash generated from operating activities
	 	 	185,698	 	 	4,463	 	 	 	 	190,161	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 INVESTING
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Acquisitions
	 	 	(33,578	)	 	—	 	 	 	 	(33,578	)
	 	 	 Restricted cash deposits
	 	 	—	 	 	(777	)	D	 	 	(777	)
	 	 	 Restricted cash withdrawals
	 	 	—	 	 	3,229	 	D	 	 	3,229	 
	 	 	 Investment in other receivables
	 	 	(2,095	)	 	—	 	 	 	 	(2,095	)
	 	 	 Proceeds from other receivables
	 	 	1,633	 	 	—	 	 	 	 	1,633	 
	 	 	 Funded landfill post-closure costs
	 	 	(2,525	)	 	—	 	 	 	 	(2,525	)
	 	 	 Purchase of capital assets
	 	 	(74,334	)	 	(5	)	A	 	 	(74,339	)
	 	 	 Purchase of landfill assets
	 	 	(55,051	)	 	(4,458	)	A	 	 	(59,509	)
	 	 	 Proceeds from the sale of capital assets
	 	 	1,183	 	 	—	 	 	 	 	1,183	 
	 	 	 Investment in deferred costs
	 	 	(1,910	)	 	—	 	 	 	 	(1,910	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash utilized in investing activities
	 	 	(166,677	)	 	(2,011	)	 	 	 	(168,688	)
	 	 	 	 	 	 	 	 	 	 	 

36

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

																
	 	 
	 	Stated in

accordance with

Canadian GAAP 	 	Adjustments

from Canadian

to U.S. GAAP 	 	Note 	 	Stated in

accordance with

U.S. GAAP 	 
	 	 FINANCING
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Payment of deferred financing costs
	 	 	(1,890	)	 	—	 	 	 	 	(1,890	)
	 	 	 Proceeds from long-term debt
	 	 	215,406	 	 	—	 	 	 	 	215,406	 
	 	 	 Repayment of long-term debt
	 	 	(123,774	)	 	—	 	 	 	 	(123,774	)
	 	 	 Trust units issued, net of issue costs
	 	 	(46	)	 	—	 	 	 	 	(46	)
	 	 	 Distributions and dividends paid to unitholders and

participating preferred shareholders
	 	 	(113,649	)	 	—	 	 	 	 	(113,649	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Cash utilized in financing activities
	 	 	(23,953	)	 	—	 	 	 	 	(23,953	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 Effect of foreign exchange changes on foreign cash and

cash equivalents
	 	 	65	 	 	69	 	 	 	 	134	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 NET CASH (OUTFLOW) INFLOW
	 	 	(4,867	)	 	2,521	 	 	 	 	(2,346	)
	 	 	 	 	 	 	 	 	 	 	 
	 	 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
	 	 	14,142	 	 	(3,319	)	 	 	 	10,823	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 CASH AND CASH EQUIVALENTS, END OF YEAR
	 	$	9,275	 	$	(798	)	 	 	$	8,477	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 SUPPLEMENTAL CASH FLOW INFORMATION:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Cash and cash equivalents are comprised of:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 Cash
	 	$	9,269	 	$	(798	)	 	 	$	8,471	 
	 	 	 	 Cash equivalents
	 	 	6	 	 	—	 	 	 	 	6	 
	 	 	 	 	 	 	 	 	 	 	 
	 	
	 	$	9,275	 	$	(798	)	 	 	$	8,477	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Cash paid during the year for:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 Income taxes
	 	$	4,014	 	$	—	 	 	 	$	4,014	 
	 	 	 	 Interest
	 	$	32,619	 	$	—	 	 	 	$	32,619	 

The
following table reconciles net income reported in accordance with Canadian GAAP to net income reportable in accordance with U.S. GAAP for the years ended December 31, 2007
and 2006: 

															
	 	 
	 	Note 	 	2007 	 	2006 	 	 
	 
	 	 Net income in accordance with Canadian GAAP
	 	 	 	$	31,687	 	$	32,743	 	 	 	 
	 	 Impact on net income of U.S. GAAP adjustments:
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 Capitalized interest, net of income taxes
	 	A	 	 	(418	)	 	4,004	 	 	 	 
	 	 	 Capitalized deferred financing costs, net of income taxes
	 	B	 	 	2,882	 	 	—	 	 	 	 
	 	 	 Funded landfill post-closure costs, net of income taxes
	 	C	 	 	—	 	 	86	 	 	 	 
	 	 	 Trust unit based compensation
	 	E	 	 	(716	)	 	(688	)	 	 	 
	 	 	 Non-controlling interest
	 	G	 	 	6,320	 	 	7,191	 	 	 	 
	 	 	 Trust units held in a rabbi trust, net of income taxes
	 	G	 	 	(32	)	 	47	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Net income in accordance with U.S. GAAP
	 	 	 	$	39,723	 	$	43,383	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Basic and diluted earnings per trust unit in accordance with U.S. GAAP
	 	 	 	$	0.59	 	$	0.66	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Weighted average trust units outstanding — basic and diluted
	 	G	 	 	67,803	 	 	65,391	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 

37

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

 Reconciliation of Canadian to U.S. GAAP — Notes  

	A.
	Capitalized interest on capital and landfill assets acquired, constructed or developed over time

In
accordance with Canadian GAAP, the cost of tangible assets may include capitalized interest costs directly attributable to an asset's acquisition, construction, or development, prior to the asset's
substantial completion or readiness for use, if the enterprise's accounting policy is to capitalize interest costs. For the purposes of reporting under Canadian GAAP, the Fund has not elected to
capitalize interest on tangible assets acquired, constructed or developed over time and has expensed all interest costs incurred on its long-term debt facilities. Under U.S. GAAP,
the historical cost of acquiring an asset includes the costs necessarily incurred to bring it to the condition and location necessary for its intended use, including interest. To comply with
U.S. GAAP, interest costs attributable to the construction and development of certain Fund-owned landfills and certain capital assets have been deducted from interest expense and
have been capitalized to the respective asset. Capitalized amounts are amortized over the asset's intended useful life in accordance with the respective accounting policy. 

