Ritchie Bros. Auctioneers Annual Report 2011

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FY2011 Annual Report · Ritchie Bros. Auctioneers

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RITCHIE BROS. AUCTIONEERS INCORPORATED

Annual Report
2011

Contents

Letter to Shareholders

Financial Information

Management’s Discussion and Analysis

Audited Consolidated Financial Statements

Supplemental Quarterly Data

Selected Financial and Operating Data

Shareholder Information

Forward-looking statements
The discussion in this Annual Report includes forward-looking statements, which involve risks and
uncertainties as to possible future outcomes. Readers should refer to the discussion concerning forward-
looking statements and risk factors included in our Management’s Discussion and Analysis of Financial
Condition and Results of Operations for the year ended December 31, 2011, which is included in the
Financial Information section of this Annual Report.

To Our Fellow Shareholders:

Transformation is part of what makes good companies even better. They don’t stand
still and instead look for ways to innovate to improve customer experience and
ensure they are offering compelling solutions that are relevant and valuable to
customers and potential customers alike. As we look back on 2011 it is clear that it
was a year of transformation for Ritchie Bros.

We started the year with a renewed mission statement, with the goal of creating
compelling business solutions to enable the world’s builders to easily and confidently
exchange equipment. We executed our strategy well in 2011 and delivered record
gross auction proceeds of $3.7 billion, the highest in our history, and earnings before
tax growth of nearly 20%; we also dramatically improved our customer experience
to enhance and extend the appeal of our unreserved auctions.

Transformation came in many different forms for Ritchie Bros. in 2011, and much of
it was designed in part to make our auctions easy and confidence inspiring. With a
focus on the needs of our customers, we added a number of new features and
information, or DEI,
services to our auction offering. Our detailed equipment
program has been a tremendous success; through this program we provide free of
charge on our website to all customers much more detailed information and photos
about the equipment to be sold at our auctions. This program is allowing customers
to shop with greater ease and bid with more confidence, and has made our auctions
more appealing to a broader range of equipment owners.

DEI is also contributing to a healthy increase in the traffic to our website. Unique
visits were up roughly 25% in 2011 to approximately 4 million for the year, including
a 22% increase in non-English speaking customers. Website users spent on average
29% more time on equipment information pages than before the launch of DEI.
These statistics are just one indication that the DEI initiative has been a success; the
is to talk to the customers who actually use the
real testament to its appeal
information, and it is clear that our DEI program is making it easier for equipment
owners to do business with us and making them more confident in their bidding and
buying decisions.

During 2011 we also launched a number of valued-added services to complement
and further enhance the wide range of customer services that we already offer and
further extend the appeal of our auctions. These programs are described in more
detail in our Management’s Discussion and Analysis that forms part of this annual
report, and included:



our financing program, which arranges through third party lenders financing
options for our customers;

powertrain service warranties, underwritten by a third party partner;

property and cargo insurance, underwritten by a third party partner;

enhanced shipping services, through our partner uShip;

free Wi-Fi at all of our auction sites; and

our mobile website to make it even easier for our customers to engage with
us in the online environment.

We expect to make further enhancements to our mobile site and internet bidding
platform in early 2012 in order to integrate even more digital commerce into our live
auctions and make our best of both worlds proposition even more compelling. We

3believe that no other auction company in the world makes live and internet bidding
as seamless as we do at Ritchie Bros., and the $1.1 billion of assets we sold to
customers over the internet in 2011 is a testament to the power and appeal of our
model. Our leadership in live and online equipment commerce is unparalleled and we
are working hard to stay out front.

To address the cost of our many buyer-focused initiatives launched in recent periods,
we simplified and expanded our fee structure effective July 1, 2011. We eliminated
certain fees, including our internet purchase fee, and expanded the scope of our
administrative fee that we charge to buyers. This resulted in incremental revenues of
$21.9 million in the second half of 2011.

Much of our effort in 2011 was dedicated to customer-focused initiatives to enhance
the auction experience for our bidders, buyers and consignors, in addition to the new
services and programs discussed above. However, we also undertook some
significant internal transformation to ensure we are properly positioned to continue
to meet the needs of our growing and evolving business.

In 2011 we took steps to modify our organizational structure to align better with and
support our strategy. We have refined sales and operational management roles and
on January 1, 2012 we realigned these teams to better equip our sales force and
operational teams for success. We have created new senior operations management
positions that work closely with our sales leaders and have sole responsibility for our
auction sites and the organization and execution of each auction. We believe that
separating these roles and increasing specialization will allow our sales teams to
become more productive and our operating teams to continue to drive efficiency, as
well as further enhance our employee engagement and management bench strength
by creating pure sales and operations leadership roles.

Another key component of our new organizational structure is the creation of a new
executive group called the Senior Leadership Team, comprised of the following
individuals, whose bios are included on our website (www.rbauction.com):

 Peter Blake – Chief Executive Officer

 Rob Mackay – President

 Bob Armstrong – Chief Strategic Development Officer

 Steve Simpson – Chief Sales Officer

 Rob McLeod – Chief Financial Officer

 Andrew Muller – Chief People Officer

 Kenton Low – Chief Marketing Officer

This team is responsible for our strategic direction and overall management of our
company. Andrew Muller and Kenton Low are new additions to our executive team,
having joined us in 2011 and 2010, respectively. They bring tremendous depth of
skills and experience to our leadership team.

As a reminder, our strategy is comprised of three strategic pillars, which are
summarized as follows:

 GROW OUR CORE AUCTION BUSINESS

4while simultaneously doing more business with new customer groups and in
new markets.

 ADD new BUSINESS & INFORMATION SOLUTIONS

Technology and innovation have played significant roles at Ritchie Bros. in the
past decade, enabling us to enhance our auctions and deliver added value to
equipment owners around the world. We will continue to harness the latest
technology to supplement and enhance our auction services, and investigate
new and complementary services to meet the needs of equipment owners
that aren’t being met by our unreserved auctions.

 PERFORM BY BUILDING AN INSPIRED, HIGH-PERFORMANCE, CUSTOMER-

FOCUSED RITCHIE BROS. TEAM
Our main internal focus in the coming years will be improving sales force
productivity, increasing employee engagement and further augmenting our
management bench strength.

2011: the year in review
Following global economic turmoil in 2009 and 2010, the velocity of used equipment
transactions started returning to a more balanced state during 2011, particularly in
the U.S., our largest market. Equipment owners demonstrated what we considered
more typical buying and selling behaviour for most of 2011, which resulted in
generally more activity in the marketplace.

The supply of late model used equipment continued to be scarce in 2011, mainly
because of the lower production and sale of new equipment over the last two years.
Demand for late model equipment remained strong during 2011, in part because of
the need of some equipment owners to replace machines that have aged
considerably over the last several years, as well as the long lead times for the
purchase of many categories of new equipment. These factors contributed to
increased used equipment prices at our auctions during 2011 compared to 2010,
which in turn contributed to growth in our gross auction proceeds.

We believe our investments and operating decisions over the last few years leave us
well positioned to continue to grow our share of the used equipment market in the
coming years. We have created a well developed sales team and an auction site
network with considerable capacity, both of which we anticipate will help sustain our
growth.

2012: the year ahead
We intend to continue executing our strategic plan in 2012, with a clear focus on our
mission. Although the vast majority of our resources are firmly focused on growing
our core auction business, recently we have dedicated some time to explore
solutions for equipment owners whose needs are not met by our unreserved auctions
and who do not currently have a satisfactory method for buying and selling used
equipment.

We have not traditionally designed services to meet the needs of these equipment
owners. However, we are now investigating complementary solutions to expand our
service offerings to extend our menu so we can help more of the world’s builders
exchange equipment. We believe there is significant opportunity that will not
cannibalize our core auction business and will
introduce our brand to many new
customers. In conjunction with these efforts, we are also looking at complementary
solutions that will help us achieve our goal of becoming the industry authority.

5We are considering affiliations, partnerships, joint ventures and acquisitions to help
us achieve certain of our strategic objectives, and these acquisitions could be
potentially material. However, we believe they will accelerate the growth of our
complementary service offering and provide significant benefits to our core auction
business.

2012 has started strongly, with solid results at early auctions. Our February Orlando
auction broke a number of Company records, including the largest sale in our history
at over $200 million in gross auction proceeds. These results are important data
points that lead one to believe that the used equipment market is carrying strength
into 2012. Competition for late model equipment remains fierce, but there are many
signs of confidence among our customers and in recent reports from industry
participants. Although visibility into the future remains a challenge for Ritchie Bros.,
we are confident that our growth is on track.

