Enhanced Investments - Financial Portal

Published: 2023-02-22

Consolidated Financial Statements

For the Years Ended December 31, 2022, and 2021

Management Report
The annual report, including the consolidated financial statements and Management’s Discussion and Analysis (MD&A), is the responsibility of the management of the Company. The consolidated financial statements were prepared by management in accordance with International Financial Reporting Standards. Where alternative accounting methods exist, management has chosen those it considers most appropriate in the circumstances. The significant accounting policies used are described in note 4 to the consolidated financial statements. Certain amounts in the financial statements are based on estimates and judgments relating to matters not concluded by year end. The integrity of the information presented in the financial statements is the responsibility of management. Financial information presented elsewhere in this annual report has been prepared by management and is consistent with the information in the consolidated financial statements.
The board of directors is responsible for ensuring that management fulfil s its responsibilities and for providing final approval of the annual consolidated financial statements. The board has appointed an Audit and Risk Committee comprising four directors; none are officers or employees of the Company or its subsidiaries. The Audit and Risk Committee meets at least four times each year to discharge its responsibilities under a written mandate from the board of directors. The Audit and Risk Committee meets with management and with the external auditors to satisfy itself that it is properly discharging its responsibilities; reviews the consolidated financial statements, MD&A, and the Report of Independent Registered Public Accounting Firm; and examines other auditing and accounting matters. The Audit and Risk Committee has reviewed the audited consolidated financial statements with management and discussed the quality of the accounting principles as applied and the significant judgments affecting the consolidated financial statements. The Audit and Risk Committee has discussed with the external auditors the external auditors’ judgments of the quality of those principles as applied and the judgments noted above. The consolidated financial statements and MD&A have been reviewed by the Audit and Risk Committee and approved by the board of directors of Stantec Inc.
The consolidated financial statements have been examined by the shareholders’ auditors, PricewaterhouseCoopers LLP, Chartered Professional Accountants. The Report of Independent Registered Public Accounting Firm outlines the nature of their examination and their opinion on the consolidated financial statements of the Company. The external auditors have ful and unrestricted access to the Audit and Risk Committee with or without management being present.
Gord Johnston	Theresa Jang
President & CEO	Executive Vice President & CFO
February 22, 2023	February 22, 2023
		F-1	Stantec Inc.

Management’s Annual Report on Internal Control
over Financial Reporting
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (IFRS). Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Management has assessed the effectiveness of the Company’s internal control over financial reporting, as at December 31, 2022, and has concluded that such internal control over financial reporting is effective. PricewaterhouseCoopers LLP, which has audited the consolidated financial statements of the Company for the year ended December 31, 2022, has also issued a report on the effectiveness of the Company’s internal control over financial reporting.
As permitted by published guidance of the U.S. Securities and Exchange Commission (SEC), management’s evaluation of and conclusions on the effectiveness of internal control over financial reporting did not include the internal controls of the businesses acquired of Barton Wil more LLP and Barton Wil more Holdings Limited and L2, Inc., Partridge Architects, Inc., and L2Partridge, LLC, which are included in the Company’s 2022 consolidated financial statements because they were acquired by the Company through business combinations during 2022. The aggregate assets of these entities represent 0.5% of the Company’s total assets as at December 31, 2022, and the aggregate gross revenue earned from the date of acquisition to December 31, 2022, represents 0.8% of the Company's gross revenue for the year ended December 31, 2022.
Gord Johnston	Theresa Jang
President & CEO	Executive Vice President & CFO
February 22, 2023	February 22, 2023
		F-2	Stantec Inc.

Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Stantec Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated statements of financial position of Stantec Inc. and its subsidiaries (together, the Company) as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for the years then ended, including the related notes (col ectively referred to as the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in al material respects, the financial position of the Company as of December 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in al material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.
Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in al material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as wel as evaluating the overal presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
	F-3	Stantec Inc.

As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded the businesses acquired of Barton Wil more LLP and Barton Wil more Holdings Limited and L2, Inc., Partridge Architects, Inc. and L2 Partridge, LLC from its assessment of internal control over financial reporting as of December 31, 2022 because they were acquired by the Company through business combinations during 2022. We have also excluded the business of Barton Wil more LLP and Barton Wil more Holdings Limited and L2, Inc., Partridge Architects, Inc. and L2 Partridge, LLC from our audit of internal control over financial reporting. The aggregate assets of these entities represent 0.5% of the Company’s total assets as of December 31, 2022, and the aggregate gross revenue earned from the date of acquisition to December 31, 2022, represents 0.8% of the Company’s gross revenue for the year ended December 31, 2022.
Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general y accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (i ) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with general y accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (i i) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit and risk committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (i ) involved our especial y chal enging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – determination of estimated contract costs for fixed-fee and variable-fee-with-ceiling contracts As described in Notes 4 and 5 to the consolidated financial statements, the Company accounts for its revenue from fixed-fee and variable-fee-with-ceiling contracts over time using the percentage of completion method where the stage of completion is measured using costs incurred to date as a percentage of total estimated costs for each contract, which requires estimates to be made for contract costs and revenues. For the year ended December 31, 2022, revenue from fixed-fee and variable-fee-with-ceiling contracts makes up a significant portion of gross revenue of $5,677 mil ion. Contract costs include direct labour, direct costs for subconsultants and other expenditures that are recoverable directly from clients. Progress on jobs is regularly reviewed by management and estimated costs to complete are revised based on the information available at the end of each reporting period. Estimated contract costs are based on various assumptions including estimated labour costs that can result in a change to contract estimates from one financial reporting period to another.
The principal considerations for our determination that performing procedures relating to revenue recognition – determination of estimated contract cost for fixed-fee and variable-fee-with-ceiling contracts is a critical audit matter are (i) the significant judgments by management in determining the estimated contract costs related to fixed-price and variable-fee-with-ceiling contracts; and (i ) a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence related to the estimated contract costs for fixed-fee and variable-fee-with-ceiling contracts and the various assumptions used by management including estimated labour costs.
	F-4	Stantec Inc.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overal opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of estimated contract costs for fixed-fee and variable-fee-with-ceiling contracts. These procedures also included, among others, (i) evaluating and testing management’s process for determining the estimated contract costs for a sample of contracts, which included evaluating the contract terms and other documents that support those estimates; (i ) testing a sample of incurred contract costs; (i i) evaluating the reasonableness of assumptions related to estimated labour costs by assessing management’s ability to reasonably estimate contract costs by performing a comparison of the actual costs with prior period estimates for a sample of contracts; and (iv) evaluating, for certain contracts, management’s assessment of progress on jobs and the estimated costs to complete by interviewing project teams personnel and obtaining documentation that supports management’s estimate.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Edmonton, Canada February 22, 2023
We have served as the Company’s auditor since 2021.
	F-5	Stantec Inc.

Consolidated Statements of Financial Position
As at December 31	2022	2021
(In mil ions of Canadian dol ars)			$	$
ASSETSCurrentCash and deposits
			148.3	193.9
Trade and other receivables			1,028.0	823.7
Unbil ed receivables				553.4	421.7
Contract assets				83.9	70.2
Income taxes recoverable				65.4	85.6
Prepaid expenses				48.6	45.8
Other assets			10.2	23.5
Total current assets				1,937.8	1,664.4
Non-currentProperty and equipment
			250.7	233.7
Lease assets			470.4	476.5
Goodwil			2,346.4	2,184.3
Intangible assets			320.4	373.3
Net employee defined benefit asset			57.4	17.0
Deferred tax assets			45.2	48.3
Other assets			224.6	228.9
Total assets				5,652.9	5,226.4
LIABILITIES AND EQUITYCurrentBank indebtedness
			65.4	7.2
Trade and other payables			755.7	634.7
Lease liabilities			99.0	123.9
Deferred revenue				327.7	264.8
Income taxes payable			25.9	26.6
Long-term debt			52.2	51.0
Provisions			48.1	36.7
Other liabilities			36.0	34.5
Total current liabilities				1,410.0	1,179.4
Non-currentLease liabilities
			522.4	545.0
Income taxes payable				7.1	8.9
Long-term debt			1,183.6	1,194.1
Provisions			149.7	122.6
Net employee defined benefit liability			32.3	58.7
Deferred tax liabilities			28.2	77.5
Other liabilities			33.2	38.0
Total liabilities				3,366.5	3,224.2
Shareholders’ equityShare capital
			983.8	972.4
Contributed surplus				6.7	10.6
Retained earnings				1,154.9	1,043.4
Accumulated other comprehensive income				140.6	(24.7)
Total shareholders’ equity				2,286.0	2,001.7
Non-controlling interests				0.4	0.5
Total liabilities and equity				5,652.9	5,226.4
See accompanying notes
On behalf of Stantec Inc.’s Board of Directors
Douglas Ammerman, Director					Gord Johnston, Director
					F-6	Stantec Inc.

Consolidated Statements of Income
Years ended December 31	2022	2021
(In mil ions of Canadian dol ars, except per share amounts)			$	$
Gross revenue			5,677.2	4,576.8
Less subconsultant and other direct expenses				1,220.0	940.7
Net revenue				4,457.2	3,636.1
Direct payrol costs			2,039.9	1,672.8
Project margin				2,417.3	1,963.3
Administrative and marketing expenses					1,742.5	1,423.6
Depreciation of property and equipment			56.8	53.9
Depreciation of lease assets			122.1	107.9
Amortization of intangible assets			104.6	60.0
Net (reversal) impairment of lease assets and property and equipment			(5.5)	24.8
Net interest expense			64.0	37.9
Other net finance expense				9.2	5.4
Foreign exchange loss				3.4	4.0
Other income			(4.9)	(17.2)
Income before income taxes				325.1	263.0
Income taxes
Current			121.3	66.7
Deferred			(43.2)	(4.4)
Total income taxes				78.1	62.3
Net income for the year				247.0	200.7
Earnings per share
Basic			2.23	1.80
Diluted			2.22	1.80
See accompanying notes
						F-7	Stantec Inc.

Consolidated Statements of Comprehensive Income
Years ended December 31	2022	2021
(In mil ions of Canadian dol ars)			$	$
Net income for the year				247.0	200.7
Other comprehensive income (loss)
Items that may be reclassified to net income in subsequent periods:
Exchange differences on translation of foreign operations				126.8	(40.1)
Net unrealized loss on FVOCI financial assets			(0.6)	(2.9)
Unrealized gain on interest rate and total return swaps			3.6	3.6
				129.8	(39.4)
Items not to be reclassified to net income:
Remeasurement gain (loss) on net employee defined benefit obligations			35.5	(10.1)
Other comprehensive income (loss) for the year, net of tax				165.3	(49.5)
Total comprehensive income for the year, net of tax				412.3	151.2
See accompanying notes
					F-8	Stantec Inc.

Consolidated Statements of Shareholders’ Equity
							Accumulated
	Shares		Share	Contributed				Other
	Outstanding	Capital		Surplus	Retained	Comprehensive
	(note 22)	(note 22)		(note 22)	Earnings		Income (Loss)		Total
(In mil ions of Canadian dol ars, except shares)		#	$		$	$		$	$
Balance, December 31, 2020										111,005,347 932.2	12.9 958.6			24.8 1,928.5
Net income					200.7							200.7
Other comprehensive loss								(49.5)	(49.5)
Total comprehensive income (loss)
					200.7			(49.5)	151.2
Share options exercised for cash										1,267,614	41.2						41.2
Share-based compensation					4.9							4.9
Shares repurchased under Normal Course Issuer Bid
											(939,482)		(8.1)		(0.1)	(42.5)		(50.7)
Fair value reclass of share options exercised
			7.1		(7.1)							—
Dividends declared						(73.4)						(73.4)
Balance, December 31, 2021										111,333,479 972.4	10.6 1,043.4			(24.7) 2,001.7
Net income					247.0							247.0
Other comprehensive gain								165.3	165.3
Total comprehensive income					247.0			165.3	412.3
Share options exercised for cash											561,217		18.0					18.0
Share-based compensation					(0.8)							(0.8)
Shares repurchased under Normal Course Issuer Bid
										(1,085,676)	(9.6)		(0.1)	(55.6)			(65.3)
Fair value reclass of share options exercised
			3.0		(3.0)							—
Dividends declared						(79.9)						(79.9)
Balance, December 31, 2022										110,809,020 983.8	6.7 1,154.9			140.6 2,286.0
See accompanying notes
			F-9								Stantec Inc.

Consolidated Statements of Cash Flows
Years ended December 31	2022	2021
(In mil ions of Canadian dol ars)			$	$
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIESNet income
				247.0	200.7
Add (deduct) items not affecting cash:
Depreciation of property and equipment			10	56.8	53.9
Depreciation of lease assets			11	122.1	107.9
Net (reversal) impairment of lease assets and property and equipment			10,11	(5.5)	24.8
Amortization of intangible assets			13	104.6	60.0
Deferred income taxes			26	(43.2)	(4.4)
Net loss (gain) on equity securities			30	2.4	(13.9)
Share-based compensation			22	26.0	46.7
Provisions			47.3	46.5
Other non-cash items				0.8	1.2
				558.3	523.4
Trade and other receivables				(211.7)	(8.4)
Unbil ed receivables				(134.9)	(46.4)
Contract assets				(13.7)	(3.5)
Prepaid expenses				(2.8)	1.9
Income taxes recoverable, net				21.1	(39.1)
Trade and other payables and other accruals				22.8	(65.8)
Deferred revenue				65.2	34.9
				(254.0)	(126.4)
Net cash flows from operating activities				304.3	397.0
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIESBusiness acquisitions, net of cash acquired
			7	(50.4)	(702.5)
Purchase of investments held for self-insured liabilities			14	(206.2)	(61.6)
Proceeds from sale of investments held for self-insured liabilities			14	244.6	47.8
Purchase of intangible assets			13	(6.4)	(4.8)
Purchase of property and equipment			10	(68.5)	(45.8)
Other				13.1	2.1
Net cash flows used in investing activities				(73.8)	(764.8)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIESNet (repayment of) proceeds from revolving credit facility
			32	(22.6)	544.7
Repayment of notes payable and software financing obligations			32	(60.3)	(58.0)
Net proceeds from bank indebtedness				65.4	—
Net lease payments			32	(153.7)	(128.4)
Repurchase of shares for cancel ation			22	(65.3)	(50.7)
Proceeds from exercise of share options				18.0	41.2
Payment of dividends to shareholders			22	(78.2)	(72.3)
Net cash flows (used in) from financing activities				(296.7)	276.5
Foreign exchange gain (loss) on cash held in foreign currency				27.8	(6.8)
Net decrease in cash and cash equivalents				(38.4)	(98.1)
Cash and cash equivalents, beginning of the year				186.7	284.8
Cash and cash equivalents, end of the year			8	148.3	186.7
See accompanying notes
					F-10	Stantec Inc.

Index to the	Page
Notes to the
	F-12
Consolidated
	F-12
Financial Statements
	F-12
	F-12
	F-21
	6 Recent Accounting Pronouncements and Changes to Accounting Policies F-257 Business Acquisitions
		F-26
	F-28
	F-28
	F-29
	F-30
	F-31
	F-33
	F-34
	F-35
	F-35
	F-37
	F-37
	F-41
	F-41
	F-41
	F-42
	F-44
	F-46
	F-49
	F-49
	F-51
	F-51
	F-52
	F-52
	F-53
	F-53
	F-54
	F-55
	F-57
	F-57
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
			Stantec Inc.