The
increase in landfill and capital asset accounting values, due to the capitalization of interest net of amortization, results in a higher accounting versus tax basis and higher future income tax
liability (deferred tax liability) which is recorded to future income tax expense on the Fund's consolidated statement of operations and comprehensive (loss) income. In addition, higher future income
tax liability and landfill and capital asset amounts, which are translated to Canadian from U.S. dollars, results in a change to the foreign currency translation adjustment amount presented in
the Fund's consolidated statement of operations and comprehensive (loss) income.  

	B.
	Capitalization of deferred financing costs

On
January 1, 2007, the Fund adopted CICA section 3855, Financial Instruments — Recognition and Measurement. Upon adoption, the Fund elected to
recognize all transaction costs in net income, including those related to long-term debt instruments. Prior to the adoption of CICA section 3855, the Fund's policy was to defer
financing costs and amortize them over the term of the underlying debt instrument. Under U.S. GAAP, costs incurred to secure long-term debt are deferred and amortized
over the term of the underlying debt instrument. To comply with U.S. GAAP, the Fund has reversed the impact of its January 1, 2007 adoption of CICA section 3855 with respect to
deferred financing costs. The reversal results in an increase in deferred financing costs and unitholders' equity (deficit and accumulated other comprehensive loss), as at January 1, 2007. In
addition, financing costs incurred in 2007 and recorded in the Fund's consolidated statement of operations and comprehensive (loss) income have been reversed and capitalized to deferred costs on the
Fund's consolidated balance sheet. Amortization of these capitalized deferred financing costs is recorded to interest expense for 2007 and has been reclassified from amortization expense to interest
expense for the year ended December 31, 2006. As CICA section 3855 was adopted retrospectively without restatement, there were no Canadian to U.S. GAAP reconciling items, with the
exception of the classification of deferred financing cost amortization, for any of the comparative years presented. 

The
increase in deferred financing costs results in a higher accounting versus tax basis and higher future income tax liability (deferred tax liability) which is recorded to future income tax expense
on the Fund's consolidated statement of operations and comprehensive (loss) income. In addition, higher deferred financing costs and future income tax liability amounts, which are translated to
Canadian from U.S. dollars results in a change to the foreign currency translation adjustment amount presented on the Fund's consolidated statement of operations and comprehensive
(loss) income.  

	C.
	Funded landfill post-closure costs

On
January 1, 2007, the Fund adopted CICA section 3855, Financial Instruments — Recognition and Measurement. Upon adoption, the Fund elected to
designate funded landfill post-closure costs as held for trading which effectively aligns the fair value accounting treatment of funded landfill post-closure costs with
U.S. GAAP. Under U.S. GAAP, funded landfill post-closure costs qualify as trading securities. To comply with U.S. GAAP in 2006, the Fund has recorded its funded
landfill post-closure costs at fair value. Gains recognized in 2006 are recorded in the Fund's consolidated statement of operations and comprehensive (loss) income. 

The
increase in funded landfill post-closure costs results in a higher accounting versus tax basis and lower future income tax asset (deferred tax asset) which is recorded to future income
tax expense on the Fund's consolidated statement of operations and comprehensive (loss) income for the year ended December 31, 2006. 

38

 
 BFI CANADA INCOME FUND

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

	D.
	Restricted cash

Under
Canadian GAAP, the Fund includes restricted cash balances in cash and cash equivalents as its intended use is deemed to be current. Under U.S. GAAP, restricted cash amounts are considered
investments that limit the holders' ability to utilize such amounts. In addition, deposits and withdrawals of restricted cash amounts are recorded as an investing activity in the consolidated
statement of cash flows. To comply with U.S. GAAP, the restricted cash amounts, reported in cash and cash equivalents on the Fund's consolidated balance sheet, were reclassified. In addition,
restricted cash deposits and withdrawals were reclassified to investing activities on the Fund's consolidated statement of cash flows.  

	E.
	Trust unit based compensation

Under
Canadian GAAP, trust unit options, with trust unit appreciation rights, and the related changes thereto are recorded to selling, general and administration expense when the quoted market price
of the trust unit exceeds the trust unit option exercise price. Under U.S. GAAP, trust unit appreciation rights are measured at fair value at the date of grant and re-measured at
fair value through settlement. The resulting compensation expense is recorded to selling, general and administration expense. The Fund elected to recognize compensation expense on a straight line
basis over the requisite service period for the entire award. 