In 2012 we are getting back to basics, having accomplished many of the investment
goals we set for ourselves previously. As our capital expenditures return to more
historic levels, we are shifting our focus to growing our sales and improving
productivity before increasing our capacity and overhead costs. We were effective
doing this in 2011, excluding the impact of spending on our strategic initiatives, and
intend to continue our efforts in this regard in 2012. This should help margins to
continue their recent upward trend and result in improved returns on invested
capital.

In conclusion, we would like to thank our people, who worked tirelessly during a year
of tremendous growth and significant transformation. We would not have succeeded
without the hard work and determination of all the men and women on the Ritchie
Bros. team. We are truly grateful for the energy, dedication and passion of our team,
and look forward to their continued contributions in the future as we help the world’s
builders to easily and confidently exchange equipment.

We also want to thank our shareholders for believing in us through the challenging
times over the last few years and trusting in our ability to set an appropriate course
for the future. We are proud of our accomplishments in 2011 and are confident we
will continue to deliver in 2012. And of course, we need to thank the ever-increasing
number of equipment owners who are choosing to participate in our unreserved
auctions. We truly appreciate your support and loyalty and are pleased we are able
to deliver compelling value to you.

Robert W. Murdoch
Chairman

Peter J. Blake
Chief Executive Officer

6RITCHIE BROS. AUCTIONEERS INCORPORATED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2011

7Overview

The following discussion summarizes significant factors affecting the consolidated
operating results and financial condition of Ritchie Bros. Auctioneers Incorporated
(“Ritchie Bros.”, the “Company”, “we” or “us”) for the year ended December 31,
2011 compared to the year ended December 31, 2010. This discussion should be
read in conjunction with our audited consolidated financial statements and notes
thereto for the year ended December 31, 2011, and with the disclosures below
regarding forward-looking statements and risk factors.

The date of this discussion is as of February 24, 2012. Additional information relating
to our Company, including our Annual Information Form, is available by accessing
the SEDAR website at www.sedar.com. None of the information on the SEDAR
website is incorporated by reference into this document by this or any other
reference.

We prepare our consolidated financial statements in accordance with International
Financial Reporting Standards, or IFRS. We also disclose in this document financial
results dating from before our transition to IFRS; these are identified by the title
previous GAAP. Amounts discussed below are based on our audited consolidated
financial statements prepared in accordance with IFRS and are presented in U.S.
dollars. Unless indicated otherwise, all tabular dollar amounts, including related
footnotes, presented below are expressed in thousands of dollars, except per share
amounts.

Ritchie Bros. is the world’s largest auctioneer of industrial equipment, selling more
equipment to on-site and online bidders than any other company in the world. Our
world headquarters are located in Vancouver, British Columbia, Canada, and as of
the date of this discussion, we operated from over 110 locations in more than 25
countries, including 43 auction sites worldwide. Our mission is to create compelling
business solutions that enable the world’s builders to easily and confidently exchange
equipment. We sell, through unreserved public auctions, a broad range of used and
unused industrial assets, including equipment, trucks and other assets used in the
construction, transportation, agricultural, material handling, mining, forestry,
petroleum and marine industries.

We operate mainly in the auction segment of the global industrial equipment
marketplace. Our primary target markets within that marketplace are the used
equipment and truck sectors, which are large and fragmented. The world market for
used equipment and trucks is driven by the cumulative supply of used equipment
and trucks, which is affected by the ongoing production of new equipment and trucks
and the motivation of equipment owners to realign and replace their fleets. Industry
analysts estimate that the world-wide value of used equipment and truck
transactions, of the type of equipment we sell at our auctions, is greater than $100
billion per year on average. Although we sell more used equipment than any other
company in the world, we estimate that our share of this fragmented market is in the
low to mid single digit range.

Typically, between 70% and 80% of the value of the items sold at our auctions is
purchased by end users of equipment and trucks (retail buyers), such as contractors,
with the remainder being purchased primarily by equipment and truck dealers, rental
companies and brokers (wholesale buyers). Consignors to our auctions represent a
broad mix of equipment owners, the majority being end users of equipment, with the

8balance being finance companies, truck and equipment dealers and equipment rental
companies, among others. Consignment volumes at our auctions are affected by a
number of factors, including regular fleet upgrades and reconfigurations, financial
pressure, retirements, and inventory reductions, as well as by the timing of the
completion of major construction and other projects.

We compete directly for potential purchasers of industrial assets with other auction
companies. Our indirect competitors include truck and equipment manufacturers,
dealers and brokers, and equipment rental companies that offer an alternative to
purchasing. When sourcing equipment to sell at our auctions, we compete with other
auction companies, dealers and brokers, and equipment owners that have
traditionally disposed of equipment through private sales. Private sales between
equipment owners are the dominant form of transaction in the used truck and
equipment sectors.

We have several key strengths that we believe provide distinct competitive
advantages and will enable us to grow and make our auctions more appealing to
both buyers and sellers of industrial assets. Some of our principal strengths include:



The power of our brand, which is supported by our reputation for conducting only
unreserved auctions and our widely recognized commitment to honesty, integrity
and fair dealing.

 Our ability to transcend local market conditions and create a global marketplace

for industrial assets by attracting diverse audiences of mainly end-user bidders
from around the world to our auctions.

 Our size, our financial strength and access to capital, the international scope of
our operations, our extensive network of auction sites, and our marketing skills.

 Our ability to respond to market changes with innovative solutions to enhance
our live auctions with technology, such as our online bidding service, our
proprietary Virtual Ramp, our Timed Auction system, as well as our 21 language
website, to provide participants in the equipment world with a compelling value
proposition to meet their needs.

 Our in-depth experience in the marketplace, including our ability to gather and

leverage equipment valuation expertise and proprietary customer and equipment
databases.

 Our dedicated and experienced workforce, which allows us to, among other

things, enter new geographic markets, structure deals to meet our customers’
needs, provide high quality and consistent service to consignors and bidders and
operate an international network of auction sites that creates value for our
customers.

Strict adherence to the unreserved auction process is one of our founding principles
and, we believe, one of our most significant competitive advantages. When we say
“unreserved” we mean that there are no minimum bids or reserve prices on anything
sold at a Ritchie Bros. auction – each item sells to the highest bidder on sale day,
regardless of the price. In addition, consignors (or their agents) are not allowed to
bid on or buy back or in any way influence the selling price of their own equipment.
We maintain this commitment to the unreserved auction process because we believe
that an unreserved auction is an efficient, effective and fair way to exchange
equipment.

9We attract a broad base of bidders from around the world to our auctions. Our
worldwide marketing efforts help to attract bidders, and they are willing to travel
long distances or participate online in part because of our reputation for conducting
fair auctions. These diverse multinational, mainly end user bidding audiences provide
a global marketplace that allows our auctions to transcend local market conditions,
which we believe is a significant competitive advantage. Evidence of this is the fact
that in recent periods an average of approximately 55% of the value of equipment
sold at our auctions left the region of the sale (which we define as the state or
province of sale for North American and Australian auctions, or the country for sales
occurring in other geographies).

We believe that our ability to consistently draw significant numbers of local and
international bidders from many different end markets to our auctions, most of
whom are end users rather than resellers, is appealing to sellers of used equipment
and trucks and helps us to attract consignments to our auctions. Higher consignment
volumes attract more bidders, which in turn attract more consignments, and so on in
a self-reinforcing process that has helped us to achieve a history of significant
growth and momentum in our business.

Following global economic turmoil in 2009 and 2010, the velocity of used equipment
transactions started returning to a more balanced state during 2011, particularly in
the U.S., with equipment owners demonstrating what we considered more typical
buying and selling behaviour.

We saw an improved pricing environment and a lack of supply of late model used
equipment in 2011, and as a result we witnessed an increase in competition.
Traditional participants, such as equipment dealers and brokers, returned to the
market following the challenging environment in 2009 and 2010 which increased
competition, contributing to an increase in the volume of our at risk business during
2011 (see below for further discussion).

The supply of late model used equipment was scarce in 2011, mainly because of the
lower production and sale of new equipment over the last two years. Demand for late
model equipment remained strong during 2011, in part because of the need of some
equipment owners to replace machines that have aged considerably over the last
several years, as well as the long lead times for the purchase of many categories of
new equipment. These factors contributed to increased used equipment prices at our
auctions during 2011 compared to 2010, which in turn contributed to growth in our
gross auction proceeds and also acted as a further catalyst to encourage equipment
owners to sell idle assets. Gross auction proceeds represent the total proceeds from
all items sold at our auctions (please see “Sources of Revenue and Revenue
Recognition” below). The exception to this was during the third quarter of 2011 when
market conditions became more challenging due to market uncertainty. However,
this appears to have been a temporary phenomenon and the velocity of used
equipment transactions returned during the fourth quarter of 2011.