Notes to the Consolidated Financial Statements
1. Corporate InformationThe consolidated financial statements of Stantec Inc. (the Company) for the year ended December 31, 2022, were authorized for issuance in accordance with a resolution of the Company’s board of directors on February 22, 2023. The Company was incorporated under the Canada Business Corporations Act on March 23, 1984. Its shares are traded on the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE) under the symbol STN. The Company’s registered office is located at Suite 400, 10220 - 103 Avenue, Edmonton, Alberta. The Company is domiciled in Canada.
The Company is a provider of comprehensive professional services in the area of infrastructure and facilities for clients in the public and private sectors. The Company’s services include engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics, from initial project concept and planning through to design, construction administration, commissioning, maintenance, decommissioning, and remediation.
2. Basis of PreparationThese consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The accounting policies adopted in these consolidated financial statements are based on IFRS effective as at December 31, 2022.
The consolidated financial statements have been prepared on a historical cost basis, unless otherwise stated in the significant accounting policies. The consolidated financial statements are presented in Canadian dol ars, and al values, including United States dol ars, are rounded to the nearest mil ion ($000,000), except when otherwise indicated.
3. Basis of ConsolidationThe consolidated financial statements include the accounts of the Company, its subsidiaries, and its structured entities as at December 31, 2022.
Subsidiaries and structured entities are ful y consolidated from the date of acquisition, which is the date the Company obtains control, and continue to be consolidated until the date that this control ceases. The financial statements of the subsidiaries and structured entities are prepared as at December 31, 2022 and December 31, 2021. Al intercompany balances are eliminated.
Joint ventures and associates are accounted for using the equity method, and joint operations are accounted for by the Company recognizing its share of assets, liabilities, revenue, and expenses of the joint operation.
4. Summary of Significant Accounting Policiesa) Cash and cash equivalentsCash and cash equivalents include cash and unrestricted investments. Unrestricted investments are comprised of short-term bank deposits with a maturity of three months or less at inception.
b) Property and equipmentProperty and equipment are recorded at cost less accumulated depreciation and any impairment losses. Cost includes the cost of replacing parts of property and equipment. When significant parts of property and equipment are required to be replaced in intervals, the Company recognizes those parts as individual assets with specific useful lives. Al other repair and maintenance costs are recognized in the consolidated statements of income as incurred.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-12	Stantec Inc.

Depreciation is calculated over the assets' estimated useful lives on a straight-line basis as fol ows:
Engineering equipment	5 to 10 years	straight-line
Office equipment	5 to 10 years	straight-line
		straight-line over term of lease to a maximum of 15 years or the improvement’s economic life
Leasehold improvements
Other	5 to 50 years	straight-line
The residual values, useful lives, and methods of depreciation of property and equipment are reviewed at each financial year-end and adjusted prospectively, if appropriate.
c) Intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. Intangible assets acquired in a business combination are measured at fair value as at the date of acquisition. Fol owing initial recognition, finite life intangible assets are carried at cost less any accumulated amortization and any impairment losses and indefinite life intangible assets are carried at cost less any impairment loss.
The Company’s intangible assets with finite lives are amortized over their useful economic lives on a straight-line basis. Once an intangible asset is ful y amortized, the gross carrying amount and related accumulated amortization are removed from the accounts.
The Company also incurs costs for third-party internet-based cloud computing services. These costs are expensed in administrative and marketing expenses over the period of the service agreement when the Company determines that it has not obtained control of the software.
Intangible assets acquired from business combinationsThe Company’s policy is to amortize client relationships with finite lives over periods ranging from 10 to 15 years. Contract backlog and finite life trademarks are amortized over estimated lives of general y 1 to 3 years. The Company assigns value to acquired intangibles using the income approach, which involves quantifying the present value of net cash flows attributed to the subject asset. This, in turn, involves estimating the revenues and earnings expected from the asset.
d) LeasesThe Company assesses at contract inception whether a contract is a lease or contains a lease; that is, if the contract conveys the right to control the use of an identified asset for a time period in exchange for consideration.
At the commencement of a lease, the Company determines the lease term as the non-cancel able period of a lease, together with periods covered by an option to extend or an option to terminate if it is reasonably certain to exercise an extension option or to not exercise a termination option. Management considers al facts and circumstances that create an economic incentive to exercise an extension option or to not exercise a termination option. This judgment is based on factors such as contract rates compared to market rates, economic reasons, significance of leasehold improvements, termination and relocation costs, instal ation of specialized assets, residual value guarantees, and any sublease term. The Company reassesses this when a significant event or significant change in circumstances within the Company’s control has occurred.
The Company recognizes lease assets and lease liabilities for al leases, except for leases of low-value assets and short-term leases with a term of 12 months or less. The lease payments associated with those exempted leases are recognized in administrative and marketing expenses on a straight-line basis over the lease term.
The lease asset is recognized at the commencement date of the lease and initial y measured at cost, which is comprised of the amount of the initial lease liability recognized less any incentives received from the lessor. Lease asset cost also includes any initial direct costs incurred, lease payments made before the commencement date, and estimated restoration costs. The lease asset is subsequently depreciated on a straight-line basis from the commencement date to the earlier of the end of the useful life of the lease asset or the end of the lease term. The lease asset is periodical y adjusted for impairment losses or reversals, if any, and adjusted for certain remeasurements of the lease liability.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
		F-13	Stantec Inc.

The lease liability is recognized at the commencement date of the lease and initial y measured at the present value of lease payments to be made over the lease term. Lease payments general y include fixed payments less any lease incentives receivable. Also, the Company elected to not separate non-lease components from lease components and to account for the non-lease and lease components as a single lease component.
The lease liability is discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method. The lease liability is remeasured when the expected lease payments change as a result of a change in the lease term, a change in the assessment of an option to purchase the leased asset, changes in the future lease payments as a result of a change in an index or rate used to determine the lease payments, and changes in estimated payments for residual value guarantees.
e) Investments in joint arrangements and associatesEach joint arrangement of the Company is classified as either a joint operation or joint venture based on the rights and obligations arising from the contractual terms between the parties to the arrangement. A joint arrangement that provides the Company with rights to the individual assets and obligations arising from the arrangement is classified as a joint operation and a joint arrangement that provides the Company with rights to the net assets of the arrangement is classified as a joint venture.
The Company accounts for a joint operation by recognizing its share of assets, liabilities, revenues, and expenses of the joint operation and combining them line by line with similar items in the Company’s consolidated financial statements.
The Company accounts for a joint venture using the equity method. The Company’s share of the after-tax net income or loss of associates or joint ventures is recorded in the consolidated statements of income. Adjustments are made in the Company’s consolidated financial statements to eliminate its share of unrealized gains and losses resulting from transactions with its associates.
If the financial statements of associates or joint arrangements are prepared for a date that is different from the Company’s date (due to the timing of finalizing and receiving information), adjustments are made for the effects of significant transactions or events that occur between that date and the date of the Company’s financial statements. When necessary, adjustments are made to bring the accounting policies in line with the Company’s.
f) ProvisionsGeneralProvisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits wil be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. When the Company expects some or al of a provision to be reimbursed—for example, under an insurance contract—and when the reimbursement is virtual y certain, the reimbursement is recognized as a separate asset. The expense relating to a provision is presented in the consolidated statements of income net of any reimbursement. If the effect of the time value of money is significant, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Management regularly reviews the timing of the outflows of these provisions.
Provision for self-insured liabilitiesThe Company self-insures certain risks related to professional liability, automobile physical damages, and employment practices liability. The provision for self-insured liabilities includes estimates of the costs of reported claims (including potential claims that are probable of being asserted) and is based on assumptions made by management and actuarial estimates. The provision for self-insured liabilities does not include unasserted claims where assertion by a third party is not probable.
Provisions for claimsProvision for claims include an estimate for costs associated with legal claims not covered by its provisions for self-insured liabilities, including claims that are subject to exclusions under the Company’s commercial and captive insurance policies. Often, these legal claims are from previous acquisitions and may be indemnified by the acquiree (note 7).
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-14	Stantec Inc.

Contingent liabilities recognized in a business combinationA contingent liability recognized in a business combination is initial y measured at its fair value. Subsequently, it is measured as discussed under “General.”
g) Foreign currency translationThe Company’s consolidated financial statements are presented in Canadian dol ars, which is also the parent Company’s functional currency. Each entity in the Company determines its own functional currency, and items included in the financial statements of each entity are measured using that functional currency. The Company is mainly exposed to fluctuations in the US dol ar (US), British pound sterling (£ or GBP), and Australian dol ar (AU).
Transactions and balancesTransactions in foreign currencies (those different from an entity’s functional currency) are initial y translated into the functional currency of an entity using the foreign exchange rate at the transaction date. Subsequent to the transaction date, foreign currency transactions are measured as fol ows:
•	On the consolidated statements of financial position, monetary items are translated at the rate of exchange in effect at the reporting date. Non-monetary items at cost are translated at historical exchange rates. Non-monetary items at fair value are translated at rates in effect at the date the fair value is determined. Any resulting realized and unrealized foreign exchange gains or losses are recognized in income in the period incurred, however, unrealized foreign exchange gains and losses on non-monetary investments are recognized in other comprehensive income.
•	Revenue and expense items are translated at the exchange rate on the transaction date.
Foreign operationsThe Company’s foreign operations are translated into its reporting currency (Canadian dol ar) as fol ows:
•	Assets and liabilities are translated at the rate of exchange in effect at each consolidated statement of financial position date.
•	Revenue and expense items (including depreciation and amortization) are translated at the average rate of exchange for the month.
The resulting unrealized exchange gains and losses on foreign subsidiaries are recognized in other comprehensive income.
h) Financial instrumentsInitial recognition and subsequent measurementFinancial assets (except trade and other receivables and unbil ed receivables that do not have a significant financing component) are initial y recognized at fair value plus directly attributable transaction costs, except for financial assets at fair value through profit and loss (FVPL) for which transaction costs are expensed. Trade and other receivables and unbil ed receivables that do not have a significant financing component are initial y measured at the transaction price determined in accordance with IFRS 15. Purchases or sales of financial assets are accounted for at trade dates.
Subsequent measurement of financial assets is at FVPL, amortized cost, or fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Company’s business approach for managing the financial assets and whether the instruments’ contractual cash flows represent “solely payments of principal and interest” on the principal amount outstanding (the SPPI criterion). The business approach considers whether a Company’s objective is to receive cash flows from holding assets, from sel ing assets in a portfolio, or a combination of both. The Company reclassifies financial assets only when its business approach for managing those assets changes.
•	Amortized cost: Assets held for col ection of contractual cash flows—when they meet the SPPI criterion—are measured at amortized cost using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified, or impaired. Items in this category include cash and cash equivalents, receivables, and certain other financial assets.
•	FVOCI: Assets held to both col ect cash flows and sel the assets—when they meet the SPPI criterion—are measured at FVOCI. Bonds held for self-insured liabilities are included in this category. Changes in the carrying amount are reported in other comprehensive income (except impairments) until disposed of. Realized gains and losses are recognized in finance income and interest income from these financial assets is included in interest
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-15	Stantec Inc.

income using the EIR method. Impairment and foreign exchange gains and losses are recognized in profit or loss and computed in the same manner as for financial assets measured at amortized cost.
•	FVPL: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL with realized and unrealized gains and losses reported in other income. Equity securities held for self-insured liabilities and indemnifications are included in this category.
Financial liabilities are initial y recognized at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs. Subsequent measurement of financial liabilities is at amortized cost using the EIR method. The EIR method discounts estimated future cash payments or receipts through the expected life of a financial instrument, and thereby calculates the amortized cost and subsequently al ocates the interest income or expense over the life of the instrument. Gains and losses are recognized in profit or loss when the liability is derecognized or modified, as wel as through the EIR amortization process. For long-term debt, EIR amortization and realized gains and losses are recognized in net finance expense.
Fair valueAfter initial recognition, the fair values of financial instruments are based on the bid prices in quoted active markets for financial assets and on the ask prices for financial liabilities. For financial instruments not traded in active markets, fair values are determined using appropriate valuation techniques, which may include recent arm’s length market transactions, reference to the current fair value of another instrument that is substantial y the same, and discounted cash flow analysis; however, other valuation models may be used. The fair values of the Company’s derivatives are based on third-party indicators and forecasts. Fair values of cash and cash equivalents, trade and other receivables, and trade and other payables approximate their carrying amounts because of the short-term maturity of these instruments. The carrying amounts of the revolving credit facility and term loan and the multicurrency credit facility (col ectively the credit facilities) approximate their fair values because the applicable interest rates are based on variable reference rates. The carrying amounts of other financial assets and financial liabilities approximate their fair values except as otherwise disclosed in the consolidated financial statements.
Al financial instruments carried at fair value are categorized into one of the fol owing:
•	Level 1 – quoted market prices in active markets for identical assets or liabilities at the measurement date.
•	Level 2 – observable inputs other than quoted prices included within level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets or liabilities that are not active, or other inputs that are observable directly or indirectly.
•	Level 3 – unobservable inputs for the assets and liabilities that reflect the reporting entity’s own assumptions and are not based on observable market data.
When forming estimates, the Company uses the most observable inputs available for valuation purposes. If a fair value measurement reflects inputs of different levels within the hierarchy, the financial instrument is categorized based on the lowest level of significant input.
When determining fair value, the Company considers the principal or most advantageous market in which it would transact and the assumptions that market participants would use when pricing the asset or liability. For financial instruments recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels of the hierarchy by reassessing categorizations at the end of each reporting period.
DerivativesFrom time to time, the Company enters into foreign currency forward contracts to manage risk associated with net operating assets or liabilities denominated in foreign currencies. The Company also utilizes interest rate swaps to manage its exposure to fluctuations in interest rates and total return swaps to manage its exposure to fluctuations in the fair value of its common shares related to its cash-settled share-based payment arrangements. The Company’s policy prohibits the use of these derivatives for trading or speculative purposes.
Derivatives are recorded at fair value in the consolidated statements of financial position as either other assets or other liabilities. Changes in the fair value of derivatives not designated as hedging instruments are recognized in the consolidated statements of income. Unrealized gains and losses for derivatives designated as hedging instruments in a cash flow hedge, to the extent they are effective, are recorded in other comprehensive income and subsequently reclassified to the consolidated statements of income when the hedged item affects earnings.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-16	Stantec Inc.

i) ImpairmentThe carrying amounts of the Company’s assets or group of assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is an indication of impairment. An asset may be impaired if objective evidence of impairment exists because of one or more events that have occurred after the initial recognition of the asset (referred to as a “loss event”) and if that loss event has an impact on the estimated future cash flows of the asset. When an indication of impairment exists, or annual impairment testing for an asset is required, the asset’s recoverable amount is estimated.
Financial assets and contract assetsThe Company recognizes a loss al owance for expected credit losses (ECLs) on financial assets and contract assets based on a 12-month ECL or lifetime ECL. The lifetime ECL (the simplified approach) is applied to trade and other receivables, unbil ed receivables, contract assets, sublease receivables, and holdbacks. 12-month ECLs are recorded against al other financial assets, unless credit risk has significantly increased since initial recognition, then the ECL is measured at the lifetime ECL. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and al the cash flows that the Company expects to receive.
The loss al owance provision is based on the Company’s historical col ection and loss experience and incorporates forward-looking factors, where appropriate.
When the carrying amount of financial assets or contract assets is reduced through an ECL al owance, the reduction is recognized in administrative and marketing expenses in the consolidated statements of income.
Non-financial assetsFor non-financial assets such as property and equipment, lease assets, goodwil , intangible assets, and investments in joint ventures and associates, the recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU’s) value in use or its fair value less costs of disposal. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. To assess value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. To determine fair value less costs of disposal, an appropriate valuation model is used. The results of these valuation techniques are corroborated by the market capitalization of comparable public companies and arm’s length transactions of comparable companies. Impairment losses are recognized in the consolidated statements of income in expense categories that are consistent with the nature of the impaired asset.
CGUs are defined based on the smal est identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Other factors are considered, including how management monitors the entity’s operations.
The Company tests intangible assets for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. To determine indicators of impairment of intangible assets, the Company considers external sources of information such as prevailing economic and market conditions and internal sources of information such as the historical and expected financial performance of the intangible assets. If indicators of impairment are present, the Company determines recoverability based on an estimate of discounted cash flows, using the higher of either the value in use or the fair value less costs of disposal method. The measurement of impairment loss is based on the amount that the carrying amount of an intangible asset exceeds its recoverable amount at the CGU level. As part of the impairment test, the Company updates its future cash flow assumptions and estimates, including factors such as current and future contracts with clients, margins, market conditions, and the useful lives of the assets.
Goodwil is evaluated for impairment annual y (as at October 1) or more frequently if circumstances indicate that an impairment may occur or if a significant acquisition occurs between the annual impairment test date and December 31. The Company considers the relationship between its market capitalization and its book value, as wel as other factors, when reviewing for indicators of impairment. Goodwil is assessed for impairment based on the CGUs or group of CGUs to which the goodwil relates. Any potential goodwil impairment is identified by comparing the recoverable amount of a CGU or group of CGUs to its carrying value which includes the al ocated goodwil . If the recoverable amount is less than its carrying value, an impairment loss is recognized.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-17	Stantec Inc.