The
Fund uses the Black-Scholes-Merton option pricing model which requires the input of highly subjective assumptions. These assumptions include the estimated length of time employees will retain
their options before exercising them and the expected volatility of the Fund's trust unit price over the expected term. Changes in subjective assumptions can materially affect the estimated fair value
of trust unit based compensation and, consequently, the related amount recognized in selling, general and administration expense on the consolidated statement of operations and comprehensive (loss)
income. In calculating the fair value of the options at December 31, 2007 and 2006, the following assumptions were used: 

									
	 	 
	 	2007 	 	2006 	 
	 	 Dividend yield
	 	 	6.8%	 	 	6.8%	 
	 	 Expected volatility
	 	 	22.8%	 	 	22.1%	 
	 	 Risk free interest rate
	 	 	3.8%	 	 	4.0%	 
	 	 Expected life, stated in years
	 	 	4.0	 	 	5.0	 
	 	 Fair value, per option
	 	$	2.15	 	$	2.25	 

Compensation
expense for the year ended December 31, 2007, and recorded to selling, general and administrative expense on the consolidated statement of operations and comprehensive (loss)
income, amounted to $716 (2006 — $688). As of December 31, 2007, unrecognized compensation cost for trust unit based compensation totaled $749
(2006 — $1,567). Unrecognized compensation cost amounts are recorded through the final vesting date, January 1, 2009. In determining the expected life of
the options, management considered the age of the recipients and duration between the vesting date and date of expiration. These options represent the Fund's first option grant. Accordingly, the Fund
has no historical information with regards to the behaviour of its option recipients. Expected volatility was calculated using changes in monthly trust unit prices for a period commensurate with the
remaining term to full vesting. 

39

 

  BFI CANADA INCOME FUND  

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)  

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated)  

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued)  

	F.
	Future income tax assets, liabilities, expense or recovery

Adjustments
to future income tax assets and liabilities on the Fund's consolidated balance sheet or to future income tax expense or recovery on the Fund's consolidated statement of operations and
comprehensive (loss) income, relate to the various Canadian to U.S. GAAP adjustments outlined in Notes A. through G. 

In
certain circumstances Canadian GAAP requires the measurement of future income tax assets and liabilities applying substantively enacted tax rates or laws. Under U.S. GAAP enacted rates or
laws are the only measure of a company's future income tax assets and liabilities. There were no significant differences between the Fund's use of substantively enacted versus enacted tax rates and
laws. Accordingly, no adjustments have been made in respect of this Canadian to U.S. GAAP difference.  

	G.
	Unitholders' equity and non-controlling interest

Trust
units of the Fund are redeemable by their holders at any time. This redemption feature is required for the Fund to retain its Canadian mutual fund trust status. Upon notification of redemption,
trust unitholders are entitled to receive a price per trust unit equal to the lesser of: (i) 90% of the average closing market price calculated for the 10 days prior to the date the
trust units are surrendered for redemption, and (ii) the closing market price on the date of redemption. In accordance with the Fund's Declaration of Trust, trust units redeemable for cash, in
any given month, is limited to $50, which may be waived at the discretion of the Fund's Trustees. Under Canadian GAAP, trust units of the Fund are considered permanent equity and are presented as a
component of unitholders' equity. 

Participating
preferred shares are ultimately redeemable for trust units of the Fund. Under Canadian GAAP, participating preferred shares are recorded as non-controlling interest in the
mezzanine section of the Fund's consolidated balance sheet. 

Under
U.S. GAAP, issued equity, which is redeemable for cash or other assets and is (a) redeemable at a fixed or determinable price on a fixed or determinable date, (b) redeemable
at the option of the holder, or (c) redeemable upon the occurrence of an event that is not solely within control of the issuer, is classified outside of permanent equity. Accordingly, the Fund
is required to classify its trust units and participating preferred shares as mezzanine equity and to record the value of the Fund's trust units and participating preferred shares at their maximum
redemption amount at each balance sheet date. The increase or decrease
resulting from valuing the Fund's trust units and participating preferred shares at their maximum redemption amount is recorded to deficit. To comply with U.S. GAAP, the Fund's trust units and
participating preferred shares are reclassified from Unitholders' Equity and Non-controlling Interest to Mezzanine Equity, where Mezzanine Equity is classified between Liabilities and
Unitholders' Equity on the Fund's consolidated balance sheet. In addition, redemption value adjustments are recorded to Mezzanine Equity and are offset by an adjustment to deficit. The
non-controlling interest's share of net income recorded under Canadian GAAP is eliminated for the purpose of complying with U.S. GAAP. 

Trust
units of the Fund, acquired for the benefit of the Fund's U.S. long-term incentive plan participants, and held in a rabbi trust have also been reclassified to Mezzanine
Equity. The deferred compensation obligation related to these trust units has been reclassified from unitholders' equity to accrued charges due to the redemption feature of the trust units. Increases
or decreases to the deferred compensation obligation, representing changes in the fair value of the obligation, are recorded to selling, general and administrative expense. Compensation expense
(recovery) for the year ended December 31, 2007 amounted to $52 (2006 — ($75)). An increase or decrease in accrued compensation obligations results in a
higher or lower accounting versus tax basis and a higher or lower future income tax asset (deferred tax asset) which is recorded to future income tax recovery or expense on the Fund's consolidated
statement of operations and comprehensive (loss) income. 

In
accordance with U.S. GAAP, exchangeable shares are included in the calculation of basic weighted average trust units outstanding whereas Canadian GAAP only includes exchangeable shares in
the calculation of diluted weighted average trust units outstanding.  

	H.
	Employee future benefits

Under
U.S. GAAP, the over or underfunded status of a defined benefit plan is recognized as an asset or liability with the change in funded status recorded through other comprehensive income.
Canadian GAAP does not require recognition of the plan's funded status. Compliance with the U.S. GAAP standard did not have a significant impact on the consolidated financial statements of the
Fund and accordingly is not reflected in the reconciliation between Canadian and U.S. GAAP. 