We believe our investment and operating decisions over the last few years leave us
well positioned to continue to grow our share of the used equipment market in the
coming years and to deliver compelling solutions to meet the needs of our
customers. Through these decisions we are building a well developed sales team and
an auction site network with considerable capacity, both of which we anticipate will
help sustain our growth. We also believe that, over the long term, designing and
executing an appropriate growth strategy will continue to be a significant

10determinant of our ability to grow our earnings, in part because our share of the
world market for used equipment and trucks is small.

Growth Strategies

Our mission is to provide compelling business solutions that enable the world’s
builders to easily and confidently exchange equipment. Our customers are the people
who buy and sell equipment and trucks to build our homes and offices, schools and
community centers, bridges and roads, as well as the people who grow our food and
those who support all of these activities, such as finance companies, rental
companies, transportation companies and equipment dealers, among others. We are
pursuing three strategic pillars, which are designed to help us achieve our mission,
as follows.

GROW our core auction business

We believe unreserved public auctions offer significant benefits over other sales
channels, including certainty, fairness and transparency. We intend to focus on
increasing our market share with our traditional customer groups, while
simultaneously doing more business with new customer groups and in new markets.
We continue to undertake deeper market research to understand more clearly why
equipment owners do or do not use our services, and to help us meet the needs of
the large number of equipment owners who may not yet be aware of Ritchie Bros.

We believe that most of our near-term growth will come from our established
regions, primarily the United States and Western Europe, and that emerging markets
such as China, Brazil and other developing countries offer significant potential for
growth in the long-term.

As part of this strategic initiative we are pursuing opportunities to partner with our
customers and potential customers by making strategic investments in various
entities that we expect will generate equipment consignments to our auctions over
the long term.

In addition, we intend to add at least one new auction site to our network each year,
as well as replace a number of existing auction sites as necessary to provide capacity
for increased consignment volumes. Our auction site network supports our long-term
growth and is a critical strategic advantage, which helps us to sustain efficient and
scalable growth and give our customers confidence. We also intend to continue to
hold offsite auctions in new regions to expand the scope of our operations.

Another key focus of this pillar is to streamline and simplify our auctions, to make
them easy for our customers. Many of our new customers have little or no
experience buying or selling at unreserved auctions; we want to make the process as
easy and customer friendly as possible, so they feel confident on auction day and
throughout the whole process.

On July 1, 2011 we introduced our Detailed Equipment Information program, which
provides detailed information and photos on our website about equipment being sold
in our auctions. We have received positive feedback from our customers and we
believe that this information is helping our customers feel more confident, making
our auctions more appealing to a broader range of equipment owners.

11To address the cost of this and other buyer-focused initiatives launched in recent
periods, we simplified and expanded our fee structure effective July 1, 2011. We
eliminated certain fees, including our internet purchase fee, and expanded the scope
of our administrative fee that we charge to buyers.

ADD new business and information solutions

Technology and innovation have played key roles in our business in the past,
allowing us to enhance our auctions and broaden their appeal to more equipment
owners. We will continue to investigate new services to meet the needs of equipment
owners that are not being met by our unreserved auctions, and harness the latest
technology to supplement and enhance our auction services.

Ritchie Bros. Financial Services, or RBFS, a new entity in which we have a 51%
interest, was established during the second half of 2011. RBFS arranges, through
third party lenders, financing options for our customers to purchase equipment at
our auctions in the U.S. and Canada. By providing an easy and integrated lending
platform, we believe we have made our auctions more accessible to existing and new
customers. To date we have partnered with four lenders in the U.S. and seven
lenders in Canada, including GE Capital in both countries. We intend to introduce the
service in Europe and other markets in 2012.

In addition to our detailed equipment information and equipment finance programs,
on July 1, 2011 we launched other valued-added services for our customers in the
U.S., Canada and certain other sites around the world. These new services, which
include real-time auction results through www.rbauction.com, powertrain service
warranties and property and cargo insurance, complement and further enhance the
wide range of customer services that we already offer. Our warranty and insurance
programs are underwritten by third party partners who specialize in these products.
The implementation of these services has been well received by our customers, with
many choosing to purchase one or more of these services.

We are also investing in enhanced business intelligence and data analysis tools to
improve our understanding of the equipment market, and position Ritchie Bros. as a
knowledge and information authority. We intend to continue to enhance our website
at www.rbauction.com by making it easier to use, more powerful and more valuable
to equipment owners, with the goal of making it the preferred global equipment
website.

Recently we began to explore solutions for equipment owners whose needs are not
met by our unreserved auctions and who do not currently have a satisfactory method
for buying and selling used equipment. We have not traditionally designed services
to meet the needs of these equipment owners. However, we are now investigating
complementary solutions to expand our service offering and extend our brand so we
can help more of the world’s builders exchange equipment. We believe there is
significant opportunity that will not cannibalize our core auction business and will
increase our share of wallet with our existing customers and introduce our brand to
many new customers.

12PERFORM by building an inspired high-performance, customer-focused Ritchie Bros.
team

To maintain our high standards of customer service, we employ people who we
believe embody our core values, especially the value of putting our customers first.

Our primary focus areas in the coming years will be improving our sales force
productivity and the efficiency of our auction operations, as well as further enhancing
employee engagement and management bench strength. We are focused on
developing future managers and we are taking steps to improve our ability to attract,
develop and retain key players. Though we are maintaining our long-term target of
increasing our sales force by an average of 5% to 10% per year, as planned we did
not achieve this target in 2011 as we focused on increasing the productivity of our
existing team.

In July 2011 we announced our updated organizational structure to align better with
and support our strategy. We have taken steps to refine sales and operational
management roles and on January 1, 2012 we realigned these teams to better equip
our sales force and operational teams for success. We have created new senior
operations management positions that work closely with our sales leaders and have
sole responsibility for our auction sites and the organization and execution of each
auction. Previously the overall management of our auction sites, including sales and
operations teams, was the responsibility of the Regional Manager. We believe that
separating these roles and increasing specialization will allow our sales teams to
become more productive and continue to drive efficiency in our operations, as well as
further enhance our employee engagement and management bench strength.

Another key component of our new organization structure is the creation of the
Senior Leadership Team, comprised of the following:



Peter Blake – Chief Executive Officer

 Rob Mackay – President

 Bob Armstrong – Chief Strategic Development Officer

 Rob McLeod – Chief Financial Officer

 Steve Simpson – Chief Sales Officer

 Andrew Muller – Chief People Officer

 Kenton Low – Chief Marketing Officer

This team is responsible for our strategic direction and overall management of our
company and includes the newly created positions of Chief Strategic Development
Officer, Chief Sales Officer, Chief People Officer, Chief Marketing Officer.

13Sources of Revenue and Revenue Recognition

Gross auction proceeds represent the total proceeds from all items sold at our
auctions. Our definition of gross auction proceeds may differ from those used by
other participants in our industry. Gross auction proceeds is an important measure
we use in comparing and assessing our operating performance. It is not a measure
of our financial performance, liquidity or revenue and is not presented in our
consolidated financial statements. We believe that auction revenues, which is the
most directly comparable measure in our income statement, and certain other line
items, are best understood by considering their relationship to gross auction
proceeds. Auction revenues represent the revenue we earn in the course of
conducting our auctions. The portion of gross auction proceeds that we do not retain
is remitted to our customers who consign the items we sell at our auctions.

Auction revenues are comprised of auction commissions and auction fees. Auction
commissions are earned from consignors through straight commission and guarantee
contracts as well as the net profits or losses on the sale of inventory items. Auction
fees are made up of administrative fees, internet purchase fees, proxy purchase
fees, documentation fees and storage fees. Beginning July 1, 2011 the internet
purchase and proxy fees were eliminated and we expanded and simplified our
administrative fee to be applicable to all buyers at our auctions. We also earn
revenue from our insurance, warranty and customer finance programs and this
revenue has been recorded as a part of auction fees.

All auction revenues are recognized when the auction sale is complete and we have
determined that the auction proceeds are collectible.

Auction Commissions

Straight commission contracts are our most common type of auction contract and
are used by us when we act as agent for consignors and earn a pre-negotiated, fixed
commission rate on the gross sales price of the consigned equipment at auction.
Straight commission sales were approximately 64% of our gross auction proceeds in
the year ended December 31, 2011 and 61% for the fourth quarter of 2011. In
recent years they have represented approximately 75-80% of our gross auction
proceeds on an annual basis.