The Company may need to test its goodwil for impairment between its annual test dates if market and economic conditions deteriorate or if volatility in the financial markets causes declines in the Company’s share price, increases the weighted average cost of capital, or changes valuation multiples or other inputs to its goodwil assessment. In addition, changes in the numerous variables associated with the judgments, assumptions, and estimates made by management in assessing the fair value could cause them to be impaired. Goodwil impairment charges are non-cash charges that could have a material adverse effect on the Company’s consolidated financial statements but in themselves do not have any adverse effect on its liquidity, cash flows from operating activities or debt covenants.
An impairment loss of goodwil is not reversed. For other assets, an impairment loss may be reversed if the estimates used to determine the recoverable amount have changed. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount or the carrying amount that would have been determined, net of amortization or depreciation, had no impairment loss been recognized for the asset in prior years. The reversal is recognized in the consolidated statements of income.
j) Revenue recognitionThe Company generates revenue from contracts in which goods or services are typical y provided over time. Revenue is measured based on the consideration the Company expects to be entitled to in exchange for providing goods and services, excluding duty and taxes col ected from clients that are reimbursable to government authorities.
While providing services, the Company incurs certain direct costs for subconsultants and other expenses that are recoverable directly from clients. The recoverable amounts of these direct costs are included in the Company’s gross revenue. Since these direct costs can vary significantly from contract to contract, changes in gross revenue may not be indicative of the Company’s revenue trends. Therefore, the Company also reports net revenue, which is gross revenue less subconsultants and other direct expenses. The Company assesses its revenue arrangements against specific criteria to determine whether it is acting as a principal or an agent. In general, the Company acts as a principal in its revenue arrangements because it obtains control of the goods or services before they are provided to the customer.
Most of the Company’s contracts include a single performance obligation because the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and therefore is not distinct. The Company’s contracts may include multiple goods or services that are accounted for as separate performance obligations if they are distinct—if a good or service is separately identifiable from other items in the contract and if a customer can benefit from it. If a contract has multiple performance obligations, the consideration in the contract is al ocated to each performance obligation based on the estimated stand-alone sel ing price.
The Company transfers control of the goods or services it provides to clients over time and therefore recognizes revenue progressively as the services are performed. Revenue from fixed-fee and variable-fee-with-ceiling contracts, including contracts in which the Company participates through joint arrangements, is recognized based on the percentage of completion method where the stage of completion is measured using costs incurred to date as a percentage of estimated costs for each contract. When the contract outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses incurred are eligible to be recovered. Provisions for estimated losses on incomplete contracts are made in the period that the losses are determined. Revenue from time-and-material contracts without stated ceilings is recognized as costs are incurred based on the amount that the Company has a right to invoice.
The timing of revenue recognition, bil ings, and cash col ections results in trade and other receivables, holdbacks, unbil ed receivables, contract assets, and deferred revenue in the consolidated statements of financial position. Amounts are typical y invoiced as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or when contractual milestones are achieved. Receivables represent amounts due from customers: trade and other receivables and holdbacks consist of invoiced amounts, and unbil ed receivables consist of work in progress that has not yet been invoiced. Contract assets represent unbil ed amounts where the right to payment is subject to more than the passage of time and includes performance-based incentives and services provided ahead of agreed contractual milestones. Contract assets are transferred to receivables when the right to consideration becomes unconditional. Deferred revenue represents amounts that have been invoiced but not yet recognized as revenue, including advance payments and bil ings in excess of revenue. Deferred revenue is recognized as revenue when (or as) the Company performs under the contract.
Revenue is adjusted for the effects of a significant financing component when the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. Advance payments and
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-18	Stantec Inc.

holdbacks typical y do not result in a significant financing component because the intent is to provide protection against the failure of one party to adequately complete some or al of its obligations under the contract.
k) Employee benefit plansDefined benefit plansThe Company sponsors defined benefit pension plans covering certain ful -time employees and past employees, primarily in the United Kingdom. Benefits are based on final compensation and years of service. Benefit costs (determined separately for each plan using the projected unit credit method) are recognized over the periods that employees are expected to render services in return for those benefits.
Remeasurements, comprising actuarial gains and losses and the return on the plan assets (excluding interest), are recognized immediately in the consolidated statements of financial position with a corresponding debit or credit to other comprehensive income in the period they occur. Remeasurements are not reclassified to net income in subsequent periods.
The calculation of defined benefit obligations is performed at least annual y by a qualified actuary, or more often as required due to plan amendments, curtailments, or settlements. When the calculation results in a potential asset, the recognized asset is limited to the economic benefits available in the form of any future refunds or of reductions in future contributions to the plan.
Past service costs are recognized in net income on the earlier of the date of the plan amendment or curtailment and the date that the Company recognizes related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, adjusted for benefit and contribution payments during the year. The Company recognizes the fol owing changes in the net defined benefit obligations under administrative and marketing expenses: service costs comprising current service costs, past service costs, gains and losses on curtailments and non-routine settlements; net interest expense or income; and administrative expenses paid directly by the pension plans.
Defined contribution plansThe Company also contributes to group retirement savings plans and an employee share purchase plan. Certain plans are based on employee contribution amounts and subject to maximum limits per employee. The Company accounts for defined contributions as an expense in the period the contributions are made.
l) TaxesCurrent income taxCurrent income tax assets and liabilities for current and prior periods are measured at the amount expected to be recovered from or paid to taxation authorities. Tax rates and tax laws used to compute the amounts are those enacted or substantively enacted at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax that relates to items recognized directly in equity is recognized in equity and not in the consolidated statements of income. Management periodical y evaluates positions taken in the tax returns when applicable tax regulations are subject to interpretation and then establishes an uncertain tax liability, if appropriate.
Income taxes payable are typical y expected to be settled within twelve months of the year-end date. However, there may be instances where taxes are payable over a longer period. Portions due after a one-year period are classified as non-current and are not discounted.
Deferred taxDeferred tax is determined using the liability method for temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are general y recognized for al taxable temporary differences. Deferred tax assets are recognized for al deductible temporary differences and the carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit wil be available against which the deductible temporary differences and the carryforward of unused tax credits and unused tax losses can be utilized. Deferred taxes are not recognized for the initial recognition of goodwil ; the initial recognition of assets or liabilities, outside of a business combination, that affect neither accounting nor taxable profit; or the differences relating to investments in associates, subsidiaries, and
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-19	Stantec Inc.

interests in joint arrangements to the extent that the reversal can be control ed and it is probable that it wil not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit wil be available to al ow al or part of the deferred tax asset to be used. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits wil al ow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled and are based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside income is also recognized outside income. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.
Deferred tax assets and deferred tax liabilities are offset when a legal y enforceable right exists to set off tax assets against tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Uncertain tax positionsIf the Company determines that it is not probable that a taxation authority wil accept an uncertain tax treatment, then an uncertain tax liability is recorded using either the most likely amount or the expected value method, depending on which method better predicts the resolution of the circumstances giving rise to the uncertainty.
Uncertain tax liabilities are presented as either income taxes payable or deferred tax liabilities. This depends on whether the uncertain tax liabilities are in respect of taxable profit for a period or income taxes payable in future periods in respect of taxable temporary differences.
Sales taxRevenues, expenses, and assets excluding trade receivables, are recognized net of the amount of sales tax recoverable from or payable to a taxation authority. The net amount of sales tax recoverable from or payable to a taxation authority is included as part of trade receivables or trade payables (as appropriate) in the consolidated statements of financial position.
m) Share-based payment transactionsUnder the Company’s share option plan, the board of directors may grant to officers and employees remuneration in the form of share-based payment transactions, whereby officers and employees render services as consideration for equity instruments (equity-settled transactions).
Under the Company’s deferred share unit plan, the board of directors may receive deferred share units (DSUs), each of which is equal to one common share. Under the Company’s long-term incentive plan, certain members of the senior leadership teams are granted performance share units (PSUs) or restricted share units (RSUs) that vest and are settled after a three-year period. DSUs, PSUs, and RSUs are settled only in cash (cash-settled transactions).
Equity-settled transactionsThe cost of equity-settled transactions is measured at fair value at the grant date using a Black-Scholes option-pricing model. The cost of equity-settled transactions, together with a corresponding increase in contributed surplus, is recognized over the period in which the service conditions are fulfil ed (the vesting period). Upon the exercise of share options for which a share-based compensation expense has been recognized, the cash paid, together with the related portion of contributed surplus, is credited to share capital. For equity-settled transactions, the cumulative expense recognized at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that wil ultimately vest. The expense or credit to income for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and is recorded in administrative and marketing expenses. No expense is recognized for awards that do not ultimately vest.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-20	Stantec Inc.

Cash-settled transactionsThe cost of cash-settled transactions is measured initial y at fair value at the grant date. For DSUs, this fair value is expensed on issue with the recognition of a corresponding liability through other liabilities. For PSUs and RSUs, the fair value is expensed over the vesting period. These liabilities are remeasured to fair value at each reporting date, up to and including the settlement date, with changes in fair value recognized in administrative and marketing expenses.
n) Earnings per shareBasic earnings per share is computed based on the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed using the treasury stock method, which assumes that the cash that would be received on the exercise of options is applied to purchase shares at the average price during the year and that the difference between the number of shares issued on the exercise of options and the number of shares obtainable under this computation, on a weighted average basis, is added to the number of shares outstanding. Antidilutive options are not considered when computing diluted earnings per share.
o) Business combinations and goodwilBusiness combinations are accounted for using the acquisition method, and the results of operations after the respective dates of acquisition are included in the consolidated statements of income. Acquisition-related costs are expensed when incurred in administrative and marketing expenses.
The cost of an acquisition is measured as the consideration transferred at fair value at the acquisition date. Any deferred or contingent consideration to be transferred by the Company is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognized in other income.
The consideration paid for acquisitions may be subject to price adjustment clauses included in the purchase agreements and may extend over a number of years. At each consolidated statement of financial position date, these price adjustment clauses are reviewed. This may result in an increase or decrease of deferred or contingent consideration (recorded on the acquisition date), recorded as notes payable, to reflect either more or less non-cash working capital than was original y recorded. Since these adjustments are a result of facts and circumstances occurring after the acquisition date, they are not considered measurement period adjustments.
For some acquisitions, additional payments may be made to the employees of an acquired company that are based on the employees’ continued service over an agreed time period. These additional payments are not included in the purchase price but are expensed as compensation when services are provided by the employees.
Goodwil is initial y measured at cost, which is the excess of the consideration transferred over the fair value of a company’s net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets acquired, the difference is recognized in income.
After initial recognition, goodwil is measured at cost less any accumulated impairment losses. Goodwil is not amortized. For the purpose of impairment testing, goodwil acquired in a business combination is, from the acquisition date, al ocated to each CGU or group of CGUs that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each CGU or group of CGUs represents the lowest level at which management monitors the goodwil .
p) DividendsDividends on common shares are recognized in the Company’s consolidated financial statements in the period the dividends are declared by the Company’s board of directors.
5. Significant Accounting Judgments, Estimates, and AssumptionsPreparation of the Company’s consolidated financial statements requires management to make judgments, estimates, and assumptions that affect the reported amounts of revenues, expenses, assets, and liabilities, as wel as the disclosure of contingent liabilities at the end of the reporting year. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
The COVID-19 pandemic has had adverse financial impacts on the global economy and financial markets. The war in Ukraine and the transition to higher inflationary environments have also contributed to increased global economic and
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-21	Stantec Inc.

financial volatility; however, there has been no significant impact on the Company's results and management continues to monitor for any potential impacts on the operations and financial position of the Company.
Discussed below are the key management judgments and assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that may lead to a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
a) Revenue recognitionThe Company accounts for its revenue from fixed-fee and variable-fee-with-ceiling contracts using the percentage of completion method, which requires estimates to be made for contract costs and revenues. Contract costs include direct labor, direct costs for subconsultants, and other expenditures that are recoverable directly from clients. Progress on jobs is regularly reviewed by management and estimated costs to complete are revised based on the information available at the end of each reporting period. Contract cost estimates are based on various assumptions that can result in a change to contract profitability from one financial reporting period to another. Assumptions are made about labor productivity, the complexity of the work to be performed, the performance of subconsultants, and the accuracy of original bid estimates. Estimating costs is subjective and requires management’s best judgments based on the information available at that time.
On an ongoing basis, estimated revenue is updated to reflect the amount of consideration the Company expects to be entitled to in exchange for providing goods and services. Revenue estimates are affected by various uncertainties that depend on the outcome of future events, including change orders, claims, variable consideration, and contract provisions for performance-based incentives or penalties.
Change orders are included in estimated revenue when management believes the Company has an enforceable right to the change order, the amount can be estimated reliably, and realization is highly probable. Claims against other parties, including subconsultants, are recognized as a reduction in costs using the same criteria. To evaluate these criteria, management considers the contractual or legal basis for the change order, the cause of any additional costs incurred, and the history of favorable negotiations for similar amounts. As change orders are not recognized until highly probable, it is possible for the Company to have substantial contract costs recognized in one accounting period and associated revenue or reductions in cost recognized in a later period.
The Company’s contracts may include variable consideration such as revenue based on costs incurred and performance-based incentives or penalties. Variable consideration is estimated by determining the most likely amount the Company expects to be entitled to, unless the contract includes a range of possible outcomes for performance-based amounts. In that case, the expected value is determined using a probability weighting of the range of possible outcomes. Variable consideration, including change orders approved as to scope but unapproved as to price, is included in estimated revenue to the extent it is highly probable that a significant reversal of cumulative revenue recognized wil not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are based on historical experience, anticipated performance, and management’s best judgment based on the information available at the time.
Consideration in contracts with multiple performance obligations is al ocated to the separate performance obligations based on estimates of stand-alone sel ing prices. The primary method used to estimate the stand-alone sel ing price is expected cost plus an appropriate margin. To determine the appropriate margin, management considers margins for comparable services under similar contracts in similar markets.
Changes in estimates are reflected in the period in which the circumstances that gave rise to the change became known and affect the Company’s revenue, unbil ed receivables, contract assets, and deferred revenue.
b) Impairment of non-financial assetsImpairment exists when the carrying amount of an asset or CGU or group of CGUs exceeds its recoverable amount, which is the higher of its fair value less costs of disposal or its value in use. Fair value less costs to sel is based on a discounted cash flow model and observable market prices for an arm’s length transaction of similar assets, less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from budgets over an appropriate number of years and do not include restructuring activities that the Company is not yet committed to or significant future investments that wil enhance the asset’s performance of the CGU or group of CGUs being tested.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-22	Stantec Inc.