40

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

               Reconciliation of Canadian to U.S. GAAP — Additional Disclosures  

               Restricted cash  

In
accordance with Regulation S-X, restricted cash represents cash received from IRB drawings in advance of incurring the expenditure for which the IRBs are available. At
December 31, 2007, approximately $1,600 of cash is restricted to fund a portion of landfill construction activities, and equipment, and container expenditures in the Fund's Texas operations. At
December 31, 2006, $798 of cash was restricted to fund a portion of landfill construction, equipment, vehicle, and container expenditures in the Fund's Pennsylvania operations. 

               Accounts receivable  

In
accordance with Regulation S-X, the allowance for doubtful accounts and notes receivable is required to be set forth separately in the balance sheet or in a note thereto. A
summary of the Fund's allowance for doubtful accounts is as follows: 

									
	 	 
	 	2007 	 	2006 	 
	 	 Balance, beginning of year
	 	$	2,507	 	$	2,761	 
	 	 Net additions to allowance for doubtful accounts
	 	 	4,823	 	 	1,997	 
	 	 Write-off's net of recoveries
	 	 	(2,761	)	 	(2,243	)
	 	 Foreign currency translation adjustment
	 	 	(395	)	 	(8	)
	 	 	 	 	 	 	 
	 	 Balance, end of year
	 	$	4,174	 	$	2,507	 
	 	 	 	 	 	 	 

               Intangibles  

In
accordance with U.S. GAAP, intangible assets acquired in 2007 and subject to amortization are comprised of $770 of customer collection contracts with 3 to 5 year amortization periods,
$91,585 of customer lists with 6 to 12 year amortization periods, $12,600 of non-competition agreements with 2 to 5 year amortization periods, $1,185 related to a transfer
station permit with a 25 year amortization period and $2,294 of trade names with a 2 year amortization period. Intangible assets acquired in 2006 and subject to amortization are
comprised of $855 of customer collection contracts with 3 to 4 year amortization periods, $10,341 of customer lists with 6 to 12 year amortization periods and $1,196 of
non-competition agreements with 3 to 5 year amortization periods. 

In
accordance with U.S. GAAP, the estimated remaining amortization expense for the Fund's intangibles in each of the five succeeding years and thereafter is as follows: 

						
	 	 2008
	 	$	31,847	 
	 	 2009
	 	 	28,429	 
	 	 2010
	 	 	19,546	 
	 	 2011
	 	 	15,972	 
	 	 2012
	 	 	14,396	 
	 	 Thereafter
	 	 	34,496	 
	 	 	 	 	 
	 	
	 	$	144,686	 
	 	 	 	 	 

               Goodwill  

In
accordance with U.S. GAAP, goodwill acquired by reportable segment is as follows: 

									
	 	 
	 	2007 	 	2006 	 
	 	 Canada
	 	$	7,701	 	$	2,871	 
	 	 U.S. South
	 	 	16,051	 	 	11,282	 
	 	 U.S. Northeast
	 	 	—	 	 	1,581	 
	 	 	 	 	 	 	 
	 	
	 	$	23,752	 	$	15,734	 
	 	 	 	 	 	 	 

41

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

Goodwill
was neither impaired nor disposed of in 2007 and 2006. 

               Deferred financing costs  

In
accordance with U.S. GAAP, deferred financing costs represent fees and costs incurred in connection with securing long-term debt. The Fund amortizes these costs, which are
recorded to interest on long-term debt on the Fund's consolidated statement of operations and comprehensive (loss) income, over the term of the related debt on a straight-line
basis, which approximates the effective interest method. 

												
	 	2007

 
	 	Cost 	 	Accumulated

Amortization 	 	Net

Book Value 	 
	 	 Deferred financing costs
	 	$	14,894	 	$	4,519	 	$	10,375	 

												
	 	2006

 
	 	Cost 	 	Accumulated

Amortization 	 	Net

Book Value 	 
	 	 Deferred financing costs
	 	$	9,661	 	$	2,646	 	$	7,015	 

Amortization
related to deferred financing costs for 2007 and 2006 amounted to $2,592 and $1,380, respectively. 

In
accordance with U.S. GAAP, the estimated remaining amortization expense for the Fund's deferred financing costs in each of the five succeeding years and thereafter is as follows: 

						
	 	 2008
	 	$	3,735	 
	 	 2009
	 	 	3,652	 
	 	 2010
	 	 	588	 
	 	 2011
	 	 	245	 
	 	 2012
	 	 	194	 
	 	 Thereafter
	 	 	1,961	 
	 	 	 	 	 
	 	
	 	$	10,375	 
	 	 	 	 	 

               Accrued charges  

In
accordance with Regulation S-X, other current liabilities in excess of 5% of total current liabilities must be disclosed separately. The components of accrued charges are
as follows: 

									
	 	 
	 	2007 	 	2006 	 
	 	 Accrued acquisition and related costs
	 	$	19,425	 	$	5,055	 
	 	 Accrued payroll and related costs
	 	 	19,286	 	 	17,837	 
	 	 Accrued insurance
	 	 	14,446	 	 	14,802	 
	 	 Accrued environmental surcharges
	 	 	3,355	 	 	2,934	 
	 	 Accrued provincial and state sales taxes
	 	 	3,219	 	 	2,575	 
	 	 Accrued interest
	 	 	2,792	 	 	5,517	 
	 	 Accrued franchise and royalty fees
	 	 	2,787	 	 	3,627	 
	 	 Accrued trust unit based compensation (trust unit options)
	 	 	1,404	 	 	688	 
	 	 Deferred compensation obligation (trust units held in a rabbi trust)
	 	 	2,976	 	 	1,206	 
	 	 Other
	 	 	10,045	 	 	4,971	 
	 	 	 	 	 	 	 