In the normal course of business, we sometimes guarantee minimum sales proceeds
to a consignor and earn a commission based on the actual results of the auction,
typically including a pre-negotiated percentage of any sales proceeds in excess of the
guaranteed amount. The consigned equipment is sold on an unreserved basis at the
next practical auction in the same manner as other consignments. If the actual
auction proceeds are less than the guaranteed amount, our commission is reduced,
and if the proceeds are sufficiently less, we can incur a loss on the sale.

Auction commissions also include the net profit or loss on the sale of inventory in
cases where we acquire ownership of equipment for a short time prior to an auction
sale. We purchase equipment for specific auctions and sell it at those auctions in the
same manner as consigned equipment. During the period that we retain ownership,
the cost of the equipment is recorded as inventory on our balance sheet. The net
gain or loss on the sale is recorded as auction commissions.

14We generally refer to our guarantee and outright purchase business as our at risk, or
underwritten, business and we are generally indifferent between a guarantee
contract and an inventory contract. As we do not control the sale price of items sold
at our auctions, both a guarantee contract and an inventory contract represent a
similar nature of risk and opportunity for us. Our customers’ circumstances, risk
tolerance and sale objectives will ultimately determine the final form of the contract.

Our at risk business represented approximately 36% of our gross auction proceeds in
2011 and 39% for the fourth quarter of 2011. This is higher than our historic levels
of approximately 20% to 25% of our annual gross auction proceeds.

Competition for equipment consignments to sell at our auctions intensified in 2011,
and this resulted in an increase in the relative proportion of our at risk business in
2011. One of our competitive advantages is our financial strength, including our
access to capital, and we have used this strategically in response to the intensified
competition in the marketplace. We believe that because we were able to provide
greater liquidity and certainty to our customers by providing outright purchase
options, this resulted in more inventory contracts during 2011. It also explains the
increase in the level of inventory on our recent period end balance sheet.

The choice by consignors between straight commission, guarantee, or outright
purchase arrangements depends on many factors, including the consignor’s risk
tolerance and sale objectives. We work with our consignors to provide them with the
contract option that best suits their needs at that point in time. As a result, the mix
of contracts in a particular quarter or year fluctuates and is not necessarily indicative
of the mix in future periods. The composition of our auction commissions and our
auction revenue rate (i.e. auction commissions as a percentage of gross auction
proceeds) are affected by the mix and performance of contracts entered into with
consignors in the particular period and fluctuates from period to period.

Auction Fees

Auction fees are generally earned from buyers at our auctions. Administrative fees
are the most significant component of auction fees and are charged to buyers on a
fixed percentage of the purchase price of each lot, to a maximum amount based on
the value of the items purchased. We also earn documentation fees and storage fees
for services provided to both our buyers and consignors. The changes to our fee
structure that took effect July 1, 2011, as discussed above, resulted in a net increase
of $21.9 million in our auction fees in the second half of the year.

Auction revenue rate

Our auction revenue rate performance for the past five years is presented in the
table below and includes both our total auction revenue rate as well as our auction
commission rate. Our auction revenue rate for the year ended December 31, 2011
was 10.66% and was positively impacted in the second half of the year by the
change in our administrative fees which took effect July 1, 2011. Our past experience
has shown that our auction revenue rate can vary and is difficult to estimate
precisely; over the past two years our quarterly rate has ranged between 9.96% and
11.84%.

The impact of the changes to our fee structure on our auction revenue rate is
demonstrated in the graph below.

15Quarterly Auction Revenue Rate from Commissions and Fees
5 Year History (1,2)

12.00%

11.50%

11.00%

10.50%

10.00%

9.50%

9.00%

8.50%

8.00%

7.50%

7.00%

Quarterly Auction Revenue Rate - commissions

Quarterly Auction Revenue Rate - total

(1) The auction revenue rate for the first quarter in 2010 excludes the results of
the auction of the megayacht Apoise; had these been included the auction
revenue rate would have been 10.76%.

(2) The revised administrative fee that took effect on July 1, 2011 resulted in an
increase in our auction revenue rate of 128 basis points for the second half of
2011.

In general, the largest contributor to the variability of our auction revenue rate is the
performance, rather than the amount, of our at risk business. In a period when our
at risk business performs better than average, our auction revenue rate typically
exceeds the expected average rate. Conversely, if our at risk business performs
below average, our auction revenue rate will typically be below the expected average
rate. Our straight commission rate and our fees remain fairly consistent.

Competition increased in 2011 and, as anticipated, the performance of our 2011 at
risk business was lower than in 2010 and 2009, and this resulted in our auction
revenue rate performing below our expected average rate. Our auction revenue rate
in 2010 and 2009 performed above the normal trend; we believe this strong
performance was related in part to the economic environment, which dampened
competition for at risk business.

Influences on auction revenues

Our gross auction proceeds and auction revenues are influenced by the seasonal
nature of the auction business, which is determined mainly by the seasonal nature of
the construction and natural resources industries in which many of our customers
participate. Gross auction proceeds and auction revenues tend to be higher during

16the second and fourth calendar quarters, during which time we generally conduct
more business than in the first and third calendar quarters. This seasonality
contributes to quarterly variability in our net earnings because a significant portion of
our operating costs is relatively fixed.

Gross auction proceeds and auction revenues are also affected on a period-to-period
basis by the timing of major auctions. Also, in newer markets where we are
developing operations, the number and size of auctions and, as a result, the level of
gross auction proceeds and auction revenues, are likely to vary more dramatically
from period to period than in our established markets, where the number, size and
frequency of our auctions are more consistent. In addition, economies of scale are
generally achieved as our operations in a region evolve from conducting intermittent
auctions, to establishing a regional auction site, and ultimately to developing a
permanent auction site. Economies of scale are also usually achieved when our
auctions increase in size.

Because of these seasonal and period-to-period variations, we believe that our gross
auction proceeds, auction revenues and net earnings are best compared on an
annual basis.

Operations

The majority of our industrial auctions are held at our permanent auction sites,
where we generally own the land and facilities, or at regional auction sites, where we
usually lease the land and typically have more modest facilities. We also hold off-site
auctions at temporary locations, often on land owned by one of the main consignors
to the particular auction. Most of our agricultural auctions are off-site auctions that
take place on the consignor’s farm. During 2011, 91% of our gross auction proceeds
were attributable to auctions held at our permanent auction sites and regional
auction sites (2010 – 92%).

Effective February 2012 we changed our definition of permanent auction site and
regional auction site (formerly regional auction unit) to reflect better some of our
recent investments. For the year ended December 31, 2011 we had 39 permanent
auction sites (2010 – 39) and we had 4 regional auction sites (2010 – 4). Further
discussion of the changes to our auction site definitions and a list of our auction sites
is included in our Annual Information Form for the year ended December 31, 2011;
the auction site information is incorporated by reference into this MD&A.

During 2011, we had approximately 385,000 bidder registrations at our industrial
auctions, compared to approximately 340,000 in 2010. In 2011 we generated
approximately 41,300 industrial asset consignments, which was 3% greater than the
40,000 generated in 2010. We handled approximately 268,500 industrial lots in 2011
compared to 277,000 lots in 2010.

During 2011, we conducted 228 unreserved industrial auctions at locations in North
and Central America, Europe, the Middle East, Australia and India (2010 – 230
auctions). We also held 111 unreserved agricultural auctions during the year in
Canada (2010 – 106). Although our auctions vary in size, our 12 month rolling
average industrial auction results were as follows:

17Average industrial auction

Twelve months ended
December 31, 2011

Twelve months ended
December 31, 2010

Gross auction proceeds

$ 15.5 million

$ 13.4 million

Registered bidders

Consignors

Lots

1,690

181

1,180

1,475

175

1,205

We sold over $1.1 billion of equipment, trucks and other assets to online bidders
during 2011, representing a 29% increase compared to 2010 (2010 – approximately
$872 million) and a new company record. Our online sales growth in 2011
reconfirmed our position as the world’s largest seller of industrial equipment to online
buyers.

Our website – www.rbauction.com - achieved some significant milestones in 2011.
We experienced an increase of 25% in the total number of unique visitors to the site
during 2011 compared to 2010. We had roughly 4 million unique visitors during 2011
and over 10 million visits. With its capabilities in 21 languages, our new website has
opened up our auctions to previously untapped markets of non-English speaking
equipment owners. We have seen an increase in site visits of over 22% from non-
English speakers compared to 2010.