The Company validates its estimate of the fair value of each asset, CGU or group of CGUs, by comparing the resulting multiples to multiples derived from comparable public companies and comparable company transactions. The Company reconciles the total fair value of al CGUs and groups of CGUs with its market capitalization to determine whether the sum is reasonable. If the reconciliation indicates a significant difference between the external market capitalization and the fair value of the CGUs or groups of CGUs, the Company reviews and adjusts, if appropriate, the discount rate of the CGUs or groups of CGUs and considers whether the implied acquisition premium (if any) is reasonable in light of current market conditions. The fair value measurement is categorized as level 3 in the fair value hierarchy based on the significant inputs in the valuation technique used (note 4h).
GoodwillTo arrive at the estimated recoverable amount of goodwil , the Company uses estimates of economic and market information, including arm’s length transactions for similar assets, growth rates in revenues, estimates of future expected changes in operating margins, and cash expenditures. The Company estimates the recoverable amount by using the fair value less costs of disposal approach. It estimates fair value using market information and discounted after-tax cash flow projections, which is known as the income approach. The income approach uses a CGUs or group of CGUs projection of estimated operating results and discounted cash flows based on a discount rate that reflects current market conditions and the risk of achieving the cash flows. The Company uses cash flow projections covering at least a five-year period derived from financial forecasts approved by senior management. To arrive at cash flow projections, the Company uses estimates of economic and market information over the projection period.
Lease assets and associated property and equipmentTo arrive at the estimated recoverable amount of lease assets and associated property and equipment, the Company uses economic and market information, including arm's length transactions for similar assets, estimates of future changes in variable head lease payments, potential sublease terms and conditions, including the timing and amount of associated cash inflows and initial direct costs, and assumptions about the future use of associated property and equipment.
The Company estimates the recoverable amount by using the value in use approach. It estimates fair value using market information and probability weighted pre-tax cash flow projections discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. The Company uses cash flow projections covering the remaining head lease term from financial forecasts approved by senior management.
c) Business combinationsIn a business combination, the Company may acquire certain assets and assume certain liabilities of an acquired entity. The estimate of fair values for these transactions involves judgment to determine the fair values assigned to the tangible and intangible assets (i.e., backlog, client relationships, and trademarks) and the liabilities assumed on the acquisition. Determining fair values involves a variety of assumptions, including revenue growth rates, client retention rates, expected operating income, and discount rates.
From time to time, as a result of the timing of acquisitions in relation to the Company’s reporting schedule, certain estimates of fair values of assets and liabilities acquired may not be finalized at the initial time of reporting. These estimates are completed after the vendors’ final financial statements have been prepared and accepted by the Company, after detailed project portfolio reviews are performed, and when the valuations of intangible assets and other assets and liabilities acquired are finalized.
Assessments are performed on acquisition agreements with deferred or contingent consideration arrangements to determine whether the amounts payable represents business combination consideration or an arrangement that is separate from the business combination. Management applies judgment and the requirements of IFRS 3 to determine whether deferred or contingent arrangements are part of the business combination consideration.
d) LeasesThe Company accounts for leases in accordance with IFRS 16 Leases, which requires judgments to be made in determining the incremental borrowing rate (IBR).
The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the lease asset in a similar economic
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-23	Stantec Inc.

environment. The Company estimates the incremental borrowing rate based on the lease term, col ateral assumptions, and the economic environment in which the lease is denominated.
e) Provision for self-insured liabilities and claimsIn the normal conduct of operations, various legal claims are pending against the Company, al eging, among other things, breaches of contract or negligence in connection with the performance of its services. The Company carries professional liability insurance, subject to certain deductibles and policy limits, and self-insures certain risks, including professional liability, automobile liability, and employment practices liability. In some cases, the Company may be subject to claims for which it is only partly insured or completely insured. The accrual for self-insured liabilities includes estimates of the costs of reported claims and is based on management’s assumptions, including consideration of actuarial estimates. These estimates of loss are derived from loss history that is then subjected to actuarial techniques to determine the proposed liability. Estimates of loss may vary from those used in the actuarial projections and result in a larger loss than estimated. An increase in loss is recognized in the period that the loss is determined and increases the Company’s self-insured liabilities and reported expenses.
Damages assessed in connection with and the cost of defending such actions could be substantial and possibly in excess of policy limits, for which a range of possible outcomes are either not able to be estimated or not expected to be significant. However, based on advice and information provided by legal counsel, the Company’s previous experience with the settlement of similar claims, and the results of the annual actuarial review, management believes that the Company has recognized adequate provisions for probable and reasonably estimated liabilities associated with these claims. In addition, management believes that it has appropriate insurance in place to respond to and offset the cost of resolving these claims.
Due to uncertainties in the nature of the Company’s legal claims, such as the range of possible outcomes and the progress of the litigation, provisions for self-insured liabilities and claims involve estimates. The ultimate cost to resolve these claims may exceed or be less than that recorded in the consolidated financial statements. Management believes that the ultimate cost to resolve these claims wil not material y exceed the insurance coverage or provisions accrued and, therefore, would not have a material adverse effect on the Company’s consolidated statements of income and financial position.
f) Employee benefit plansThe cost of the defined benefit pension plans and the present value of the pension obligations are determined separately for each plan using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual future developments. These include determining the discount rate, mortality rates, future salary increases, inflation, and future pension increases. Due to the complexities involved in the valuation and its long-term nature, the defined benefit obligation and cost are highly sensitive to changes in these assumptions, particularly to the discount and mortality rates (although portions of the pension plans have protection against changes in the discount rate and improving mortality rates by utilizing annuities). Al assumptions are reviewed annual y.
In determining the appropriate discount rate, management considers the interest rates of corporate bonds in currencies consistent with the currencies of the post-employment obligation and that have an ‘AA’ rating or above, as set by an international y acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the benefit obligation.
The mortality rate is based on publicly available information in the actuarial profession’s publications plus any special geographical or occupational features of each plan’s membership. Mortality tables tend to change only at intervals in response to demographic changes. Future salary increases reflect the current estimate of management. Pension increases are calculated based on the terms of the individual plans and estimated future inflation rates.
In determining whether the purchase of a bulk annuity contract results in a settlement of the Company's defined benefit obligations, management considers the intent of the transaction as wel as the degree to which the Company continues to retain the related risks and obligations.
g) TaxesUncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of deferred taxable income. The Company’s income tax assets and liabilities are based on interpretations of income tax legislation across various jurisdictions, primarily in Canada, United States, the United Kingdom, and Australia. The Company’s effective tax rate can change from year to year based on the mix of income among jurisdictions, changes in tax laws in these jurisdictions, and changes in the estimated value of deferred tax assets and liabilities. The
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-24	Stantec Inc.

Company’s income tax expense reflects an estimate of the taxes it expects to pay for the current year, as wel as a provision for changes arising in the values of deferred tax assets and liabilities during the year. The tax value of these assets and liabilities is impacted by factors such as accounting estimates inherent in these balances, management’s expectations about future operating results, previous tax audits, and differing interpretations of tax regulations by the taxable entity and the responsible tax authorities. Differences in interpretation may arise for a wide variety of issues, depending on the conditions prevailing in the respective legal entity’s domicile. Management regularly assesses the likelihood of recovering value from deferred tax assets, such as loss carryforwards, as wel as from deferred tax depreciation of capital assets, and adjusts the tax provision accordingly.
Deferred tax assets are recognized for al unused tax losses to the extent that it is probable that taxable profit wil be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized based on the likely timing and the level of future taxable profits, together with future tax-planning strategies. If estimates change, the Company may be required to recognize an adjustment to its deferred income tax asset or liability and income tax expense.
6. Recent Accounting Pronouncements and Changes to Accounting
Policiesa) Recent adoptionsIn May 2020, the IASB issued Onerous Contracts — Cost of Fulfil ing a Contract (Amendments to IAS 37). The amendments clarify that both incremental costs and an al ocation of other costs that relate directly to fulfil ing the contract should be included in assessing whether a contract is onerous. The amendments became effective January 1, 2022. The amendments did not have a material impact on the Company's consolidated financial statements.
b) Future adoptionsListed below are the standards, amendments, and interpretations that the Company reasonably expects to be applicable at a future date and intends to adopt when they become effective. The Company is currently considering the impact of adopting these standards, amendments, and interpretations on its consolidated financial statements and cannot reasonably estimate the effect at this time.
•	In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1) that aims to promote consistency by helping companies determine whether debt and other liabilities with an uncertain settlement date should be classified as current or non-current in the statement of financial position. The amendments also clarify the classification requirements for debt a company might settle by converting it into equity. In October 2022, the IASB issued Non-current Liabilities with Covenants (Amendments to IAS 1) that provides guidance on how covenants may affect an entity's right to defer settlement of a liability for at least twelve months after the reporting period, which may determine whether a liability should be presented as current or non-current. Both of these amendments to IAS 1 are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted, applied retrospectively.
•	In February 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8). The amendments define accounting estimates and clarify the distinction between changes in accounting estimates and changes in accounting policies. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted.
•	In February 2021, the IASB issued Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2). The amendments provide guidance to help entities disclose their material (previously "significant") accounting policies. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted.
•	In May 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). The amendments narrow the scope of the recognition exemption so that companies would be required to recognize deferred tax for transactions that give rise to equal amounts of taxable and deductible temporary differences, such as leases. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted, applied retrospectively.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
		F-25	Stantec Inc.

•	In September 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16). The amendments address the measurement requirements for sale and leaseback transactions. The amendments require a sel er-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize any amount of the gain or loss that relates to the right of use it retains. The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted, applied retrospectively.
7. Business AcquisitionAcquisitions in 2021On March 1, 2021, the Company acquired al the shares and business of Greg Tucker and Associates Pty Ltd. (GTA) for cash consideration and notes payable. GTA is an Australian-based transportation planning and engineering firm with offices in Melbourne, Sydney, Brisbane, Adelaide, and Perth. This addition further strengthens the Company's Infrastructure operations in the Global group of CGUs.
On May 1, 2021, the Company acquired al the shares and business of Clever West Investments Pty Ltd. (Engenium) for cash consideration and notes payable. Engenium is based in Australia and specializes in the delivery of sustainable mining, resources, and industrial infrastructure projects, and has a strong focus on renewable energy and sustainable solutions. This addition further strengthens the Company's commitment to sustainability in its Global group of CGUs and Energy & Resources operations.
On September 30, 2021, the Company acquired certain assets and liabilities of Paleo Solutions, Inc. (Paleo). Paleo is a ful -service natural resources and cultural resources management consulting firm. Paleo provides paleontological and archaeological services for the rail, transportation, water, and power sectors. Paleo is headquartered in Los Angeles, California with offices in Redlands, California and Denver, Colorado. This addition further strengthens the Company's commitment to sustainability in the Environmental Services operations in the United States CGU.
On November 1, 2021, the Company acquired al the shares of Driven by Values B.V. (Driven by Values) for cash consideration and notes payable. Driven by Values is an environmental services firm specialized in energy transition. Drive by Values is in the Netherlands with offices in Eindhoven and Sittard. This addition further strengthens the Company's Global Environmental Services operations in the Global group of CGUs.
On December 8, 2021, the Company acquired al of the shares of the North America and Asia Pacific engineering and consulting groups of Cardno Limited (Cardno). Cardno is a multidisciplinary firm specializing in designing, developing, and delivering sustainable projects. The operations include 85 offices primarily in the United States, Australia and New Zealand. This addition further strengthens the Company's Environmental Services and Infrastructure operations in the United States CGU, and the Environmental Services, Infrastructure, and Water operations in the Global group of CGUs.
On December 31, 2021, the Company acquired certain assets and liabilities of Cox\|McLain Environmental Consulting, Inc (CMEC). CMEC is a ful -service environmental consulting firm that provides comprehensive environmental and cultural resource compliance services. CMEC is headquartered in Austin, Texas with additional offices in Houston and Irving, Texas; Oklahoma City and Tulsa, Oklahoma; Washington DC; and Baton Rouge, Louisiana. This addition further strengthens the Company's Environmental Services operations in the United States CGU.
Acquisitions in 2022On April 1, 2022, the Company purchased the assets of Barton Wil more LLP and al the shares of Barton Wil more Holdings Limited (col ectively Barton Wil more) for cash consideration and notes payable. Barton Wil more is a 300- person firm based in the United Kingdom. The firm provides planning and design services for both public and private clients across al development sectors, with specific expertise in the residential space. This addition further strengthened the Company’s Infrastructure operations in the Global group of CGUs.
On October 28, 2022, the Company acquired al of the shares of L2, Inc., and Partridge Architects, Inc. and al of the membership interests of L2Partridge, LLC (col ectively L2P) for cash consideration and notes payable. L2P is a 40-person firm headquartered in Philadelphia, Pennsylvania serving the science and technology, commercial workplace, higher education, residential, and hospitality markets. This acquisition further strengthened the Company's Buildings operations in the United States CGU.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-26	Stantec Inc.

Details of the aggregate consideration transferred and the fair value of the identifiable assets and liabilities acquired at the date of acquisition, including measurement period adjustments for prior acquisitions, are as fol ows:
	For the year ended December 31,
		2022	2021
				$	$
Cash consideration	52.5	734.7
Notes payable				16	40.6	41.6
Consideration	93.1	776.3
Cash consideration	52.5	734.7
Cash acquired	2.1	32.2
Net cash paid	50.4	702.5
Assets and liabilities acquiredCash
	2.1	32.2
Non-cash working capital
Trade receivables	21.1	98.9
Unbil ed receivables	4.5	43.5
Trade and other payables	(9.9)	(75.5)
Deferred revenue	(3.1)	(43.0)
Other non-cash working capital	(4.9)	12.0
Property and equipment				10	(0.5)	11.6
Lease assets				11	8.5	79.9
Intangible assets				13	15.3	205.7
Deferred tax assets (liabilities), net				26	18.7	(19.9)
Lease liabilities	(1.6)	(91.4)
Provisions				17	(21.3)	(9.7)
Other	(0.5)	(0.8)
Total identifiable net assets at fair value	28.4	243.5
Goodwill arising on acquisitions				12	64.7	532.8
Deferred consideration is included as notes payable and has been assessed as part of the business combination and recognized at fair value at the acquisition date.
Trade receivables and unbil ed receivables are recognized at fair value at the time of acquisition, and their fair value approximated their net carrying value.
Goodwil consists of the value of expected synergies arising from an acquisition, the expertise and reputation of the assembled workforce acquired, and the geographic location of the acquiree. During the year, $10.8 of goodwil and intangible assets were deductible for income tax purposes.
At December 31, 2022, provision for claims outstanding relating to al prior acquisitions were $23.7, based on their expected probable outcome (note 17).
Gross revenue earned from Barton Wil more and L2P since the acquisition date was $42.6.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
					F-27	Stantec Inc.

Fair value of net assets for current and prior year acquisitionsThe preliminary fair values of the net assets recognized in the Company’s consolidated financial statements were based on management’s best estimates of the acquired identifiable assets and liabilities at the acquisition dates. Management finalized the fair value assessments of assets and liabilities purchased from Engenium, Driven by Values, Paleo, Cox McLean, and Cardno Limited. For Barton Wil more and L2P, management is reviewing vendor's closing financial statements, purchase adjustments, and other outstanding information. Once the outstanding information is received, reviews are completed, and approvals are obtained, the valuation of acquired assets and liabilities wil be finalized. Measurement period adjustments increased goodwil by $2.4 including an increase of $21.9 in deferred tax assets, $20.8 in provisions, and $3.6 in other net assets and a decrease of $2.3 in property and equipment.
8. Cash and Cash EquivalentsThe Company’s policy is to invest cash in excess of operating requirements in highly liquid investments. For the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of the fol owing:
	December 31		December 31
		2022		2021
		$		$
Cash		139.5		183.9
Unrestricted investments		8.8		10.0
Cash and deposits		148.3		193.9
Bank indebtedness		—		(7.2)
Cash and cash equivalents		148.3		186.7
9. Trade and Other Receivables
	December 31,		December 31
		2022		2021
		$		$
Trade receivables, net of expected credit losses of $2.0 (2021 – $2.0)		988.1		787.9
Holdbacks, current		26.3		28.6
Other		13.6		7.2
Trade and other receivables		1,028.0		823.7
The aging analysis of gross trade receivables is as fol ows:
					Total	1–30	31–60	61–90	91–120		121+
					$	$	$	$		$	$
December 31, 2022					990.1	556.4	246.9	71.6	39.8		75.4
December 31, 2021					789.9	467.8	181.1	56.3	30.6		54.1
Information about the Company’s exposure to credit risks for trade and other receivables is included in note 24.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
								F-28	Stantec Inc.

10. Property and Equipment
	Engineering		Office			Leasehold
	Equipment			Equipment	Improvements			Other	Total
		$			$		$	$	$
CostDecember 31, 2020
		118.4	85.3				242.6	40.6	486.9
Additions		21.5	5.1				15.1	4.5	46.2
Additions arising on acquisitions		5.6	0.7				3.3	2.0	11.6
Disposals		(15.3)	(6.7)				(15.7)	(3.2)	(40.9)
Impact of foreign exchange		(1.5)	(0.8)				(1.4)	(0.6)	(4.3)
December 31, 2021		128.7	83.6				243.9	43.3	499.5
Additions		26.7	5.8				32.7	8.1	73.3
Measurement period adjustment
		(0.6)	0.2				(0.1)	—	(0.5)
net of acquisition additions
Disposals		(19.2)	(13.2)				(35.3)	(8.9)	(76.6)
Impact of foreign exchange		2.9	3.8				6.9	3.7	17.3
December 31, 2022		138.5	80.2				248.1	46.2	513.0
Accumulated depreciationDecember 31, 2020
		61.5	43.2				122.7	19.4	246.8
Depreciation		17.5	7.2				26.2	3.0	53.9
Disposals		(14.7)	(5.7)				(15.6)	(2.5)	(38.5)
Impairment (note 11)		—	1.6				4.1	—	5.7
Impact of foreign exchange		(0.8)	(0.3)				(0.8)	(0.2)	(2.1)
December 31, 2021		63.5	46.0				136.6	19.7	265.8
Depreciation		19.3	6.8				26.9	3.8	56.8
Disposals		(17.7)	(11.5)				(33.4)	(6.7)	(69.3)
Impairment net of reversal (note 11)		—	(0.3)				(0.4)	—	(0.7)
Impact of foreign exchange		2.1	1.8				4.5	1.3	9.7
December 31, 2022		67.2	42.8				134.2	18.1	262.3
Net book valueDecember 31, 2021
		65.2	37.6				107.3	23.6	233.7
December 31, 2022		71.3	37.4				113.9	28.1	250.7
Leasehold improvements includes construction work in progress of $6.4 (2021 – $3.4) on which depreciation has not started.
Included in the Other category is automotive equipment, buildings, and land.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
		F-29								Stantec Inc.