	 	 Accrued charges
	 	$	79,735	 	$	59,212	 
	 	 	 	 	 	 	 

42

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

               Long-term debt  

In
accordance with Regulation S-X, the availability of unused revolving credit facilities, the rate of interest, and commitment fees under certain of the Fund's
long-term debt facilities are as follows: 

              Term loan and U.S. revolving credit facility  

The
Fund's U.S. term loan is fully drawn. The Fund's U.S. revolving credit facility makes available, net of U.S. $166,755
(2006 — U.S. $128,141) in letters of credit, U.S. $74,745 at December 31, 2007
(2006 — U.S. $50,859). At December 31, 2007, U.S. $61,938 was immediately available for borrowing under the U.S. revolving credit
facility. Unused revolving credit facility commitments are subject to a standby fee ranging from 0.375% to 0.50%. At December 31, 2007, the Fund's standby fee was 0.50%
(2006 — 0.50%). In January 2005, the Fund entered into three interest rate swaps, which are effective through January 2009, with three financial
institutions. Variable rate interest on $75,000 of the term loan and U.S. revolving credit facility (the "facility") was converted to fixed rates of 3.47%, 3.57%, and 3.60%, plus a bank
margin ranging from 1.75% to 3.50%. In March 2007, the Fund entered into an interest rate swap, which is effective through March 2009, with one financial institution. Variable rate
interest on $2,000 of the facility was converted to a fixed rate of 4.98%, plus a bank margin ranging from 1.75% to 3.50%. In September 2007, the Fund entered into four interest rate swaps for
3, 4 and 5 year periods, with two financial institutions. Variable rate interest on $75,000 of the facility, expiring in October 2010 was converted to a fixed rate of 4.72%, plus a bank
margin ranging from 1.75% to 3.50%. Variable rate interest on $50,000 of the facility, expiring in October 2011 was converted to a fixed rate of 4.79%, plus a bank margin ranging from 1.75% to
3.50%. Variable rate interest on $25,000 of the facility, expiring in October 2011 was converted to fixed rate of 4.73%, plus a bank margin ranging from 1.75% to 3.50%. Variable rate
interest on $35,000 of the facility, expiring in October 2012 was converted to a fixed rate of 4.89%, plus a bank margin ranging from 1.75% to 3.50%. 

At
December 31, 2007, the interest rate applicable to U.S. $247,000 outstanding under the revolving credit facility was EURO plus 200 basis points, or 7.01%, and the interest rate
applicable to the remaining balance of U.S. $86,500 outstanding thereunder was Bank of America's prime rate plus 50 basis points, or 7.25%. 

At
December 31, 2007, the interest rate applicable to U.S. $195,000 outstanding under the revolving credit facility was EURO plus 175 basis points, or 6.61%. 

The
Fund's U.S. term loan and revolving credit facility contains a restrictive covenant which limits IESI's ability to pay a dividend subject to a financial threshold measure. At present there
are no limitations on IESI's ability to pay dividends. 

              Canadian revolving credit facility  

The
Fund's remaining availability under its Canadian revolving credit facility at December 31, 2007, net of letters of credit totaling $24,713
(2006 — $22,555), amounts to $53,287 (2006 — $13,445). Available amounts under the Canadian revolving credit facility were
immediately available for borrowing in 2007 and 2006. Unused revolving credit facility commitments are subject to a standby fee ranging from 0.225% to 0.325%. At December 31, 2007, the Fund's
standby fee was 0.275% (2006 — 0.275%). Revolving credit facility advances bear interest at Canadian bank prime plus a spread of 0.0% to 0.5%, bankers'
acceptances plus a spread of 0.875% to 1.375% or LIBOR plus a spread of 0.875% to 1.375%. At December 31, 2007, revolving credit facility advances were principally priced at the bankers'
acceptances rate of 4.61%, plus a spread of 1.125% (2006 — 4.34%, plus a spread of 1.125%). 

               Other  

On
March 1, 2007, the Fund entered into a 15-year agreement with the Mission Economic Development Corporation, which permits the Fund access to variable rate demand solid waste
disposal industrial revenue bonds ("TX IRB Facility"). The current daily interest rate applicable to the TX IRB Facility was 5.80% as of December 31, 2007
(2006 — nil%). 

On
November 16, 2006, the Fund entered into a 22-year agreement with the Pennsylvania Economic Development Financing Authority, which permits the Fund access to variable rate demand
solid waste disposal industrial revenue bonds ("PA IRB Facility"). The current daily interest rate applicable to the PA IRB Facility was 6.17% as of December 31, 2007
(2006 — 6.66%). 

On
October 20, 2005, the Fund entered into a 30-year agreement with the Seneca County Industrial Development Agency, which permits the Fund access to variable rate demand solid
waste disposal industrial revenue bonds ("Seneca IRB Facility"). The current daily interest rate applicable to the Seneca IRB Facility was 6.17% as of December 31, 2007
(2006 — 6.66%). 