The launch of detailed equipment information on our website on July 1, 2011
increased the average time spent on our website significantly. Website users spent
on average 29% more time on equipment information pages than before the
introduction of this service. Additionally, the Company launched a mobile version of
rbauction.com in November 2011 to facilitate mobile internet usage by our
customers.

In 2011, approximately 50% of our auction revenues were earned from auctions in
the United States (2010 – 52%), 25% were generated from auctions in Canada
(2010 – 23%) and the remaining 25% were earned from operations in countries
other than the United States and Canada, primarily in Europe, the Middle East,
Australia, and Mexico (2010 – 25%). We had 1,279 full-time employees at December
31, 2011, including 302 sales representatives and 16 trainee territory managers,
compared to 1,162 full-time employees, 314 sales representatives and 13 trainee
territory managers at the end of 2010.

We are a public company and our common shares are listed under the symbol “RBA”
on the New York and Toronto Stock Exchanges. On February 24, 2012 we had
106,397,320 common shares issued and outstanding and stock options outstanding
to purchase a total of 2,997,188 common shares.

Overall Performance

Our gross auction proceeds were $3.7 billion for the year ended December 31, 2011,
which is an increase of 13% from 2010 and a new Company record. The increase in

182011 is mainly attributable to higher used equipment prices and an improved mix of
equipment sold at our auctions compared to 2010.

Foreign exchange fluctuations had a modest impact on our 2011 gross auction
proceeds. Applying the foreign exchange rates in effect in 2010, our reported gross
auction proceeds in 2011 would have been approximately $74.2 million, or 2%,
lower.

For the year ended December 31 2011, we recorded auction revenues of $396.1
million and net earnings of $76.6 million, or $0.72 per diluted common share. This
performance compares to auction revenues of $357.4 million and net earnings of
$65.7 million, or $0.62 per diluted share, for the year ended December 31, 2010. We
ended 2011 with working capital of $63.3 million, compared to $45.5 million at
December 31, 2010. The increase in our working capital was primarily due to net
earnings achieved during the period.

Adjusted net earnings for the year ended December 31, 2011 were $73.6 million, or
$0.69 per diluted share, compared to adjusted net earnings of $64.9 million, or
$0.61 per diluted share for the year ended December 31, 2010. We define adjusted
net earnings as financial statement net earnings excluding the after-tax effects of
sales of excess properties and significant foreign exchange gains or losses resulting
from financing activities that we do not expect to recur in the future (please see our
reconciliation below).

Adjusted net earnings is a non-GAAP measure that does not have a standardized
meaning, and is therefore unlikely to be comparable to similar measures presented
by other companies. We believe that comparing adjusted net earnings as defined
above for different financial periods provides more useful information about the
growth or decline of our net earnings for the relevant financial period, and identifies
the impact of items which we do not consider to be part of our normal operating
results.

Our adjusted net earnings in 2011 increased by approximately 13% compared to
2010. The increase is primarily a result of the higher auction revenues.

A reconciliation of our net earnings to adjusted net earnings is as follows:

Year ended December 31,

2011
Net earnings................................ $ 76,633
Gain on sale of excess property(1) ..... (3,482)
487
Tax relating to reconciling items .......
Adjusted net earnings .....................$ 73,638

2010
$ 65,675
(1,230)
474
$ 64,919

(1) During the year ended December 31, 2011, we completed the sale of our former

Vancouver, British Columbia permanent auction site. During year ended December 31,
2010, we completed the sale of our former Houston, Texas, permanent auction site.

19Selected Annual Information

The following selected consolidated financial information as at December 31, 2011,
2010 and 2009 and for each of the years in the three-year period ended December
31, 2011 has been derived from our audited consolidated financial statements. This
data should be read together with those financial statements and the risk factors
described below. Our consolidated financial statements are prepared in accordance
with IFRS. For the year ended December 31, 2009, the consolidated financial
statements were prepared in accordance with previous GAAP.

Year Ended December 31,

IFRS

2011

2010

Previous GAAP
2009

Statement of Operations
Data:

Auction revenues ..........................$ 396,099
Direct expenses.............................(48,044)
348,055

Selling, general and
administrative expenses (1) .............
(244,343)
Other income (expense) (2) .............7,518
Finance income (costs) ...................(3,215)
108,015
Earnings before income
taxes ...........................................
Income taxes ...............................31,382
Net earnings ................................$ 76,633

Net earnings per share —
basic ............................................
Net earnings per share —
diluted ................................

0.72

Cash dividends declared per
share ...........................................

0.44(3)

Balance Sheet Data (year
end):

Working capital (including
cash) ...........................................
Property, plant and
equipment ................................ 644,333
Total assets ................................967,241
Non-current liabilities .....................158,811

$ 63,296

Statement of Cash Flows
Data:
Property, plant and
equipment additions.......................

$ 77,053

$ 357,369
(47,021)
310,348

(218,833)
2,024
(3,181)
90,358

24,683
65,675

0.62

$ 377,211
(49,890)
327,321

(200,073)
2,419
1,856
131,523

38,071
$ 93,452

0.89

0.88

0.41

0.38

45,543

$ 30,510

618,984
872,558
155,556

597,945
857,821
145,213

62,284

$ 157,416

(1) Selling, general and administrative expenses include depreciation and selling, general

and administrative expenses.

20(2) Other income in 2009 included a $759 foreign exchange gain ($664, or $0.01 per diluted
share, after tax) on U.S. dollar denominated bank debt held by a subsidiary that has the
Canadian dollar as its functional currency. We have highlighted this amount because in
January 2009, the Canadian subsidiary assigned the bank debt to an affiliate whose
functional currency is the U.S. dollar to eliminate the future impact of these currency
fluctuations. We did not settle any long-term intercompany loans in 2010 or 2011 that
resulted in a significant foreign exchange adjustment. In addition, other income in 2011
included gains of $3,482 ($2,995 or $0.03 per diluted share after tax) recorded on the
sale of our former Vancouver, British Columbia permanent auction site; other income in
2010 included gains of $1,230 ($756 or $0.01 per diluted share after tax) recorded on
the sale of our former Houston, Texas permanent auction site; other income in 2009
included gains of $1,097 ($746, or $0.01 per diluted share after tax for 2009) recorded
on the sale of our Minneapolis, Minnesota, permanent auction site.

(3) Cash dividends declared per share include cash payments made during the financial

year; there are timing differences for the fourth quarter dividend which is paid in the
subsequent year. For the fourth quarter of 2011, we declared a cash dividend of
$0.1125 per common share on January 20, 2012, which is not included in the 2011
amount.

Results of Operations

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

We conduct operations around the world in a number of different currencies, but our
reporting currency is the U.S. dollar. In 2011, approximately 45% of our revenues
and approximately 60% of our operating costs were denominated in currencies other
than the U.S. dollar.

The main currencies other than the U.S. dollar in which our revenues and operating
costs are denominated are the Canadian dollar and the Euro. In recent periods there
have been significant fluctuations in the value of the Canadian dollar and the Euro
relative to the U.S. dollar. These fluctuations affect our reported auction revenues
and operating expenses when non-U.S. dollar amounts are converted into U.S.
dollars for financial statement reporting purposes. It is difficult, if not impossible, to
quantify how foreign exchange rate movements affect such variables as the supply of
and demand for the assets we sell. However, excluding these impacts, the effect of
foreign exchange fluctuations on our translated auction revenues and operating
expenses in our consolidated financial statements has been largely offset, making
the impact of the currency fluctuation on our net earnings minimal.

21United States Dollar Exchange Rate Comparison

Years ended
December 31,

2011

%
Change
in U.S.$

2010

%
Change
in U.S.$

2009

Value of one U.S.
dollar:

Year-end exchange
rate:

Canadian dollar ...................
Euro ................................

$1.0210
€0.7716

2%
3%

$0.9976
€0.7479

-5%
7%

$1.0513
€0.6985

Average exchange
rate:

Canadian dollar ...................
Euro ................................

$0.9893
€0.7192

-4%
-5%

$1.0301
€0.7549

-10%
5%

$1.1415
€0.7197

Auction Revenues

Years ended December 31,

2011

2010

% Change

Auction revenues – United
States (1).......................................$195,274
Auction revenues – Canada (1).......... 100,404
Auction revenues – Europe (1) .......... 51,403
Auction revenues – Other (1) ............ 49,018
Total auction revenues....................$396,099

$185,486
82,894
51,428
37,561
$357,369

5%
21%
-1%
31%
11%

Gross auction proceeds ...................$3,714,281

$3,277,771

13%

Auction revenue rate ...................... 10.66%

10.90%

(1) Information by geographic segment is based on auction location.