11. Lease Assets
	Building		Other	Total
		$	$	$
December 31, 2020						443.4		3.6	447.0
Additions						43.8		12.2	56.0
Acquisitions						74.0		5.9	79.9
Depreciation						(102.9)		(5.0)	(107.9)
Modifications						24.4		0.2	24.6
Impairment net of reversal						(19.1)		—	(19.1)
Foreign exchange						(3.9)		(0.1)	(4.0)
December 31, 2021	459.7		16.8	476.5
Additions						76.4		4.7	81.1
Acquisitions						8.3	0.2	8.5
Depreciation						(115.9)		(6.2)	(122.1)
Modifications						6.7	(0.2)	6.5
Reversal of impairment, net						4.8	—	4.8
Foreign exchange						15.0		0.1	15.1
December 31, 2022	455.0		15.4	470.4
The Company leases buildings for its office spaces across the globe. Lease terms typical y range from 1 to 15 years and had a weighted average remaining lease term of 6.6 years at December 31, 2022 (2021 - 7.3 years). To provide operational flexibility, the Company includes extension and termination options in certain leases.
The Company leases vehicles and office equipment with terms typical y ranging from 2 to 7 years and had a weighted average remaining lease term of 3.2 years at December 31, 2022 (2021 - 3.4 years).
The Company also leases IT equipment and other equipment with terms typical y ranging from 1 to 5 years. These leases are general y short-term or for low-value assets that the Company has elected not to recognize in lease assets and lease liabilities.
The Company's acquisition integration activities and initiatives to optimize office space led to the approval of formal plans to sublease and exit certain underutilized office spaces. These changes in use resulted in the recognition of impairment losses, where the carrying amount of the assets exceeded the recoverable amount, determined based on the value in use method, and an onerous contract provision of $19.0 (2021 - $12.5) (note 17). Subsequent payments made for variable costs on impaired office lease assets reduced the estimated future cash outflows and increased the recoverable amount of the leased assets resulting in the reversal of previously recorded impairments.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
					F-30	Stantec Inc.

Impairment losses and reversals for the year are as fol ows:
	Canada	United States	Global	Total
At December 31, 2022					$	$	$	$
Impairment losses
Lease assets	0.1					0.3	2.2	2.6
Impairment reversals	(2.5)					(3.4)	(2.2)	(8.1)
Net impairment reversal of lease assets and property and equipment
	(2.4)					(3.1)	—	(5.5)
Recoverable amount					—	—	4.3	4.3
	Canada	United States	Global	Total
At December 31, 2021					$	$	$	$
Impairment losses
Lease assets	10.5					12.6	0.6	23.7
Property and equipment	1.9					4.8	0.2	6.9
Impairment reversals	(3.8)					(1.2)	(0.8)	(5.8)
Net impairment of lease assets and property and equipment
	8.6					16.2	—	24.8
Recoverable amount					—	6.8	1.1	7.9
Amounts recognized in administrative and marketing expenses						For the year ended December 31,
			2022	2021
							$	$
Rent expense - variable lease payments							39.6	43.5
Rent expense - short-term leases and leases of low-value assets							2.9	2.5
Income from subleases							(2.5)	(3.1)
Total							40.0	42.9
Variable lease payments include operating expenses, real estate taxes, insurance, and other variable costs. Future undiscounted cash flows for short-term leases, leases of low-value assets, variable lease payments, and sublease payments receivable are disclosed in note 20.
Cash outflows for lease liabilities are disclosed in note 32.
12. Goodwil
								December 31	December 31
			2022	2021
							$	$
Gross goodwil , beginning of the year							2,362.3	1,851.8
Acquisitions							64.7	532.8
Impact of foreign exchange							97.4	(22.3)
Gross goodwill, end of the year							2,524.4	2,362.3
Accumulated impairment losses							(178.0)	(178.0)
Net goodwill, end of the year							2,346.4	2,184.3
Goodwil arising from acquisitions includes factors such as the expertise and reputation of the assembled workforce acquired, the geographic location of the acquiree, and the expected synergies.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
					F-31				Stantec Inc.

The Company considers its CGUs based on the interdependence of cash flows between different geographic locations and how management monitors the operations. As such, the CGUs are defined as Canada, US, Asia/Pacific, Latin America, and UK/Europe/Middle East. As goodwil is not monitored at a level lower than the Company’s operating segments, the CGUs excluding Canada and the US are grouped in Global for purposes of al ocating goodwil and testing impairment.
Goodwil was al ocated to its CGUs or group of CGUs as fol ows:
	December 31		December 31
		2022		2021
		$		$
Canada		359.5		359.5
United States		1,408.0		1,304.9
Global		578.9		519.9
Allocated		2,346.4		2,184.3
On October 1, 2022, and October 1, 2021, the Company performed its annual goodwil impairment test in accordance with its policy described in note 4. Based on the results of the 2022 and 2021 tests, the Company concluded that the recoverable amount of each CGU or group of CGUs exceeded its carrying amount and, therefore, goodwil was not impaired.
AssumptionsThe calculation of fair value less costs of disposal is most sensitive to the fol owing key assumptions:
•	Operating margin rates based on actual experience and management’s long-term projections.
•	Discount rates reflecting investors’ expectations when discounting future cash flows to a present value, taking into consideration market rates of return, capital structure, company size, and industry risk. If necessary, a discount rate is further adjusted to reflect risks specific to a CGU or group of CGUs when future estimates of cash flows have not been adjusted. For its October 1, 2022 impairment tests, the Company discounted the cash flows for each CGU or group of CGUs using an after-tax discount weighted-average rate ranging from 8.8% to 10.1% (October 1, 2021 – 7.7% to 8.8%).
Other assumptions:
•	Terminal growth rates based on actual experience and market analysis. Projections are extrapolated beyond five years using a growth rate that does not exceed 3.8% (2021 – 2.5%).
•	Non-cash working capital requirements are based on historical actual rates, market analysis, and management’s long-term projections.
•	Net revenue growth rate based on management’s best estimates of cash flow projections over a five-year period.
Sensitivity to changes in assumptionsAs at October 1, 2022, the recoverable amounts of CGUs and group of CGUs tested exceeded their carrying amounts and management believes that no reasonably possible change in any of the above key assumptions would have caused the carrying amount to exceed its recoverable amount.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
					F-32	Stantec Inc.

13. Intangible Assets
	Client		Contract
		Relationships	Backlog	Software	Other	Total
	$						$	$	$	$
CostDecember 31, 2020
			325.0						2.6	39.3	2.0	368.9
Additions			—						—	48.5	0.7	49.2
Additions arising on acquisitions			152.6		51.5					—	1.6	205.7
Removal of ful y amortized assets			(8.7)		(4.1)	(13.0)	(0.2)	(26.0)
Impact of foreign exchange			(5.7)						0.2	(0.1)	—	(5.6)
December 31, 2021			463.2		50.2	74.7	4.1	592.2
Additions			—						—	25.7	—	25.7
Additions arising on acquisitions			13.1						1.7	0.5	—	15.3
Removal of ful y amortized assets			(24.3)		(6.1)	(12.3)	(1.7)	(44.4)
Disposals			—						—	—	(1.4)	(1.4)
Impact of foreign exchange			19.9						2.8	0.4	0.2	23.3
December 31, 2022			471.9		48.6	89.0	1.2	610.7
Accumulated amortizationDecember 31, 2020
			163.2						—	23.7	—	186.9
Amortization			32.5						6.8	20.4	0.3	60.0
Removal of ful y amortized assets			(8.7)		(4.1)	(13.0)	(0.2)	(26.0)
Impact of foreign exchange			(2.0)						0.1	(0.1)	—	(2.0)
December 31, 2021			185.0						2.8	31.0	0.1	218.9
Amortization			45.6		33.3	24.2	1.5	104.6
Removal of ful y amortized assets			(24.3)		(6.1)	(12.3)	(1.7)	(44.4)
Impact of foreign exchange			9.3						1.4	0.4	0.1	11.2
December 31, 2022			215.6		31.4	43.3	—	290.3
Net book valueDecember 31, 2021
			278.2		47.4	43.7	4.0	373.3
December 31, 2022			256.3		17.2	45.7	1.2	320.4
During 2022, the Company concluded that there were no indicators of impairment related to intangible assets.The net book value of software acquired through software financing obligations is $32.7 (2021 - $33.5). In 2022, software additions through software financing obligations were $19.3 (2021 - $44.4) and have been excluded from the consolidated statement of cash flows (note 32).
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
									F-33	Stantec Inc.

14. Other Assets
	December 31		December 31
		2022		2021
					$		$
Financial assets
Investments held for self-insured liabilities					156.8		198.3
Holdbacks on long-term contracts	33.7		23.6
Other	27.0		15.5
Non-financial assets
Investments in joint ventures and associates	7.8		7.4
Other	9.5		7.6
	234.8		252.4
Less current portion - financial	9.1		21.4
Less current portion - non-financial	1.1		2.1
Long-term portion	224.6		228.9
Financial assets - Other primarily includes indemnifications, sublease receivables, deposits, and derivative financial instruments (note 24). Non-financial assets - Other primarily includes transactions costs on long-term debt and investment tax credits.
Investments held for self-insured liabilities include government and corporate bonds that are classified as FVOCI with unrealized gains (losses) recorded in other comprehensive income. Investments also include equity securities that are classified as FVPL with gains (losses) recorded in net income. During 2022, the Company recorded an unrealized loss on equity securities of $18.0 (2021 - unrealized gain of $13.9) (note 30) and an unrealized loss on bonds of $0.6 (2021 - unrealized loss of $2.9).
Their fair value and amortized cost are as fol ows:
						December 31	December 31
						2022	2021
							$	$
								Amortized	Amortized
						Fair Value		Fair Value		Cost/Cost
Bonds										104.4	124.4	124.5
Equity securities										52.4	73.9	55.3
Total										156.8	198.3	179.8
The bonds bear interest at rates ranging from 0.75% to 8.00% per annum (2021 – 0.80% to 4.55%). The terms to maturity of the bond portfolio, stated at fair value, are as fol ows:
	December 31		December 31
		2022		2021
		$		$
Within one year	1.3		17.3
After one year but not more than five years	45.7		104.8
More than five years	57.4		2.3
Total	104.4		124.4
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
							F-34	Stantec Inc.

15. Trade and Other Payables
	December 31		December 31
		2022		2021
		$		$
Trade accounts payable		300.6		213.1
Employee and payrol liabilities		368.5		349.5
Accrued liabilities		86.6		72.1
Trade and other payables		755.7		634.7
16. Long-Term Debt
	December 31		December 31
		2022		2021
		$		$
Senior unsecured notes		298.6		298.2
Revolving credit facility		533.0		543.3
Term loan		307.2		307.9
Notes payable		62.4		64.7
Software financing obligations		34.6		31.0
		1,235.8		1,245.1
Less current portion		52.2		51.0
Long-term portion		1,183.6		1,194.1
Senior unsecured notesThe Company has $300 of senior unsecured notes (the notes) that mature on October 8, 2027. The notes bear interest at a fixed rate of 2.048% per annum, which is payable in Canadian funds semi-annual y on April 8th and October 8th of each year. The notes rank pari passu with al other debt and future indebtedness of the Company.
Revolving credit facility and term loanThe Company has syndicated senior credit facilities consisting of a senior revolving credit facility in the maximum amount of $800 and a senior term loan of $310 in two tranches. Additional funds of $600 can be accessed subject to approval and under the same terms and conditions. On December 8, 2022, the Company amended the syndicated senior credit facilities to change certain terms and conditions, including extending the maturity dates for the revolving credit facility from October 29, 2026 to December 8, 2027, the $150 tranche B of the term loan from October 29, 2024 to December 8, 2025, and the $160 tranche C of the term loan from October 29, 2026 to December 8, 2027. The amendments to the terms and conditions were not considered to be substantial. As such, the amendments were accounted for as a debt modification.
The revolving credit facility and the term loan are unsecured and may be repaid from time to time at the option of the Company. At December 31, 2022, $376.0 (2021 - $403.0) of the revolving credit facility was payable in Canadian funds and $157.0 (US$116.0) (2021 - $140.3 (US$111.0)) was payable in US funds. As at December 31, 2022 and 2021, both tranches of the term loan were payable in Canadian funds. The average interest rate for the revolving credit facility and term loan at December 31, 2022, was 6.09% (2021 – 2.15%).
The funds available under the revolving credit facility are reduced by overdrafts (included in bank indebtedness in the consolidated statements of financial position) and outstanding letters of credit issued pursuant to the facility agreement. At December 31, 2022, the Company had issued outstanding letters of credit that expire at various dates before October 2023, are payable in various currencies, and total $2.6 (2021 – $5.8). These letters of credit were issued in the normal course of operations, including the guarantee of certain office rental obligations. At December 31, 2022, $223.6 (2021 – $243.7) was available under the revolving credit facility.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
					F-35	Stantec Inc.

Bank indebtedness On December 23, 2022, the Company entered into an uncommitted unsecured multicurrency credit facility of up to £20 that is repayable on demand. The average interest rate for the facility at December 31, 2022, was 5.18% and the amount drawn was $24.6 (£15.0).
Bank indebtedness also includes overdrafts drawn under the terms of the Company’s syndicated senior credit facilities of $12.7 (2021 - nil) payable in Canadian funds and $28.1 (US$20.7) (2021 - $7.2 (US - $5.7)) payable in US funds.
Notes payableNotes payable consists primarily of notes payable for acquisitions (note 7) and repayment is contingent on sel ing shareholders complying with the terms of the acquisition agreements. The weighted average interest rate on the notes payable at December 31, 2022, was 1.6% (2021 – 1.5%). Notes payable may be supported by promissory notes and are due at various times from 2023 to 2025. The aggregate maturity value of the notes of $62.8 (2021 - $65.3) is comprised of:
	December 31,	December 31,
	2022	2021
			Foreign	Foreign
	CAD		currency	CAD	currency
Australian dol ars					22.8	24.7	55.4	60.3
British pounds					28.6	17.5	4.0	2.4
Other currencies					11.4	8.5	5.9	5.3
Software financing obligationsThe Company has financing obligations for software, included in intangible assets, bearing interest at rates up to 5.94% (2021 - up to 4.69%). These obligations expire at various dates before October 2027. Software additions acquired through software financing obligations during 2022 were $19.3 (2021 - $44.4) and have been excluded from the consolidated statement of cash flows (note 32).
Letter of credit and surety facilitiesThe Company has a separate letter of credit facility outside of its revolving credit facility that provides letters of credit up to $100. At December 31, 2022, $66.9 (2021 – $76.5) in aggregate letters of credit outside of the Company’s credit facilities were issued and outstanding. These were issued in various currencies. Of these letters of credit, $54.6 (2021 – $63.7) expire at various dates before January 2024 and $12.3 (2021 – $12.8) have open-ended terms.
The Company has surety facilities related to Construction Services (which was sold in 2018), to accommodate the issuance of bonds for certain types of project work. At December 31, 2022, the Company retained bonds of $27.1 (US$20.0) (2021 - $65.5 (US$51.8)) in US funds that wil expire on completion of the associated projects. The estimated completion dates of these projects are before March 2024. Although the Company remains obligated for these instruments, the purchaser of the Construction Services business has indemnified the Company for any obligations that may arise from these bonds.
The Company also has $18.8 (2021 - $10.1) in bonds for our continuing operations that wil expire on completion of the associated projects. The estimated completion dates of these projects are before August 2029.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-36			Stantec Inc.