43

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

               Future income tax liabilities  

In
accordance with U.S. GAAP, domestic and foreign income (loss) before income taxes and non-controlling interest and domestic and foreign income taxes is required disclosure. The
components of each prepared on a U.S. GAAP basis are as follows: 

										
	 	 
	 	2007 	 	2006 	 
	 	 Income before income taxes and non-controlling interest
	 	 	 	 	 	 	 
	 	 	 Canada
	 	$	34,413	 	$	36,030	 
	 	 	 U.S.
	 	 	15,542	 	 	20,417	 
	 	 	 	 	 	 	 
	 	
	 	$	49,955	 	$	56,447	 
	 	 	 	 	 	 	 
	 	 Current income expense
	 	 	 	 	 	 	 
	 	 	 Canada
	 	$	5,388	 	$	2,107	 
	 	 	 U.S.
	 	 	3,391	 	 	3,503	 
	 	 	 	 	 	 	 
	 	
	 	 	8,779	 	 	5,610	 
	 	 Future income tax expense (recovery)
	 	 	 	 	 	 	 
	 	 	 Canada
	 	 	2,694	 	 	3,895	 
	 	 	 U.S.
	 	 	(1,241	)	 	3,559	 
	 	 	 	 	 	 	 
	 	
	 	 	1,453	 	 	7,454	 
	 	 	 	 	 	 	 
	 	
	 	$	10,232	 	$	13,064	 
	 	 	 	 	 	 	 

At
December 31, 2007, the total valuation allowance recognized on deferred income tax assets was $3,085 (2006 — $4,256). 

The
Fund recognizes interest related to uncertain tax positions and penalties to current income tax expense. Interest and penalties related to uncertain tax positions amounted to $nil at
January 1 and December 31,
2007. The total amount of interest and penalties accrued in respect of uncertain tax positions at January 1 and December 31, 2007 was $nil and $nil, respectively. 

The
Fund is subject to federal, provincial and state income taxes and files tax returns in multiple jurisdictions. Tax years open to audit range from 2000 to 2007 in Canada and from 1997 to 2007 in
the U.S. 

The
Fund does not tax effect its foreign currency translation adjustment. 

44

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

              Unitholders' equity  

The
following table presents Canadian to U.S. GAAP reconciliation items which impact various components of Unitholders' equity. 

													
	 	 
	 	Note 	 	2007 	 	2006 	 
	 	 Contributed Equity
	 	 	 	 	 	 	 	 	 
	 	 	 Stated in accordance with Canadian GAAP
	 	 	 	$	1,006,751	 	$	908,221	 
	 	 	 	 Reclassification of trust units to mezzanine equity
	 	G	 	 	(1,006,751	)	 	(908,221	)
	 	 	 	 	 	 	 	 	 
	 	 	 Stated in accordance with U.S. GAAP
	 	 	 	$	—	 	$	—	 
	 	 Deficit
	 	 	 	 	 	 	 	 	 
	 	 	 Stated in accordance with Canadian GAAP
	 	 	 	$	(248,815	)	$	(174,044	)
	 	 	 	 Revaluation of trust units and participating preferred shares reclassified to mezzanine equity and fair value adjustments to rabbi trust units
	 	G	 	 	(306,196	)	 	(448,436	)
	 	 	 	 Capitalized interest
	 	A	 	 	7,738	 	 	8,240	 
	 	 	 	 Capitalized financing costs and transition adjustment
	 	B	 	 	7,379	 	 	(84	)
	 	 	 	 Fair value of funded landfill post-closure costs
	 	C	 	 	—	 	 	98	 
	 	 	 	 Fair value of trust unit based compensation
	 	E	 	 	(1,404	)	 	(688	)
	 	 	 	 	 	 	 	 	 
	 	 	 Stated in accordance with U.S. GAAP
	 	 	 	$	(541,298	)	$	(614,914	)
	 	 Accumulated other comprehensive loss
	 	 	 	 	 	 	 	 	 
	 	 	 Stated in accordance with Canadian GAAP
	 	 	 	$	(128,747	)	$	(32,888	)
	 	 	 	 Foreign currency translation of capitalized interest
	 	A	 	 	(1,146	)	 	(40	)
	 	 	 	 Foreign currency translation of capitalized financing costs
	 	B	 	 	(780	)	 	—	 
	 	 	 	 	 	 	 	 	 
	 	 	 Stated in accordance with U.S. GAAP
	 	 	 	$	(130,673	)	$	(32,928	)
	 	 	 	 	 	 	 	 	 
	 	 Unitholders' Equity stated in accordance with U.S. GAAP
	 	 	 	$	(671,971	)	$	(647,842	)
	 	 	 	 	 	 	 	 	 

               Revenues  

It
is the Fund's accounting policy that tax assessed by governmental authorities imposed on a revenue-producing transaction between the Fund and its customers is excluded from revenues as presented in
the consolidated statement of operations and comprehensive (loss) income. 

              Advertising costs  

Advertising
costs of $2,360 (2006 — $1,887) are included in selling, general and administration expenses in the consolidated statement of operations and
comprehensive (loss) income. 