Our auction revenues increased in 2011 compared to 2010 primarily as a result of
higher gross auction proceeds and our revised administrative fee, partially offset by a
lower auction revenue rate. Our at risk business represented approximately 36% of
total gross auction proceeds for the year (2010 – 24%). Our gross auction proceeds
in local currency in 2011, primarily being the U.S., Canadian and Australian dollars
and the Euro, increased by 12% compared to 2010.

Our auction revenue rate was 10.66% for 2011 (2010 – 10.90%). The decrease was
primarily attributable to the lower performance of our at risk business, partially offset
by higher fee income in 2011 as a result of our revised administrative fee, launched
on July 1, 2011. Our revised fee structure resulted in net incremental auction
revenues of $21.9 million for the second half of 2011.

Our auction revenues and net earnings are influenced to a great extent by small
changes in our auction revenue rate. For example, a 10 basis point (0.1%) increase

22in our auction revenue rate during 2011 would have increased auction revenues by
approximately $3.7 million, of which approximately $2.6 million, or $0.02 per diluted
share, would have flowed through to net earnings after tax in our consolidated
Statement of Operations, assuming no other changes. This factor is important to
consider when evaluating our current and past performance, as well as when
assessing future prospects.

Direct Expenses

Years ended December 31,

2011

2010

%
Change

Direct expenses .............................$ 48,044
Direct expenses as a

percentage of
gross auction proceeds ................. 1.29%

$ 47,021

1.43%

Direct expenses are the costs we incur specifically to conduct an auction. Direct
expenses include the costs of hiring temporary personnel to work at the auction,
advertising costs directly related to the auction, travel costs for employees to attend
and work at the auction, security personnel hired to safeguard equipment at the
auction site and rental expenses for temporary auction sites, among other costs.

Our direct expense rate, which represents direct expenses as a percentage of gross
auction proceeds, fluctuates from period to period based in part on the size and
location of the auctions we hold during a particular period. The direct expense rate
generally decreases as the average size of our auctions increase. In addition, we
usually experience lower direct expense rates for auctions held at our permanent
auction sites compared to auctions held at offsite locations, mainly as a result of the
economies of scale and other efficiencies that we typically experience at permanent
auction sites. Our direct expense rate for 2011 was lower than the rate we
experienced in 2010 primarily as a result of the larger average size of our auctions in
2011.

Selling, General and Administrative Expenses (SG&A)

Years ended December 31,

2011

2010

%
Change

Depreciation ................................$ 42,408
Other SG&A expenses.....................201,935
$244,343
Total

$ 37,813
181,020
$218,833

12%
12%
12%

Depreciation is calculated on either a straight line or a declining balance basis on
assets employed in our business, including buildings, computer hardware and
software, automobiles and yard equipment.

Depreciation in 2011 increased as a result of new assets that we have put into
service in recent periods, such as our new permanent auction sites and our
technology investments, including our new website that was launched in April 2010.
In addition, in the first quarter of 2010 we reversed depreciation of $2.7 million
relating to certain assets on which depreciation was charged that we subsequently
determined had an indefinite life. Excluding this adjustment, depreciation increased

235% in 2011 over 2010. We expect our depreciation in future periods to increase in
line with our on-going capital expenditures. As our capital expenditure program
moderates, we would expect the rate of increase in our depreciation expense also to
moderate.

Other SG&A expenses include such expenditures as personnel (salaries, wages,
bonuses and benefits), information technology, non-auction related travel, repairs
and maintenance, leases and rentals and utilities. Approximately 60% of our other
SG&A expenses on an annual basis are personnel costs.

The increase in our other SG&A for 2011 compared to 2010 was largely a result of
incremental costs of approximately $8.6 million associated with our strategic
initiatives, which were mostly recorded in personnel costs.

Additionally, foreign currency fluctuations resulted in an increase in our other SG&A
of approximately $5.0 million in 2011 compared to 2010, in connection with the
translation into U.S. dollars of our foreign operations’ SG&A. Excluding this amount
and the incremental costs associated with our strategic initiatives, our other SG&A
for the year ended December 31, 2011 increased by 4% compared to 2010.

Foreign Exchange Loss

Years ended December 31,

2011

2010

%
Change

Foreign exchange loss.....................$

(585)

(49)

1094%

Foreign exchange gains or losses arise when foreign currency denominated monetary
items are revalued to the exchange rates in effect at the end of the reporting period.
Examples of these items include accounts receivable and accounts payable.

Gain on Disposition of Property, Plant & Equipment (PP&E)

Years ended December 31,

2011

2010

%
Change

Gain on disposition of PP&E .............$ 3,861

250

1444%

The gain on disposition of PP&E in 2011 included a gain on the sale of our former
Vancouver, British Columbia, permanent auction site, as well as some small gains on
the disposal of other assets. During 2010, we disposed of our former Houston,
Texas, permanent auction site, the gain from which was partially offset by losses on
other assets.

24Finance Income

Years ended December 31,

2011

2010

%
Change

Finance income ..............................$ 2,326

2,035

14%

Finance income is earned on our excess cash and receivable balances. Our finance
income fluctuates from period to period depending on the timing of our receipt of
auction proceeds as well as on our cash position, which is affected by the timing, size
and number of auctions held during the period.

Finance Costs

Years ended December 31,

2011

2010

%
Change

Finance costs................................$ 5,541

5,216

Finance costs are comprised mainly of interest paid on long-term debt and revolving
credit facilities, offset by interest that has been capitalized as a part of self-
constructed assets. Finance costs increased in 2011 compared to 2010 due in part to
a lower amount of interest capitalized to projects under development during the
year, partly offset by lower interest rates on our long-term borrowings.

Income Taxes

Years ended December 31,

2011

2010

Income taxes................................$ 31,382
Effective income tax rate................. 29.1%

$ 24,683

27.3%

%
Change

27%

Income taxes have been calculated using the tax rates in effect in each of the tax
jurisdictions in which we earn our income. The effective tax rate for the year ended
December 31, 2011 was higher than the effective tax rate for the year ended
December 31, 2010 primarily due to an increase in unrecognized deferred income
tax assets. Income tax rates in future periods will fluctuate depending upon the
impact of unusual items and the level of earnings in the different tax jurisdictions in
which we earn our income.

Net Earnings

Years ended December 31,

2011

2010

Net earnings before income
taxes ............................................$108,015
Net earnings................................ 76,633
0.72
Net earnings per share – basic .........
Net earnings per share –
diluted ..........................................

0.72

$ 90,358
65,675
0.62

0.62

%
Change

20%
17%
16%

16%

25Our net earnings increased in 2011 primarily as a result of higher gross auction
proceeds, and the gain on sale of excess property, offset in part by a slightly lower
auction revenue rate. Adjusted net earnings for 2011 were $73.6 million, or $0.69
per diluted share, compared to adjusted net earnings of $64.9 million, or $0.61 per
diluted share, in 2010, representing a 13% increase in 2011.

Summary of Fourth Quarter Results

We earned auction revenues of $113.4 million and net earnings of $26.8 million, or
$0.25 per diluted share, during the fourth quarter of 2011. This compares to auction
revenues of $88.3 million and net earnings of $13.5 million, or $0.13 per diluted
share, in the fourth quarter of 2010.

Our gross auction proceeds were $1.0 billion for the quarter ended December 31,
2011, which is an increase of 30% compared to the comparable period in 2010. This
increase in our gross auction proceeds was mainly attributable to higher volumes of
equipment, higher used equipment prices and an improved mix of equipment sold at
our auctions compared to the same period in 2010. Had the foreign exchange rates
in effect in the fourth quarter of 2010 been applied to the gross auction proceeds
achieved in the fourth quarter of 2011, our reported gross auction proceeds would
have been approximately $5.3 million higher.

Our auction revenue rate decreased to 10.91% in the fourth quarter of 2011 from
11.06% in the comparable period in 2010, mainly as a result of the weaker
performance of our at risk business in the fourth quarter of 2011. This was offset by
the effect of the revised administrative fee introduced on July 1, 2011, which
contributed approximately $12.9 million to auction revenues during the quarter.

Our SG&A expenses increased to $61.1 million in the fourth quarter of 2011,
compared to $57.4 million in the comparable 2010 period. The increase was
primarily the result of increased personnel costs compared to the same period in
2010, largely attributable to our strategic initiatives. We incurred incremental SG&A
costs of $2.6 million during the fourth quarter of 2011 in connection with our
strategic initiatives.