17. Provisions
	Self-
	insured			Lease			Onerous
	liabilities	Claims			restoration		contracts		Total
	$		$			$		$	$
Balance, beginning of the year										109.5	20.4	12.7	16.7		159.3
Current year provisions										26.0	56.8	2.9	20.6		106.3
Acquisitions										—	10.8	3.5		7.0	21.3
Paid or otherwise settled										(46.7)	(37.4)	(2.0)	(11.8)		(97.9)
Impact of foreign exchange										5.8	2.0	0.4		0.6	8.8
										94.6	52.6	17.5	33.1		197.8
Less current portion										7.6	26.6	3.0	11.0		48.1
Long-term portion										87.0	26.0	14.5	22.1		149.7
Cash outflows for provisions for claims are expected to occur within the next one to five years, although this is uncertain and depends on the development of the various claims. These outflows are not expected to have a material impact on the Company’s net cash flows.
Provision for lease restoration relates to building leases (note 11). Cash outflows for provisions for lease restoration are expected to occur within the next one to twelve years.
18. Employee Defined Benefit Obligations
				December 31,				December 31,
							2022		2021
							$		$
Net defined benefit pension asset							(57.4)		(17.0)
Net defined benefit pension liability							17.0		42.8
End of employment benefit plans							15.3		15.9
							32.3		58.7
Defined benefit pension plansThe Company sponsors defined benefit pension plans (the Plans) covering certain ful -time and past employees, primarily in the United Kingdom. The benefits for the Plans are based on final compensation and years of service. The Plans are closed to new participants and have ceased al future service benefits, although the future salary link has been retained for certain continuing active members.
The Plans are governed by the laws of the United Kingdom. Each pension plan has a board of trustees that is responsible for administering the assets and defining the investment policies of the Plans.
The funding objective of each pension plan is to have sufficient and appropriate assets to meet actuarial liabilities. The board of trustees reviews the level of funding required based on separate triennial actuarial valuations for funding purposes; the most recent were completed as at March 31, 2021. The Plans require that contributions be made to separately administered funds, which are maintained independently by custodians. The Company expects to contribute approximately $21 to the Plans in 2023.
The Plans expose the Company to a number of risks, including changes to long-term UK interest rates and inflation expectations, movements in global investment markets, changes in life expectancy rates, foreign exchange risk, and regulatory risk from changes in UK pension legislation. The Company is also exposed to price risk because the Plans’ assets include investments in equities.
The Company has a bulk annuity policy for a UK pension scheme and also holds guaranteed annuities for certain plan members upon retirement. Future cash flows from annuities wil match the amount and timing of certain benefits
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
		F-37							Stantec Inc.

payable under the Plans, partial y mitigating the Company's exposure to future volatility in the related obligations. At December 31, 2022, 56.9% (2021 - 54.2%) of the defined benefit obligation was ful y covered against changes in interest rates and longevity post-retirement. Post-retirement benefits that are ful y matched with annuity policies have been included in both the asset and liability figures in the fol owing tables.
A liability-driven investment (LDI) strategy has been implemented to mitigate a portion of the Plans’ long-term interest rate and inflation risks by investing in assets that have similar interest rate and inflation characteristics as the Plans’ liabilities. The LDI strategy relates to only a portion of the Plans’ investments; therefore, the Plans remain exposed to significant interest rate and inflation risk, along with the other risks mentioned above.
The fol owing table presents a reconciliation from the opening balances to the closing balances for the net defined benefit (asset) liability and its components:
	2022	2021
					Net
					Defined				Net
			Defined	Fair Value				Benefit (Asset)	Defined	Fair Value					Defined
			Benefit	of Plan					Benefit	of Plan					Benefit
			Obligation	Assets				Liability	Obligation	Assets					Liability
	$			$	$		$	$	$
Balance, beginning of the year				586.1	(560.3)				25.8	601.6	(575.2)					26.4
Administrative and marketing expensesInterest expense (income)
				9.8	(9.5)				0.3	6.8	(6.7)					0.1
Administrative expenses paid by the Plans
										—	1.6	1.6	—	1.0			1.0
				9.8	(7.9)				1.9	6.8	(5.7)					1.1
Other comprehensive loss (income)Adjustments on the plan assets, excluding interest income
										—	127.0			127.0	—	11.1		11.1
Actuarial (gains) losses arising from:
Changes in demographic assumptions
				(0.3)	—	(0.3)	5.0		—	5.0
Changes in financial assumptions				(192.7)	—	(192.7)	0.5		—	0.5
Experience adjustments				16.3	—	16.3	(1.8)		—	(1.8)
Remeasurement (gain) loss, before tax			(176.7)	127.0				(49.7)	3.7	11.1					14.8
Effect of movement in exchange rates				(22.7)	21.9				(0.8)	(10.4)	10.1					(0.3)
				(199.4)	148.9				(50.5)	(6.7)	21.2					14.5
OtherBenefits paid
				(14.0)	14.0				—	(15.6)	15.6					—
Contributions by employer										—	(17.6)			(17.6)	—	(16.2)		(16.2)
				(14.0)	(3.6)				(17.6)	(15.6)	(0.6)					(16.2)
Balance, end of the year				382.5	(422.9)				(40.4)	586.1	(560.3)					25.8
The total remeasurement gain on the net employee defined benefit liability at December 31, 2022, is a gain of $35.5, net of deferred tax expense of $14.2 (2021 – loss of $10.1, net of deferred tax recovery of $4.7).
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-38							Stantec Inc.

December 31,		December 31,
	2022		2021
	$		$
				Included in the consolidated statement of financial position within:
				Net defined benefit asset		(57.4)	(17.0)
				Net defined benefit liability		17.0	42.8
	(40.4)		25.8
				The Company has an unconditional right to derive economic benefit from the above surplus and has therefore recognized a net defined benefit asset.
				Major categories of plan assets, measured at fair value, are as fol ows:
December 31,		December 31,
	2022		2021
	$		$
				Cash and cash equivalents		18.9	23.1
				Investments quoted in active markets (mutual, exchange-traded, and pooled funds): Equities
	15.2		43.1
				Corporate bonds and fixed income		6.5	9.9
				Pooled fund liability-driven investments		18.7	26.2
				Property funds		0.6	1.6
				Unquoted investments: Annuity policies
	217.7		317.5
				Insurance contracts:
				Equities and property		97.5	100.7
				Corporate bonds		26.8	27.9
				Cash and cash equivalents		21.0	10.3
				Fair value of plan assets		422.9	560.3
				The investment policy for the Plans is to balance risk and return. Approximately 14% of plan assets are invested in mutual, exchange-traded, and pooled funds (fair valued using quoted market prices) or held in cash. Approximately 52% of plan assets are held in annuity policies that wil have cash flows that match the amount and timing of certain benefits payable under the Plans. The fair value of these policies reflects the present value of the related obligations and is determined using actuarial techniques and guaranteed annuity rates. The remaining assets of the Plans are invested in a whol y insured with-profits insurance contract with a major insurance company. Contributions made to this contract are invested in insurance policies administered by third parties, which provide for a declared rate of interest. The yields on the investments are intended to provide for a steady return on the assets. The insurance contract is fair valued using valuation techniques with market observable inputs.
				Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
					F-39	Stantec Inc.

The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using actuarial valuations. The principal assumptions used in determining pension benefit obligations for the Plans are shown below (expressed as weighted averages):
	December 31,		December 31,
		2022		2021
Discount rate		4.60 %		1.80 %
Rate of increase in salaries		4.30 %		4.27 %
Rate of inflation, pre-retirement		2.68 %		2.74 %
Rate of increase in future pensions payment		3.39 %		3.49 %
Life expectancy at age 65 for current pensioners: Male
		22 years		22 years
Female		24 years		24 years
Life expectancy at age 65 for current members aged 45: Male
		23 years		23 years
Female		25 years		25 years
At December 31, 2022, the weighted average duration of the defined benefit obligation was 15 years (2021 – 15 years).
Quantitative sensitivity analyses showing the impact on the defined benefit obligation for significant assumptions are as fol ows:
					December 31,	December 31,
					2022	2021
					Increase		Decrease	Increase	Decrease
						$	$		$	$
Change in discount rate by 0.25%									(11.4)	11.6	(22.3)		23.8
Change in pre-retirement inflation rate by 0.25%									2.7	(2.7)		5.1	(5.1)
Change in salary growth by 0.25%									0.3	(0.3)		1.1	(1.1)
Change in pension increase assumption by 0.25%									7.1	(7.1)				12.3	(11.6)
Change in one year in the life expectancy									10.3	(10.3)				12.0	(12.0)
The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting year. The sensitivity analyses were based on changing a significant assumption and keeping al other assumptions constant and may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another.
End of employment benefit plansThe liability for end of employment benefit plans represents the Company’s estimated obligations for long service leave and annual leave that is legislated in some countries in which the Company operates.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
								F-40	Stantec Inc.

19. Other Liabilities
	December 31,		December 31,
		2022		2021
					$		$
Cash-settled share-based compensation					22	60.4		62.0
Other	8.8		10.5
	69.2		72.5
Less current portion	36.0		34.5
Long-term portion	33.2		38.0
Other liabilities - Other primarily includes derivative financial instruments (note 24).
20. CommitmentsThe Company has various lease commitments included in lease liabilities (note 11). In addition, the Company has commitments for variable lease payments, short-term leases, and leases of low-value assets. These commitments as at December 31, 2022, are as fol ows:
						Total	1 to 3 Years		After 3 Years
						$	$		$
Variable lease payments									283.7	81.0	155.1
Short-term and low value lease payments						0.8	0.6	0.2
Leases not commenced but committed									7.6	2.3	4.9
									292.1	83.5	160.0
Future minimum payments receivable under non-cancelable sublease agreements as at December 31, 2022, are $28.1 (2021 - $7.2), of which $11.9 (2021 - $3.0) relates to sublease receivables included in other assets (note 14).
21. Contingencies and GuaranteesThe nature of the Company’s legal claims and the provisions recorded for these claims are described in notes 4 and 5. Although the Company accrues adequate provisions for probable legal claims, it has contingent liabilities relating to reported legal incidents that, based on current known facts, are not probable to result in future cash outflows. The Company is monitoring these incidents and wil not accrue any provision until further information results in a situation in which the criteria required to record a provision is met. Due to the nature of these incidents, such as the range of possible outcomes and the possibility of litigation, it is not practicable for management to estimate the financial effects of these incidents, the amount and timing of future outflows, and the possibility of any reimbursement of these outflows.
In the normal course of business, the Company provides indemnifications and, in limited circumstances, surety bonds and guarantees. These are often standard contractual terms and are provided to counterparties in transactions such as purchase and sale contracts for assets or shares, service agreements, and leasing transactions. The Company also indemnifies its directors and officers against any and al claims or losses reasonably incurred in the performance of their service to the Company to the extent permitted by law. These indemnifications may require the Company to compensate the counterparty for costs incurred as a result of various events, including changes to or in the interpretation of laws and regulations, or as a result of damages or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of these indemnifications and guarantees wil vary based on the contract, the nature of which prevents the Company from making a reasonable estimate of the maximum potential amount that it could be required to pay to counterparties. In most cases, the potential payment amount of an outstanding indemnification or guarantee is limited to the remaining cost of work to be performed under service contracts. The Company carries liability insurance, subject to certain deductibles and policy limits, that provides protection against certain insurable indemnifications. Historical y, the Company has not made any material payments under such indemnifications or guarantees, and no amounts have been accrued in the consolidated financial statements with respect to these indemnifications and guarantees.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
						F-41	Stantec Inc.

22. Share CapitalAuthorized
Unlimited	Common shares, with no par value
Unlimited	Preferred shares issuable in series, with attributes designated by the board of directors
Common sharesOn November 14, 2022, the Company received approval from the TSX to renew its Normal Course Issuer Bid (NCIB), enabling it to purchase up to 5,538,309 common shares during the period November 16, 2022, to November 15, 2023. The Company also has an Automatic Share Purchase Plan (ASPP) which al ows a broker, in its sole discretion and based on the parameters established by the Company, to purchase common shares for cancel ation under the NCIB at any time during predetermined trading blackout periods. During 2022, 1,085,676 (2021 – 939,482) common shares were repurchased for cancel ation pursuant to the NCIB at a cost of $65.3 (2021 – $50.7). Of this amount, $9.6 and $0.1 (2021 – $8.1 and $0.1) reduced share capital and contributed surplus, respectively, and $55.6 (2021 – $42.5) was charged to retained earnings. As at December 31, 2022 and December 31, 2021, no liability was recorded in the Company’s consolidated statements of financial position in connection with the ASPP.
DividendsHolders of common shares are entitled to receive dividends when declared by the Company’s board of directors. The table below sets out the dividends paid in 2022.
				Dividend per Share		Paid
Date Declared		Record Date	Payment Date		$	$
November 3, 2021		December 31, 2021	January 18, 2022		0.165	18.3
February 23, 2022		March 31, 2022	April 18, 2022		0.180	20.0
May 11, 2022		June 30, 2022	July 15, 2022		0.180	19.9
August 10, 2022		September 29, 2022	October 17, 2022		0.180	20.0
November 10, 2022		December 30, 2022	January 17, 2023		0.180	—
At December 31, 2022, trade and other payables included $20.0 (2021 – $18.3) related to the dividends declared on November 10, 2022.
Share-based payment transactionsThe Company has a long-term incentive program that uses share options, restricted share units, and performance share units (RSUs and PSUs). The Company also has a deferred share unit (DSUs) plan for the board of directors.
During 2022, the Company recognized a net share-based compensation expense of $26.0 (2021 – $46.7) in administrative and marketing expenses in the consolidated statements of income. The amount expensed included nil (2021 – $0.1) related to the amortization of the fair value of options granted and $26.0 (2021 – $46.6) related to the cash-settled share-based compensation (RSUs, PSUs, and DSUs). Also, an adjustment of $0.8 (December 31, 2021 - $4.9) was included in contributed surplus for deferred tax impacts on share-based compensation.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
							F-42	Stantec Inc.

a) Share options
	For the year ended		For the year ended
	December 31,		December 31,
		2022		2021
		Weighted Average		Weighted Average
		Exercise Price		Exercise Price
	Shares				per Share	Shares			per Share
	#					$	#				$
Share options outstanding, beginning of the year 848,278					32.37 2,123,800		32.45
Exercised								(561,217)	32.06 (1,267,614)		32.50
Forfeited									(6,000)				32.16	(7,908)				32.98
Share options outstanding, end of the year								281,061	32.98 848,278		32.37
Share options vested, end of the year								281,061	32.98 848,278		32.37
These options are held by officers and employees, expire on May 15, 2023, and can be exercised at a price per share of $32.98.
b) Cash-settled share-based payments
									December 31, 2022	December 31, 2021
									RSUs	PSUs				DSUs	RSUs	PSUs			DSUs
								#	#				#	#	#				#
Units, beginning of year											406,762	862,032	200,411				289,180	869,337		163,249
Granted and adjusted dividends											150,591	263,434	28,871				128,579	251,120		37,162
Paid											(148,327)	(318,058)				—	—	(235,373)			—
Forfeited											(13,301)	(21,919)				—	(10,997)	(23,052)			—
Units, end of year											395,725	785,489	229,282				406,762	862,032		200,411
The Company has total return swaps for a portion of its RSUs and DSUs to offset its exposure to the change in common share price (note 24).
Restricted share unitsUnder the Company’s long-term incentive program, certain officers and employees may be granted RSUs. These units are adjusted for dividends as they arise, based on the number of units held on the record date, and the fair value is determined based on the trading price of the Company's common shares. For units that vest upon completing a three-year service condition, unit holders wil receive cash payments based on the number of units held on the record date and the volume weighted average trading price of the Company’s common shares for the last five trading days preceding the vesting date, less withholding amounts.
During 2022, the Company granted 145,884 RSUs (2021 - 124,599) at a fair value of $8.0 (2021 - $6.7) and 148,327 RSUs were paid at a value of $8.0 (2021 - no payments were made for RSUs). At December 31, 2022, the obligations accrued for RSUs were $12.7 (2021 - $15.4) included in other liabilities (note 19).
Performance share unitsUnder the Company’s long-term incentive program, certain members of the senior leadership team may be granted PSUs. These units are adjusted for dividends as they arise, based on the number of units held on the record date. The number of units that vest upon completing a three-year service condition, is subject to a percentage that can range from 0% to 200%, depending on achieving three-year performance and market objectives. The objectives include a return on equity target for a 60% weighting and a total shareholder return relative to the Company's peer group for a 40% weighting.
The fair value of these units is measured using the Monte Carlo method. For units that vest upon completing a three-year service condition that starts after the grant date, unit holders wil receive cash payments based on the number of
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-43						Stantec Inc.

units held on the record date and the volume weighted average trading price of the Company’s common shares for the last five trading days preceding the vesting date, less withholding amounts.
During 2022, 253,938 PSUs (2021 - 242,701) were granted at a fair value of $14.5 (2021 - $14.0) and 318,058 PSUs were paid (2021 - 235,373) at a value of $15.3 (2021 - $9.0). At December 31, 2022, the obligations accrued for PSUs were $32.8 (2021 – $32.5) included in other liabilities (note 19).
Deferred share unitsThe directors of the board receive DSUs and once certain requirements are met, on an annual basis, the directors may elect to al ocate their compensation between DSUs and cash payment (to a maximum of 70%), less withholding amounts. These units vest on their grant date and are adjusted for dividends as they arise, based on the number of units held on the record date. The fair value is determined based on the trading price of the Company's common shares and are paid in cash to the directors of the board on their death or retirement. Cash payment is determined at the volume weighted average of the closing market price of the Company’s common shares for the last 10 trading days of the month.
During 2022, 28,871 DSUs (2021 – 37,162) were granted at a fair value of $1.6 (2021 – $1.8), based on the closing market price of the Company’s common shares at the grant date. At December 31, 2022, the outstanding and vested DSUs had a fair value of $14.9 (2021 – $14.1) included in other liabilities (note 19).
23. Fair Value MeasurementsWhen forming estimates, the Company uses the most observable inputs available for valuation purposes. If a fair value measurement reflects inputs of different levels within the hierarchy, the financial instrument is categorized based on the lowest level of significant input.
When determining fair value, the Company considers the principal or most advantageous market in which it would transact and the assumptions that market participants would use when pricing the asset or liability. The Company measures certain financial assets and liabilities at fair value on a recurring basis.
For financial instruments recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorizations at the end of each reporting period.
During 2022, no changes were made to the method of determining fair value and no transfers were made between levels of the hierarchy.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-44	Stantec Inc.