45

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

              Statement of cash flows  

In
accordance with U.S. GAAP, the change in non-cash working capital items consists of the following: 

										
	 	 
	 	2007 	 	2006 	 
	 	 	 Accounts receivable
	 	 	8,109	 	 	(18,464	)
	 	 	 Due from non-controlling interest (participating preferred shareholder)
	 	 	—	 	 	(6,638	)
	 	 	 Prepaid expenses
	 	 	(772	)	 	(684	)
	 	 	 Accounts payable
	 	 	(2,155	)	 	19,150	 
	 	 	 Accrued charges
	 	 	(13,439	)	 	1,660	 
	 	 	 Income taxes payable
	 	 	1,204	 	 	37	 
	 	 	 Deferred revenues
	 	 	(2,860	)	 	637	 
	 	 	 Effect of foreign currency translation adjustments
	 	 	16,858	 	 	1,386	 
	 	 	 	 	 	 	 
	 	 Change in non-cash working capital items
	 	$	6,945	 	$	(2,916	)
	 	 	 	 	 	 	 

               Acquisitions  

In
accordance with U.S. GAAP, the Fund is required to disclose the pro forma impact of significant acquisitions. Disclosure includes the pro forma impact on the Fund's results of
operations as though the acquisition had been completed at the beginning of the current period, unless the acquisition was at or near the beginning of the current period, and on the comparable period
as though the acquisition had been
completed at the beginning of the preceding period. The following unaudited pro forma results of operations assume that the Fund's acquisition of Winters Bros., acquired effective
August 31, 2007 and accounted for using the purchase method of accounting, occurred as of January 1, 2006, on a U.S. GAAP basis: 

									
	 	 
	 	2007 	 	2006 	 
	 	 
	 	(unaudited)
	 	(unaudited)
	 
	 	 Revenues
	 	$	973,941	 	$	839,507	 
	 	 Net income
	 	$	22,707	 	$	9,820	 
	 	 Net income per trust unit, basic and diluted
	 	$	0.33	 	$	0.15	 

The
unaudited pro forma results may not be indicative of the results of operations that would have occurred if the transactions had been in effect on January 1, 2006 or of the operating
results which may be realized in the future. The pro forma effects of the remaining acquisitions consummated in 2006 through 2007 are not significant to the Fund's operating results. 

Goodwill
recognized on the Winters Bros. acquisition is due primarily to the vertical integration of assets in the Fund's existing northeast segment. Integrating the Winters Bros. assets increases the
Fund's ability to internalize waste and management's ability to employ its market-focused strategies which management anticipates will have a positive impact on the results of its operations. 

               Employee future benefits  

As
the sole sponsor of the defined benefit pension plan, the Fund's primary objective is to provide sufficient funds to meet payments as they become due and to maintain sufficient assets over
actuarial requirements to meet unforeseen liabilities. Investment activity is carried out with due regard to these objectives and investments are managed prudently with emphasis on income and
long-term growth. The assets under investment are actively managed by a third party manager ("manager") with the expectation of added value through both individual investment selection and
management of the allocation of assets
between various investment categories. The manager's objective is to achieve both income returns and capital growth through a broadly diversified range of investments. The manager is constrained by
allowable investment, quality and asset allocation guidelines. In addition, the manager's qualitative objective is to better the Consumer Price Index by 3% annually measured on a four-year
moving average basis and secondly to exceed the passive benchmark, described therein, by 1% annually measured on a four-year moving average basis. 

In
the determination of the expected long-term rate of return, management uses its best estimate, giving due consideration to various factors including but not limited to, inflation,
including historical, current and forecast rates, historical investment returns, 

46

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

the
plan's benchmark returns as outlined in its Statement of Investment Policies and Procedures, and other long-term indicators, including government of Canada long-term bond
yields, that may influence the long-term rate of return. 

The
asset allocation guidelines suggest a normal asset allocation target as follows: Canadian equity 33%, foreign equity 25%, fixed income investments 37% and short term income investments 5%. 

Contributions
expected for 2008 are expected to approximate 2007. 

               Reconciliation of Canadian and U.S. GAAP — Recent Accounting Developments  

              Income Taxes  

Effective
January 2007, the Fund adopted the Financial Accounting Standards Board ("FASB") interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48").
FIN 48 clarifies the accounting for uncertainty in income taxes recognized on an entity's financial statements. The evaluation of uncertain tax positions is a two step process whereby the
entity first determines whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the
technical merits of the position. The second step requires measurement of a tax
position that meets the more likely than requirement. FIN 48 also establishes standards for the recognition, de-recognition and measurement of tax positions taken or expected to be
taken subsequent to initial adoption and also addresses interest and penalties, classification and disclosure requirements. The Fund's review and assessment of its tax positions did not result in any
change to the Fund's reported consolidated financial results. 

               Framework for Fair Value Measurement  

In
September 2006, Financial Accounting Standard No. 157, "Fair Value Measurements", ("SFAS 157") was issued. SFAS 157 defines and establishes a framework for measuring
fair value and expands disclosures for assets and liabilities measured at fair value. SFAS 157 retains the exchange price notion with an emphasis on the price that would be received to sell the
asset or paid to transfer the liability. The standard also emphasizes that fair value is a market-based measurement applying assumptions that market participants would apply in pricing the asset or
liability and establishes a hierarchy as a basis for considering market participant assumptions. Additional disclosures include a focus on the inputs used to measure fair value and the effect these
inputs have on earnings. For the Fund, SFAS 157 is effective January 1, 2008 and applied prospectively. Early adoption is permitted, subject to certain conditions, and retrospective
application is permitted for certain financial instruments. With the exception of additional disclosure, the adoption of SFAS 157 had no impact on the Fund's consolidated financial statements. 