Adjusted net earnings in the fourth quarter of 2011 increased to $26.8 million from
$13.5 million in the same period in 2010, primarily due to higher auction revenues
offset in part by higher operating expenses. For both the fourth quarter of 2011 and
2010 there were no adjustments to net earnings to arrive at adjusted net earnings.

PP&E additions were $21.1 million for the fourth quarter of 2011, compared to $16.1
million in the fourth quarter of 2010. Our capital expenditures in the fourth quarter
of 2011 related primarily to continued development of our existing permanent and
regional auction sites and our information system enhancements.

26Summary of Quarterly Results

The following tables present our unaudited consolidated quarterly results of
operations for each of our last eight fiscal quarters. This data has been derived from
our unaudited consolidated financial statements, which were prepared on the same
basis as our annual audited consolidated financial statements and, in our opinion,
include all normal recurring adjustments necessary for the fair presentation of such
information. These unaudited quarterly results should be read in conjunction with our
audited consolidated financial statements for the years ended December 31, 2011
and 2010, and our discussion above about the seasonality of our business.

Q4 2011

Q3 2011

Q2 2011

Q1 2011

Gross auction
proceeds (1) ................................

$1,039,790

$ 673,362

$1,149,847

$ 851,283

$ 113,403
Auction revenues ...........................
26,767
Net earnings................................
26,767
Adjusted net earnings .....................

$ 79,709
6,533
6,533

$ 114,524
26,763
26,763

$ 88,463
16,570
13,575

Net earnings per
share — basic ................................
0.25
Net earnings per
share — diluted..............................0.25
Adjusted net earnings
per share — diluted ........................0.25

0.06

0.25

0.16

0.06

0.25

0.16

0.13

Q4 2010

Q3 2010

Q2 2010

Q1 2010(2)

Gross auction
proceeds (1) ................................

$ 798,566

$ 750,912

$ 951,634

$ 776,659

Auction revenues ...........................
$ 88,296
Net earnings................................13,538
13,538
Adjusted net earnings .....................

$ 82,229
13,375
13,375

$ 103,300
26,054
25,298

$ 83,544
12,707(3)
12,707(3)

Net earnings per
share — basic ................................
Net earnings per
share — diluted..............................0.13
Adjusted net earnings
per share — diluted ........................0.13

0.13

0.25

0.12

0.13

0.25

0.24

0.12

(1) Gross auction proceeds represents the total proceeds from all items sold at our auctions.

Gross auction proceeds is not a measure of revenue and is not presented in our
consolidated financial statements. Please see further discussion above under “Sources of
Revenue and Revenue Recognition.”

(2) Results for the first quarter of 2010 included $46.8 million of gross auction proceeds, $0.9
million of auction revenues and $0.2 million of direct expenses generated from the auction
of Apoise.

27(3) In the first quarter of 2010, we determined that certain assets on which depreciation was

charged had an indefinite life and therefore should not have been depreciated. The
accumulated depreciation on these assets was $2.7 million, which was reversed in the
period as an immaterial adjustment, resulting in a $2.7 million decrease to depreciation
expense.

Liquidity and Capital Resources

December 31,

2011

2010

%
Change

Working capital ..............................$ 63,296

$ 45,543

39%

Our cash position can fluctuate significantly from period to period, largely as a result
of differences in the timing, size and number of auctions, the timing of the receipt of
auction proceeds from buyers, and the timing of the payment of net amounts due to
consignors. We generally collect auction proceeds from buyers within seven days of
the auction and pay out auction proceeds to consignors approximately 21 days
following an auction. If auctions are conducted near a period end, we may hold cash
in respect of those auctions that will not be paid to consignors until after the period
end. Accordingly, we believe that working capital, including cash, is a more
meaningful measure of our liquidity than cash alone. For 2011, our working capital
increased by $17.8 million primarily as a result of positive operating cashflows.

There are a number of factors that could potentially impact our working capital, such
as the volume and profitability of our auctions and our capital expenditures.
However, we believe we have sufficient borrowing capacity in the event of any
temporary working capital requirements.

As at December 31, 2011, we had $13 million of outstanding short term debt, which
consisted of draws on our revolving credit facilities with a weighted average interest
rate of 2.5% per annum. This left a total of $408 million of availability under our
credit facilities, including a $137 million five-year committed credit facility expiring in
January 2014, and a $166 million three-year uncommitted non-revolving credit
facility expiring in November 2014. During 2011 we negotiated a seasonal committed
credit facility of $50 million available to us in February, March, August and
September every year, which expires in January 2014.

We believe our existing working capital and credit facilities are sufficient to satisfy
our present operating requirements, as well as to fund future growth initiatives, such
as property acquisitions and development. While we continue to believe that we have
adequate access to capital resources, there can be no assurance that the cost or
availability of future borrowings under our credit facilities will not be materially
affected should there be a significant capital or credit market disruption.

28Contractual Obligations

Total

Non-current debt
obligations ...................... $ 133,881
Interest on long-term
debt obligations ...............
Operating leases
obligations ......................
Other non-current
obligations ......................
Total contractual
obligations ...................... $ 296,390

142,745

18,722

1,042

In 2012

Payments Due by Period
In 2013
and
2014

In 2015
and
2016

After
2016

$ 75,254

$ 58,627

5,292

8,386

5,044

9,230

14,990

14,458

104,067

381

661

$14,903

$ 99,291

$ 78,129

$104,067

Our long-term debt included in the table above is comprised mainly of term loans put
in place in 2005 with original terms to maturity of five years, which were
subsequently extended, a revolving loan drawn under a credit facility that is available
until January 2014, as well as a term loan put in place in 2009 with a term to
maturity of seven years. Our operating leases relate primarily to land on which we
operate regional auction sites and administrative buildings. These properties are
located in Canada, the U.S.A., the Netherlands, Spain, Germany, the U.K., Australia,
China, Dubai, Turkey, Mexico and Panama.

In the normal course of our business, we will sometimes guarantee to a consignor a
minimum level of proceeds in connection with the sale at auction of that consignor’s
equipment. Our total exposure at December 31, 2011 from these guarantee
contracts was $44.7 million (compared to $28.9 million at December 31, 2010),
which we anticipate will be fully covered by the proceeds that we will receive from
the sale at auction of the related equipment, plus our commission. We do not record
any liability in our financial statements in respect of these guarantee contracts, and
they are not reflected in the contractual obligations table above.

Cash Flows

December 31,

2011

2010

% Change

Cash provided by (used in):

Operations.................................
Investing ...................................
Financing...................................

$ 141,146
(70,101)
(24,674)

$ 40,165
(54,593)
(43,342)

251%
28%
-43%

As discussed above regarding our cash position, our cash provided by operations can
fluctuate significantly from period to period, due to factors such as differences in the
timing, size and number of auctions during the period, the timing of the receipt of
auction proceeds from buyers, and the timing of the payment of net amounts due to
consignors. Therefore, we do not believe that the change in our cash position
provided by operations during the year is indicative of a trend; it is primarily a result

29of the increase in our earnings in 2011 as well as the timing of sales before year end
and higher inventory purchases made in 2011 compared to 2010.

Property, plant and equipment (PP&E) additions were $77.1 million for 2011
compared to $62.3 million in 2010. Our PP&E expenditures in 2011 related primarily
to the development of two regional auction sites and two permanent auction sites, as
well as preliminary costs related to the replacement of certain other permanent
auction sites that will be developed in the future. PP&E additions also included
investments in computer software and hardware, including continued enhancements
of our new website and strategic initiatives.

Based on our most recent review of our auction site development plans and process
improvement initiatives, we expect that our annual capital expenditures will be in the
range of $50 to $60 million per year for the next several years. We plan to add an
average of one new auction site to our network per year, and to make improvements
to and replace older existing sites. Actual expenditures will depend on the availability
and cost of suitable expansion opportunities and prevailing business and economic
conditions. We also expect to undertake system improvements, including
expenditures on hardware, the development, purchase and implementation of
software, and related systems, in connection with our strategic initiatives discussed
above. We expect to fund future capital expenditures from operating cash flows and
borrowings under credit facilities.

We may consider acquisitions to help us achieve certain of our strategic objectives,
and these acquisitions could be material to us.

We declared and paid regular cash dividends of $0.105 per share for each of the
quarters ended December 31, 2010 and March 31, 2011, and declared and paid
dividends of $0.1125 per share for each of the quarters ended June 30, 2011,
September 30, 2011. The payments of these dividends were made in 2011, and the
total dividend payments for 2011 were $46.2 million compared to $43.3 million in
2010. We also declared a quarterly cash dividend of $0.1125 per common share
payable on March 9, 2012 to shareholders of record on February 17, 2012. All
dividends we pay are “eligible dividends” for Canadian income tax purposes unless
indicated otherwise.