The fol owing tables summarize the Company’s fair value hierarchy for those assets and liabilities measured and adjusted to fair value on a recurring basis:
	Carrying
	Amount	Level 1	Level 2	Level 3
At December 31, 2022					$	$	$	$
AssetsInvestments held for self-insured liabilities
					14		156.8					—	156.8					—
Derivative financial instruments					14,24					3.1	—	3.1					—
LiabilitiesNotes payable
					16		62.4					—	—	62.4
Derivative financial instruments					19,24					2.3	—	2.3					—
	Carrying
	Amount	Level 1	Level 2	Level 3
At December 31, 2021					$	$	$	$
AssetsInvestments held for self-insured liabilities
					14		198.3					—	198.3					—
Derivative financial instruments					24					0.6	—	0.6					—
LiabilitiesNotes payable
					16		64.7					—	—	64.7
Derivative financial instruments					24					2.3	—	2.3					—
Investments held for self-insured liabilities consist of government and corporate bonds and equity securities. Fair value of bonds is determined using observable prices of debt with characteristics and maturities that are similar to the bonds being valued. Fair value of equities is determined using the reported net asset value per share of the investment funds. The funds derive their value from the observable quoted prices of the equities owned that are traded in an active market.
The fair value of notes payable is not based on observable market data and as such, the valuation method is classified as level 3 in the fair value hierarchy. For payments with terms greater than one year, the estimated liability is discounted using an appropriate rate of interest.
The fol owing table summarizes the Company’s fair value hierarchy for those liabilities that were not measured at fair value but are required to be disclosed at fair value on a recurring basis:
									Carrying
									Amount	Level 1					Level 2	Level 3
At December 31, 2022										Note	$	$	$					$
Senior unsecured notes										16		298.6	—					259.8	—
									Carrying
									Amount	Level 1					Level 2	Level 3
At December 31, 2021										Note	$	$	$					$
Senior unsecured notes										16		298.2	—					290.1	—
The fair value of senior unsecured notes is determined by calculating the present value of future payments using observable benchmark interest rates and credit spreads for debt with similar characteristics and maturities.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
					F-45	Stantec Inc.

24. Financial Instrumentsa) Derivative financial instrumentsInterest rate swapThe Company has an interest rate swap agreement to hedge the interest rate variability on tranche C of the term loan with a notional amount of $160.0, maturing on June 27, 2023. The swap agreement has the effect of converting the variable interest rate on the term loan, based on a bankers’ acceptance rate, into a fixed interest rate of 2.295%, plus applicable basis points spread. The change in fair value of the interest rate swap, estimated using market rates at December 31, 2022, is an unrealized gain of $4.3 ($3.3 net of tax) (2021 - unrealized gain of $4.6 ($3.5 net of tax)). The Company has designated the swap as a cash flow hedge against tranche C; therefore, the unrealized gains and losses are recorded in other comprehensive income (loss) and in the statement of financial position as other assets (note 14).
There is an economic relationship between the interest rate swap and this tranche of the term loan because the terms of the two instruments match (i.e., notional amount, payment, and reset dates). The Company has established a hedge ratio of 1:1 for the hedging relationship as the underlying risks of the interest rate swap are identical to the hedged risks.
Hedge ineffectiveness could arise due to a renegotiation or amendment made to the hedged term loan resulting in a reduced term or a mismatch in the notional amount compared to the interest rate swap.
Total return swaps on share-based compensation unitsThe Company has total return swap (TRS) agreements with financial institutions to manage its exposure to changes in the fair value the Company's shares for certain cash-settled share-based payment obligations. The TRS agreements fixed the impact that the Company's share price has on the payments required to settle the obligations for RSUs and DSUs. The Company has designated the TRSs related to its RSUs as a cash flow hedge, with a notional amount of $22.4 maturing between 2023 and 2025.
The fair value of the TRSs are based on the difference between the hedged price and the fair value of the Company’s common shares and are recorded in other assets (note 14) and other liabilities (note 19). For the year ended December 31, 2022, changes in the fair value of the TRSs related to the Company's RSUs of $0.4 ($0.3 net of tax) (2021 - $0.1 ($0.1 net of tax)) were recognized in other comprehensive (loss) income and $3.0 ($2.3 net of tax) (2021 - $0.1 ($0.1 net of tax)) was reclassified to the consolidated statements of income, in administrative and marketing expenses. Changes in the fair value of the TRSs related to the Company's DSUs, for which hedge accounting was not applied, of $1.2 (2021 - $0.1) were recognized in administrative and marketing expenses in the consolidated statements of income.
There is an economic relationship between these TRSs and the obligation for RSUs because the terms of the two instruments match (i.e., notional amount and payment). The Company has established a hedge ratio of 1:1 for the hedging relationship as the underlying risk of the TRSs are identical to the hedged risk component.
Hedge ineffectiveness could arise if actual forfeitures of RSUs are greater than anticipated which could create a mismatch in the notional amounts.
Foreign currency forward contractsThe Company entered into foreign currency forward contracts to manage the variability of foreign currency exchange rates of certain currencies. The fair value of the contracts, estimated using market rates as at December 31, 2022, is a net unrealized gain of $0.1 (2021 - net unrealized gain of $0.3) and was recorded in foreign exchange losses and in the consolidated statements of financial position within other assets and liabilities. The notional amount of contracts held to purchase or sel primarily includes US$110.6 for CAD$149.9 and AUD$56.4 for CAD$51.6 (2021 - AUD$42.8 for CAD$39.3).
b) Nature and extent of risks The COVID-19 pandemic, the conflict in Ukraine, and the transition to higher inflationary environments, as described in note 5, have had adverse financial impacts on the global economy, but the Company has not seen a significant increase to its risk exposure. Management continues to closely monitor the impacts on the Company’s risk exposure and wil adjust its risk management approach as necessary.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-46	Stantec Inc.

Credit riskAssets that subject the Company to credit risk consist primarily of cash and deposits, trade and other receivables, unbil ed receivables, contract assets, investments held for self-insured liabilities, holdbacks on long-term contracts, and other financial assets. The Company’s maximum amount of credit risk exposure is limited to the carrying amount of these assets, which at December 31, 2022, was $2,031.1 (2021 – $1,746.9).
The Company limits its exposure to credit risk by placing its cash and cash equivalents in high-quality credit institutions. Investments held for self-insured liabilities include corporate bonds and equity securities. The Company believes the risk associated with corporate bonds and equity securities is mitigated by the overal quality and mix of the Company’s investment portfolio. Substantial y al bonds held by the Company are investment grade, and none are past due. The Company monitors changes in credit risk by tracking published external credit ratings.
The Company mitigates the risk associated with trade and other receivables, unbil ed receivables, contract assets, and holdbacks on long-term contracts by providing services to diverse clients in various industries and sectors of the economy. In addition, management reviews trade and other receivables past due on an ongoing basis to identify matters that could potential y delay the col ection of funds at an early stage. The Company does not concentrate its credit risk in any particular client, industry, or economic or geographic sector.
The Company monitors trade receivables to an internal target of days of revenue in trade receivables. At December 31, 2022, the days of revenue in trade receivables was 62 days (2021 – 59 days).
The lifetime ECLs relating to financial assets are outlined in the table below:
	Total	1–30	31–60	61–90	91–120	121+
December 31, 2022	$	$	$	$			$	$
Expected loss rate		0.07 %	0.11 %	0.28 %	0.61 %	1.27 %
Gross carrying amount	1,720.1 1,286.3		246.9		71.6		39.8		75.5
Loss allowance provision, end of the year		2.6	1.1		0.2		0.2		0.2	0.9
December 31, 2021Expected loss rate
		0.09 %	0.14 %	0.34 %	0.73 %	1.55 %
Gross carrying amount	1,348.3 1,026.1		181.1		56.3		30.7		54.1
Loss al owance provision, end of the year		2.6	1.1		0.2		0.2		0.2	0.9
During 2022, $1.9 trade receivables were written off (2021 – $1.0) and the Company had recoveries of $1.1 (2021 - $2.2) from the col ection of accounts receivable previously written off.
Bonds carried at FVOCI are considered to be low risk; therefore, the impairment provision is determined to be the 12-month ECL.
Price riskThe Company’s investments held for self-insured liabilities are exposed to price risk arising from changes in the market values of the equity securities. This risk is mitigated because the portfolio of equity funds is monitored regularly and appropriately diversified. A reasonably possible change in market prices assumption was increased from 1% to 5% to reflect market volatility. For the Company's investments held for self-insured liabilities, a 5% increase or decrease in equity prices at December 31, 2022, would increase or decrease the Company’s net income by $2.0 (2021 - $2.8), respectively.
The Company is also exposed to changes in its share price arising from its cash-settled share-based payments as the Company's obligation under these arrangements are based on the price of the Company's shares. The Company mitigates a portion of its exposure to this risk for its RSUs and DSUs by entering into TRSs. For PSUs, a 10% increase or decrease in the price of the Company's shares at December 31, 2022, would decrease or increase the Company’s net income by $1.2 (2021 - $1.3), respectively.
Liquidity riskThe Company meets its liquidity needs through various sources, including cash generated from operations, issuing senior unsecured notes, borrowings from its $800 revolving credit facility, term loan, and multicurrency credit facility, and the issuance of common shares. The unused capacity of the credit facilities at December 31, 2022, was $231.8 (2021 – $243.7) and the Company also has access to additional funds of $600 under its syndicated credit facilities
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
	F-47						Stantec Inc.

(note 16). The Company believes that it has sufficient resources to meet obligations associated with its financial liabilities.
The timing of undiscounted cash outflows relating to financial liabilities is outlined in the table below:
	Total Less than 1 Year	1 to 3 Years	After 3 Years
	$			$	$	$
December 31, 2022Bank indebtedness
							65.4			65.4	—	—
Trade and other payables							755.7			755.7	—	—
Lease liabilities							708.0			118.7	240.1	349.2
Long-term debt							1,241.3			54.0	192.1	995.2
Other financial liabilities							6.0			4.0	2.0	—
Total contractual obligations							2,776.4			997.8	434.2		1,344.4
December 31, 2021Bank indebtedness
							7.2			7.2	—	—
Trade and other payables							634.7			634.7	—	—
Lease liabilities							758.9			136.9	241.2	380.8
Long-term debt							1,250.0			52.6	190.7		1,006.7
Other financial liabilities							6.2			3.4	2.7	0.1
Total contractual obligations							2,657.0			834.8	434.6		1,387.6
Interest rate riskThe Company is subject to interest rate cash flow risk to the extent that its credit facilities and term loan are based on floating interest rates. However, this risk has been partial y mitigated by our interest rate swap on tranche C of the term loan. The Company is also subject to interest rate pricing risk to the extent that its investments held for self-insured liabilities include fixed-rate government and corporate bonds. A reasonably possible change in interestrates assumption was increased from 0.5% to 1.0% to reflect market interest rate increases. If the interest rate on the Company’s credit facilities and term loan balances at December 31, 2022, was 1.0% higher or lower, with al other variables held constant, net income would decrease or increase by $5.4 (2021 - $5.3), respectively.
Foreign exchange riskForeign exchange risk is the risk that the fair value of the future cash flows of a financial instrument wil fluctuate because of changes in foreign exchange rates. Foreign exchange gains or losses in net income arise on the translation of foreign currency-denominated assets and liabilities (such as trade and other receivables, bank indebtedness, trade and other payables, and long-term debt) held in the Company’s Canadian operations and foreign subsidiaries. The Company manages its exposure to foreign exchange fluctuations on these items by matching foreign currency assets with foreign currency liabilities and, from time to time, through the use of foreign currency forward contracts.
Foreign exchange fluctuations may also arise on the translation of the Company’s US-based subsidiaries or other foreign subsidiaries, where the functional currency is different from the Canadian dol ar, and are recorded in other comprehensive income. The Company does not hedge for this foreign exchange risk.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
								F-48	Stantec Inc.

25. Capital ManagementThe Company’s objective when managing capital is to provide sufficient capacity to cover normal operating and capital expenditures, acquisition growth, payment of dividends, and opportunistic share repurchases under its NCIB program, while maintaining an adequate return for shareholders. The Company defines its capital as cash, the aggregate of long-term debt (including the current portion) and shareholders’ equity.
	December 31,		December 31,
		2022		2021
		$		$
Current portion of long-term debt		52.2		51.0
Non-current portion of long-term debt		1,183.6		1,194.1
Long-term debt		1,235.8		1,245.1
Bank indebtedness		65.4		7.2
Less: cash and deposits		(148.3)		(193.9)
Net debt		1,152.9		1,058.4
Shareholders’ equity		2,286.0		2,001.7
Total capital managed		3,438.9		3,060.1
The Company manages its capital structure to maintain the flexibility to adjust to changes in economic conditions and acquisition growth and to respond to interest rate, foreign exchange, credit, and other risks. To maintain or adjust its capital structure, the Company may purchase shares for cancel ation pursuant to NCIB, issue new shares, or raise or retire debt.
The Company is subject to various covenants related to its syndicated senior credit facilities and senior unsecured notes. The financial covenants (measured quarterly) include but are not limited to a leverage ratio and an interest coverage ratio (non-IFRS measures). The leverage ratio is calculated as the aggregate amount of indebtedness, less unencumbered cash of up to $150.0 Canadian dol ars, to EBITDA (on a pre-IFRS 16 basis) as defined by the syndicate senior credit facilities agreement. The interest coverage ratio is calculated as EBITDA to interest expense (pre-IFRS 16 basis). Failure to meet the terms of one or more of these covenants may constitute a default, potential y resulting in accelerating the repayment of these debt obligations.
The Company was in compliance with the covenants under these agreements as at and throughout the year ended December 31, 2022.
26. Income TaxesThe effective income tax rate for continuing operations in the consolidated statements of income differs from statutory Canadian tax rates as a result of the fol owing:
		For the year ended
		December 31
		2022		2021
		%		%
Income tax expense at statutory Canadian rates		25.2		25.9
Increase (decrease) resulting from:
Rate differential on foreign income		(1.7)		(1.8)
Research and development and other tax credits		(0.6)		(0.7)
Non-deductible expenses and non-taxable income		(0.5)		(0.1)
Other		1.6		0.4
		24.0		23.7
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
					F-49	Stantec Inc.