               The Fair Value Option for Financial Assets and Financial Liabilities  

In
February 2007, Financial Accounting Standard No. 159, "Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159") was issued. SFAS 159 permits
entities to choose to measure many financial instruments and certain other items at fair value. The standard permits all entities to choose, at specified election dates, to measure eligible items at
fair value with unrealized gains and losses recorded to earnings. Upfront costs and fees related to items for which fair value is elected is recognized in earnings as incurred and not deferred.
Additional disclosures include a focus on management's reasons for electing fair value, methods and assumptions used to estimate fair value, and separation of fair value eligible and elected assets
and liabilities from the carrying amounts of similar assets and liabilities measured using another measurement attribute. For the Fund, SFAS 159 is effective January 1, 2008 and applied
prospectively. Early adoption is permitted subject to certain conditions. The Fund's adoption of SFAS 159 did not have a significant impact on its consolidated financial statements. 

              Business Combinations  

In
December 2007, FASB issued Financial Accounting Standard No. 141(R), "Business Combinations" ("SFAS 141(R)"). The standard establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree, how goodwill or a
gain from a bargain purchase option is recognized and measured in a business combination, and outlines disclosure requirements to enable users of the financial statements to evaluate the nature and
financial effects of a business combination. SFAS 141(R) outlines that the acquisition date fair value is the measurement objective for all assets acquired and liabilities assumed.
SFAS 141(R) requires that all acquisition related and restructuring costs be charged to earnings and requires contingent consideration to be recognized at its fair value on the date of
acquisition. Certain contingent consideration arrangements will result in fair value changes being recognized in earnings until settled. This statement eliminates adjustments to goodwill for changes
in deferred tax assets and 

47

 
 BFI CANADA INCOME FUND 

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

 For the years ended December 31, 2007 and December 31, 2006

(in thousands, except per trust unit amounts, unless otherwise stated) 

 25.   RECONCILIATION OF CANADIAN TO U.S. GAAP (Continued) 

uncertain
tax positions after the acquisition accounting measurement period (limited to one year from the date of acquisition). SFAS 141(R) is effective prospectively for acquisitions that
occur on or after January 1, 2009. The Fund is currently evaluating the effect the adoption of SFAS 141(R) will have on its accounting and reporting for future acquisitions. 

               Non-controlling Interests in Consolidation Financial Statements  

In
December 2007, FASB issued Financial Accounting Standard No. 160, "Non-controlling Interests in Consolidated Financial Statements" ("SFAS 160"). SFAS 160
requires ownership interests in subsidiaries held by parties other than the parent to be clearly identified, labeled, and presented in the consolidated statement of financial position within equity,
but separate from parent's equity. The standard also requires consolidated net income attributable to the parent and to the non-controlling interest to be clearly identified and presented
on the face of the consolidated statement of income. While the parents control is retained, the standard requires changes in the parent's ownership interest to be accounted for similarly as an equity
transaction. Upon deconsolidation of a subsidiary, any retained non-controlling equity investment in the former subsidiary is initially measured at fair value and the gain or loss on the
deconsolidation is measured using the fair value of any non-controlling equity investment rather than the carrying amount of the retained investment. For the Fund, SFAS 160 is
effective January 1, 2009 and is applied prospectively, except for the presentation and disclosure requirements which are applied retrospectively for all periods presented. Earlier adoption is
prohibited. The Fund does not expect the adoption of SFAS 160 to have a significant impact on its consolidated financial statements. 

               Disclosures about Derivative Instruments and Hedging Activities  

In
March 2008, FASB issued Financial Accounting Standard No. 161, "Disclosures about Derivative Instruments and Hedging Activities — an amendment of
FASB Statement No. 133" ("SFAS 161"). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS 161 is intended to enhance
the current disclosure framework and requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The additional disclosure conveys
the purpose of derivative use in terms of the risks that the entity is intending to manage. Also, disclosing the fair values of derivative instruments and their gains and losses in a tabular format
and credit-risk-related contingent features and their impact on an entity's liquidity is required. For the Fund, SFAS 161 is effective January 1, 2009. The Fund
does not expect the adoption of SFAS 161 to have a significant impact on its consolidated financial statements. 

               Useful Life of Intangible Assets  

In
April 2008, FASB issued FSP No. 142-3, "Determination of the Useful Life of Intangible Assets", which amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142. The purpose of this guidance is to improve the consistency between the
useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. Accordingly, entities are required to disclose information for a
recognized intangible asset that enables users of the financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entities intent
and/or ability to renew or extend the arrangement. For the Fund, FSP No. 142-3 is effective January 1, 2009. The Fund does not expect the adoption of FSP
No. 142-3 to have a significant impact on its consolidated financial statements. 

              The Hierarchy of Generally Accepted Accounting Principles  

In
May 2008, Statement of Financial Accounting Standard No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162") was issued, which identifies the sources
of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity
with U.S. GAAP. FASB does not expect this standard to change current practice. SFAS 162 will become effective 60 days following the Security and Exchange Commission's approval of
the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". The Fund does not expect
the adoption of SFAS 162 to have a material impact on its consolidated financial statements. 

48

QuickLinks

Exhibit 4.3

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

BFI CANADA INCOME FUND CONSOLIDATED BALANCE SHEETS December 31, 2007 and December 31, 2006 (in thousands of dollars)

BFI CANADA INCOME FUND CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME For the years ended December 31, 2007 and 2006 (in thousands of dollars, except net income per trust unit
amounts)

BFI CANADA INCOME FUND CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2007 and 2006 (in thousands of dollars)

BFI CANADA INCOME FUND CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY, DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS For the years ended December 31, 2007 and 2006 (in thousands of dollars)

BFI CANADA INCOME FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2007 and December 31, 2006 (in thousands, except per trust unit amounts, unless otherwise stated)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]