Current income tax expense of $121.3 (2021 - $66.7) are from ongoing operations and major components of deferred income tax recovery are as fol ows:
	For the year ended
	December 31
	2022	2021
			$	$
Origination and reversal of timing differences					(45.7)	(2.3)
Unrecognized tax losses and temporary differences					2.6	0.9
Change of tax rates					0.3	(2.4)
Recovery arising from previously unrecognized tax assets					(0.4)	(0.6)
Deferred income tax recovery					(43.2)	(4.4)
Significant components of net deferred tax assets (liabilities) are as fol ows:
				December 31,	December 31,
	2022	2021
			$	$
Deferred tax assets (liabilities)Lease liabilities
					159.4	166.7
Differences in timing of taxability of revenue and deductibility of expenses					99.9	47.3
Loss and tax credit carryforwards					30.0	28.2
Other					1.9	1.5
Employee defined benefit plan					(14.2)	7.3
Carrying value of property and equipment in excess of tax cost					(18.3)	(15.2)
Carrying value of intangible assets in excess of tax cost					(130.9)	(147.1)
Lease assets					(110.8)	(117.9)
					17.0	(29.2)
The fol owing is a reconciliation of net deferred tax assets (liabilities):
				December 31,	December 31,
	2022	2021
			$	$
Balance, beginning of the year					(29.2)	(21.0)
Tax effect on equity items					(14.4)	7.3
Impact of foreign exchange					(1.3)	(0.4)
Other					—	0.4
Deferred taxes acquired through business combinations					18.7	(19.9)
Tax recovery during the year recognized in net income					43.2	4.4
Balance, end of the year					17.0	(29.2)
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
						F-50	Stantec Inc.

At December 31, 2022, al loss carryforwards and deductible temporary differences available to reduce the taxable income of Canadian, US, and foreign subsidiaries were recognized in the consolidated financial statements, except as noted below.
	December 31,		December 31,
		2022		2021
		$		$
Deductible temporary differences		0.1		0.2
Non-capital tax losses:Expire (2023 to 2042)
		29.7		72.0
Never expire		41.8		41.8
		71.5		113.8
Capital tax losses:Never expire
		7.8		2.5
		79.4		116.5
Deferred tax assets have not been recognized in respect of these temporary differences and losses, as wel as foreign tax credits of $4.0 (2021 - $4.9), because they are restricted to certain jurisdictions and cannot be used elsewhere in the Company at this time.
In October 2022, the Organization for Economic Co-operating and Development reached an agreement for a two-pil ar approach to international tax reform and released a draft legislative framework in December 2022. This could impact corporate tax rates in the next few years for jurisdictions electing to adopt the framework. The Company is monitoring the developments of the reform and its impact to the jurisdictions the Company operates in.
27. Net Interest Expense
		For the year ended
		December 31
		2022		2021
					Note	$		$
Interest on credit facilities					16		38.2		9.5
Interest on lease liabilities					11		22.5		23.7
Other		8.9		9.5
Total interest expense		69.6		42.7
Total interest income		(5.6)		(4.8)
Net interest expense		64.0		37.9
28. RevenueDisaggregation of revenueThe Company provides professional consulting services in engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics throughout North America and global y. The Company has five specialized business operating units: Buildings, Energy & Resources, Environmental Services, Infrastructure, and Water. Revenue is derived principal y under fee-for-service agreements with clients. Disaggregation of revenue by geographic area and service is included in note 34. Acquisitions increased deferred revenue by $3.1 (2021 - $43.0) and did not impact contract assets (note 7).
Revenue recognized in 2022 and included in deferred revenue at January 1, 2022, was $264.8 (2021 – $197.3). Revenue recognized in 2022 from performance obligations satisfied (or partial y satisfied) in prior years was less than 1% (2021 – <1%) of the Company’s gross revenue from continuing operations.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
						F-51	Stantec Inc.

Remaining performance obligations (backlog)The aggregate amount of estimated revenue related to performance obligations that are unsatisfied (or partial y unsatisfied) as at December 31, 2022, was $5,901.7 (2021 – $5,134.3). This amount includes al contracts with customers but excludes variable consideration that is not highly probable. The Company expects to recognize approximately 73% (2021 – 78%) of this revenue as contracts are completed over the next 18 months with the remainder recognized thereafter.
29. Employee Costs
	For the year ended December 31,
		2022	2021
				$	$
Wages, salaries, and benefits	3,243.2	2,644.6
Pension costs	93.5	77.3
Net share-based compensation					22	26.0	46.7
Total employee costs	3,362.7	2,768.6
Direct labor	2,039.9	1,672.8
Indirect labor	1,322.8	1,095.8
Total employee costs	3,362.7	2,768.6
Direct labor costs include salaries, wages, and related fringe benefits (including pension costs) for labor hours directly associated with the completion of projects. Bonuses, share-based compensation, termination payments, and salaries, wages, and related fringe benefits (including pension costs) for labor hours not directly associated with the completion of projects are included in indirect labor costs. Indirect labor costs are included in administrative and marketing expenses in the consolidated statements of income. Included in pension costs is $91.6 (2021 – $76.1) related to defined contribution plans.
30. Other Income
	For the year ended December 31,
		2022	2021
				$	$
Realized gain on equity securities	(15.6)	(2.0)
Unrealized loss (gain) on equity securities						14	18.0	(13.9)
Gain on disposition of intangible asset	(5.6)	—
Other	(1.7)	(1.3)
Total other income	(4.9)	(17.2)
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
						F-52	Stantec Inc.

31. Weighted Average Shares OutstandingThe number of basic shares outstanding and diluted common shares, calculated on a weighted average basis, is as fol ows:
	December 31,		December 31,
		2022		2021
		#		#
Basic shares outstanding		110,936,481		111,242,658
Share options (dilutive effect in 2022 of 281,061 options; 2021 – 848,278 options)
		133,295		374,007
Diluted shares		111,069,776		111,616,665
At December 31, 2022, and December 31, 2021, no options were antidilutive.
32. Cash Flow InformationA reconciliation of liabilities arising from financing activities for the year ended December 31, 2022, is as fol ows:
						Revolving
						Credit
					Senior	Facility	Software
					Unsecured	and Term		Notes	Financing		Lease
					Notes		Loan	Payable	Obligations	Liabilities		Total
						$	$	$	$	$	$
December 31, 2020						299.5	309.1		68.8	3.4	629.8	1,310.6
Statement of cash flowsNet proceeds (repayments)
						—	544.7		(41.2)	(16.8)		(128.4)	358.3
Non-cash changesForeign exchange
						—		(1.4)	(3.2)	(0.2)	(2.8)	(7.6)
Additions and modifications						—		—	41.6	44.4		169.3	255.3
Other						(1.3)		(1.2)	(1.3)	0.2	1.0	(2.6)
December 31, 2021						298.2	851.2		64.7	31.0		668.9	1,914.0
Statement of cash flowsNet repayments
						—		(22.6)	(43.1)	(17.2)		(153.7)	(236.6)
Non-cash changesForeign exchange
						—		12.1	0.3	1.1	15.9	29.4
Additions and modifications						—		(1.2)	40.6	19.3		89.9	148.6
Other						0.4		0.7	(0.1)	0.4	0.4	1.8
December 31, 2022						298.6	840.2		62.4	34.6		621.4	1,857.2
	December 31,		December 31,
		2022		2021
		$		$
Supplemental disclosureIncome taxes paid, net of recoveries
									91.2		89.0
Interest paid, net of receipts									61.1		36.4
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
						F-53	Stantec Inc.

Amounts for leases recognized in the consolidated statements of cash flows
	For the year ended December 31,
		2022	2021
		$	$
Cash payments for the interest portion of lease liabilities		22.5	23.7
Cash payments for leases not included in the measurement of lease liabilities		40.1	42.9
Cash used in operating activities		62.6	66.6
Net cash used in financing activities		153.7	128.4
Total cash used for leases		216.3	195.0
33. Related-Party DisclosuresAt December 31, 2022, the Company had subsidiaries and structured entities that it control ed and included in its consolidated financial statements. The Company also enters into related-party transactions through a number of joint ventures, associates, and joint operations. These transactions involve providing or receiving services entered into in the normal course of business.
The fol owing lists the most significant entities where the Company owns 100% of the voting and restricted securities.
Name	Jurisdiction of Incorporation
Cardno Consulting, LLC	Delaware, United States
International Insurance Group Inc.	Barbados
Mustang Acquisition Holdings Inc.	Delaware, United States
Stantec Australia Holdings No.1 Pty Ltd	Australia
Stantec Australia Pty Ltd	Australia
Stantec Consulting Caribbean Ltd.	Barbados
Stantec Consulting International LLC	Arizona, United States
Stantec Consulting International Ltd.	Canada
Stantec Consulting Ltd./Stantec Experts-conseils ltée	Canada
Stantec Consulting Michigan Inc.	Michigan, United States
Stantec Consulting Services Inc.	New York, United States
Stantec Delaware V LLC	Delaware, United States
Stantec Global Capital Limited	United Kingdom
Stantec Holding (2017) Limited	United Kingdom
Stantec Holdings LP	Canada
Stantec Holdings ULC	Canada
Stantec International Consulting, Inc.	Delaware, United States
Stantec New Zealand	New Zealand
Stantec Technology International Inc.	Delaware, United States
Stantec Global Capital Limited	United Kingdom
Stantec UK Limited	United Kingdom
There are no significant restrictions on the Company’s ability to access or use assets or to settle liabilities of its subsidiaries. Financial statements of al subsidiaries are prepared as at the same reporting date as the Company’s.
Structured entitiesAt December 31, 2022, the Company had management agreements in place with several entities to provide various services, including architecture, engineering, planning, and project management. These entities have been designed so that voting rights are not the dominant factor in deciding who controls the entity. Each entity has a management agreement in place that provides the Company with control over the relevant activities of the entity where it has been assessed that the Company is exposed to variable returns of the entity and can use its power to influence the variable
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
				F-54	Stantec Inc.

returns. The Company receives a management fee general y equal to the net income of the entities and has an obligation regarding the liabilities and losses of the entities. Based on these facts and circumstances, management determined that the Company controls these entities and they are consolidated in the Company’s consolidated financial statements. The Company does not have any unconsolidated structured entities.

The fol owing lists the most significant structured entities that are consolidated in the Company’s financial statements.

Name

Jurisdiction of Incorporation

Stantec Architecture Inc.

North Carolina, United States

Stantec Architecture Ltd.

Canada

Stantec Geomatics Ltd.

Canada

Stantec International Inc.

Pennsylvania, United States

Joint operationsThe Company also conducted its business through the fol owing significant joint operations.

OwnershipInterests

NameJurisdiction

Starr l , a Joint Venture

47%

United States

Better Together, a Joint Venture

10%

Australia

Joint ventures

The Company enters into transactions through its investments in joint ventures. The fol owing table provides the total dol ar amount for transactions that have been entered into with related parties.

For the year ended December 31, 2022

For the year ended December 31, 2021

Amounts

Sales to

Owed

Sales to

Owed

Distributions

by Related

Distributions

by Related

Parties

Paid

Parties

Paid

Parties

Joint ventures

69.1

2.1

12.6

44.5

1.7

4.6

Compensation of key management personnel and directors of the Company

For the year ended December 31,

2022

2021

Salaries and other short-term employment benefits

13.9

12.4

Directors’ fees

0.7

0.8

Share-based compensation

9.0

21.6

Total compensation

23.6

34.8

The Company’s key management personnel for 2022 and 2021 include its Chief Executive Officer (CEO), Chief Operating Officers, Chief Financial Officer, Chief Practice and Project Officer, Chief Growth & Innovation Officer, and Executive Vice Presidents. The amounts disclosed in the table are the amounts recognized as an expense related to key management personnel and directors during the year. Share-based compensation includes the fair value adjustment for the year.

34. Segmented InformationThe Company provides comprehensive professional services in the area of infrastructure and facilities throughout North America and global y. It considers the basis on which it is organized, including geographic areas, to identify its reportable segments. Operating segments of the Company are defined as components of the Company for which separate financial information is available and are evaluated regularly by the chief operating decision maker when al ocating resources and assessing performance. The chief operating decision maker is the CEO of the Company, and the Company’s operating segments are based on its regional geographic areas.

Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022

F-55

Stantec Inc.

The Company’s reportable segments are Canada, United States, and Global. These reportable segments provide professional consulting in engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics services in the area of infrastructure and facilities.
Segment performance is evaluated by the CEO based on project margin and is measured consistently with project margin in the consolidated financial statements. Inter-segment revenues are eliminated on consolidation and reflected in the Adjustments and Eliminations column. Reconciliations of project margin to net income before taxes and discontinued operations is included in the consolidated statements of income.
Reportable segments from continuing operations
	For the year ended December 31, 2022
							Adjustments
					Total			and
		Canada	United States	Global		Segments	Eliminations		Consolidated
			$	$			$	$		$		$
Total gross revenue											1,375.5	3,099.5			1,344.3	5,819.3	(142.1)		5,677.2
Less inter-segment revenue
											38.5	42.9			60.7	142.1	(142.1)	—
Gross revenue from external customers
											1,337.0	3,056.6			1,283.6	5,677.2	—		5,677.2
Less subconsultants and other direct expenses
											186.2	790.0			243.8	1,220.0	—		1,220.0
Total net revenue											1,150.8	2,266.6			1,039.8	4,457.2	—		4,457.2
Project margin											611.0	1,254.1			552.2	2,417.3	—		2,417.3
	For the year ended December 31, 2021
							Adjustments
					Total			and
		Canada	United States	Global	Segments		Eliminations		Consolidated
			$	$			$	$		$		$
Total gross revenue			1,257.7	2,431.5		998.7		4,687.9		(111.1)				4,576.8
Less inter-segment revenue
			31.8	31.3		48.0		111.1		(111.1)		—
Gross revenue from external customers
			1,225.9	2,400.2		950.7		4,576.8		—				4,576.8
Less subconsultants and other direct expenses
			157.4	600.7		182.6		940.7		—		940.7
Total net revenue			1,068.5	1,799.5		768.1		3,636.1		—				3,636.1
Project margin			571.9	977.8		413.6		1,963.3		—				1,963.3
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
												F-56	Stantec Inc.

The fol owing tables disclose disaggregation of non-current assets by geographic area and revenue by geographic area and services:
Geographic information	Non-Current Assets	Gross Revenue
			December 31,	December 31,		For the year ended December 31
	2022				2021	2022					2021
								$	$				$	$
Canada				618.4				644.6	1,337.0					1,225.9
United States				1,982.0				1,880.0	3,056.6					2,400.2
United Kingdom				202.2				144.5	409.3					341.0
Australia				421.2				441.9	459.3					243.8
Other global geographies				164.1				156.8	415.0					365.9
				3,387.9				3,267.8	5,677.2					4,576.8
Non-current assets consist of property and equipment, lease assets, goodwil , and intangible assets. Geographic information is attributed to countries based on the location of the assets. Non-current assets at December 31, 2021for Australia was restated from $325.6 to $441.9 and other global geographies from $273.1 to $156.8. An adjustmentof $116.3 was made for certain assets in Australia that were previously grouped in other global geographies.
Gross revenue is attributed to countries based on the location of the project.
Gross revenue by services						For the year ended December 31,
		2022					2021
									$	$
Infrastructure							1,597.6					1,266.2
Environmental Services							1,250.9					831.7
Water							1,137.2					994.8
Buildings							1,027.7					904.8
Energy & Resources							663.8					579.3
Total gross revenue from external customers							5,677.2					4,576.8
CustomersThe Company has a large number of clients in various industries and sectors of the economy. No particular customer exceeds 10% of the Company’s gross revenue.
35. Investment Tax CreditsInvestment tax credits, arising from qualifying scientific research and experimental development efforts pursuant to existing tax legislation, are recorded as a reduction of administrative and marketing expenses when there is reasonable assurance of their ultimate realization. In 2022, investment tax credits of $9.9 (2021 – $7.7) were recorded.
36. Event after the Reporting PeriodDividendsOn February 22, 2023, the Company declared a dividend of $0.195 per share, payable on April 17, 2023, to shareholders of record on March 31, 2023.
Notes to the Consolidated Financial StatementsIn Mil ions of Canadian Dol ars Except Number of Shares and Per Share DataDecember 31, 2022
				F-57			Stantec Inc.