30Long-term Debt and Credit Facilities

Our long-term debt and available credit facilities at December 31, 2011 and
December 31, 2010 were as follows:

December
31, 2011

December
31, 2010

%
Change

Long-term debt ....................... $ 133,881

$ 135,886

-1%

Committed:

Revolving credit facilities: ...............$ 235,000
Revolving credit facilities
– available:................................ 146,687

$ 200,000

152,828

Uncommitted: Revolving credit facilities: ...............103,475

106,268

Revolving credit facilities
– available:................................

94,979

93,840

Non-revolving credit facilities: .........225,000
Non-revolving credit facilities
– available:................................ 166,236

250,000

189,856

Total credit facilities:......................$ 563,475
Total credit facilities
– available:................................ 407,902

$ 556,268

436,524

Our credit facilities are with financial institutions in the United States, Canada, the
Netherlands and the United Kingdom. Certain of the facilities include commitment
fees applicable to the unused credit amount. During 2011, we had fixed rate and
floating rate long-term debt bearing interest rates ranging from 1.9% to 6.4%. We
were in compliance with all financial covenants applicable to our debt at December
31, 2011.

Quantitative and Qualitative Disclosure about Market Risk

We conduct operations in local currencies in countries around the world, but we use
the U.S. dollar as our reporting currency. As a result we are exposed to currency
fluctuations and exchange rate risk. We cannot accurately predict the future effects
of foreign currency fluctuations on our financial condition or results of operations, or
quantify their effects on the macroeconomic environment. For the year ended
December 31, 2011, approximately 45% of our revenues were earned in currencies
other than the U.S. dollar and approximately 60% of our operating costs were
denominated in currencies other than the U.S. dollar. The proportion of revenues
denominated in currencies other than the U.S. dollar in a given period will differ from
the annual proportion depending on the size and location of auctions held during the
period. However, on an annual basis, we expect these amounts to largely offset and
generally act as a natural hedge against exposure to fluctuations in the value of the
U.S. dollar. We have not adopted a long-term hedging strategy to protect against
foreign currency fluctuations associated with our operations denominated in

31currencies other than the U.S. dollar, but we may consider hedging specific
transactions if we deem it appropriate in the future.

During 2011, we recorded a net decrease in our foreign currency translation
adjustment balance of $6.1 million, compared to an increase of $4.5 million in 2010.
Our foreign currency translation adjustment arises from the translation of our net
assets denominated in currencies other than the U.S. dollar to the U.S. dollar for
reporting purposes.

We have not experienced significant interest rate exposure historically, as our long-
term debt generally bears fixed rates of interest. However, borrowings under our
global revolving credit facility are available at both fixed and floating rates of
interest. If we determine our exposure to short-term interest rates is too high, we
may consider fixing a larger portion of our portfolio. As at December 31, 2011 we
had a total of $30.0 million (December 31, 2010 - $31.0 million) in revolving loans
bearing floating rates of interest.

Although we cannot accurately anticipate the future effect of inflation on our financial
condition or results of operations, inflation historically has not had a material impact
on our operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future material effect on our financial condition, changes in
financial condition, revenues or expenses, financial performance, liquidity, capital
expenditures or capital resources.

Legal and Other Proceedings

From time to time we have been, and expect to continue to be, subject to legal
proceedings and claims in the ordinary course of our business. Such claims, even if
lacking merit, could result in the expenditure of significant financial and managerial
resources. We are not aware of any legal proceedings or claims that we believe will
have, individually or in the aggregate, a material adverse effect on us or on our
financial condition or results of operations or that involve a claim for damages,
excluding interest and costs, in excess of 10% of our current assets.

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements in conformity with IFRS, we must
make decisions that impact the reported amounts and related disclosures. Such
decisions include the selection of the appropriate accounting principles to be applied
and the assumptions on which to base accounting estimates. In reaching such
decisions, we apply judgments based on our understanding and analysis of the
relevant circumstances and historical experience. On an ongoing basis, we evaluate
these judgments and estimates, including consideration of uncertainties relating to
revenue recognition criteria, valuation of consignors’ equipment and other assets
subject to guarantee contracts, recoverability of property, plant and equipment,
goodwill and deferred income tax assets, and the assessment of possible contingent
assets or liabilities that should be recognized or disclosed in our consolidated
financial statements. Actual amounts could differ materially from those estimated by
us at the time our consolidated financial statements are prepared.

32The following discussion of critical accounting policies and estimates is intended to
supplement the significant accounting policies presented as note 2 to our
consolidated financial statements, which summarizes the accounting policies and
methods used in the preparation of those consolidated financial statements. The
policies and the estimates discussed below are included here because they require
more significant judgments and estimates in the preparation and presentation of our
consolidated financial statements than other policies and estimates.

Accounting for Income Taxes

We record income taxes relating to our business in each of the jurisdictions in which
we operate. We estimate our actual current tax exposure and the temporary
differences resulting from differing treatment of items for tax and book accounting
purposes. These differences result in deferred income tax assets and liabilities, which
are included within our consolidated balance sheet. We must then assess the
likelihood that our deferred income tax assets will be recovered from future taxable
income. If recovery of these deferred tax assets is considered unlikely, we must
calculate our best estimate of the recovery. To the extent we either establish or
increase our best estimate in a period, we must include an expense within the tax
provision in the consolidated income statements. Significant management judgment
is required in determining our provision for income taxes, our measurement of
deferred tax assets and liabilities, and any change in best estimate recorded against
our net deferred tax assets. If actual results differ from these estimates or we adjust
these estimates in future periods, we may need to change our best estimate which
could materially impact the presentation of our financial position and results of
operations.

Valuation of Goodwill

We assess the possible impairment of goodwill in accordance with IFRS on an annual
basis. The standards stipulate that goodwill is allocated to Cash-Generating Units
(CGUs), or groups of CGU’s, that are expected to benefit from the synergies of the
business combination from which is arose. The allocation is based on the level at
which goodwill is monitored internally. A CGU is the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the cash
inflows of other groups. An impairment loss is recognized if the CGU’s carrying
amount (including goodwill) exceeds the recoverable value, which is the greater of
fair value less costs to sell and value in use, which is based on the net present value
of future cash flows.

We perform the goodwill test annually or more frequently if events or changes in
circumstances indicate that goodwill might be impaired. We performed the test as at
December 31, 2011 and determined that no impairment had occurred.

Presentation of Inventory Contracts

We present the revenue from straight commission and guarantee contracts and the
net proceeds from inventory contracts as auction revenues. We have one sales team
that generates all of our revenue, and regardless of the type of contract, all of the
equipment sold at our auctions is sold to the highest bidder on an unreserved basis.
Although we take title to the equipment we sell under inventory contracts, the period
of direct ownership is relatively short and the equipment is processed in the same
manner as other consigned equipment. As a result, we present the results of all

33equipment sold at our auctions on a net basis as auction revenues because it is more
reflective of the substance of the transaction.

We value our inventory at the lower of cost and net realizable value on a specific
item basis. In addition, we monitor the results from the sale of this inventory at
auction after the balance sheet date up to the release of our financial statements and
record any losses realized on inventory contracts.

Changes in Accounting Policies

From January 1, 2011, IFRS have been effective for our interim and annual financial
statements. The conversion to IFRS from previous GAAP is disclosed in note 29 to
our consolidated annual financial statements.

The qualitative impact of the transition on our net earnings for the comparative year
ended December 31, 2010 was a reduction of $0.2 million. This is due to a change in
the recognition of expense for stock options which vest over more than one year.
Other balance sheet reclassifications and changes in financial reporting on transition
are detailed in the transition note to the consolidated annual financial statements.

Other than the change of framework from previous Canadian GAAP to IFRS, there
have been no accounting policy changes implemented during the period.

Recent Accounting Pronouncements

There were no accounting pronouncements made during 2011 that impact our
accounting policies or the presentation of our consolidated financial position or
financial performance.

Disclosure Controls and Procedures

We have established and maintained disclosure controls and procedures in order to
provide reasonable assurance that material information relating to our Company is
made known to the appropriate level of management in a timely manner.

Based on current securities legislation in Canada and the United States, our Chief
Executive Officer and Chief Financial Officer are required to certify that they have
assessed the effectiveness of our disclosure controls and procedures as at December
31, 2011.

We performed an evaluation under the supervision and with the participation of our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures as at December 31, 2011. Based on that
evaluation, we concluded that our disclosure controls and procedures were effective
as of that date to provide reasonable assurance that information required to be
disclosed by us in the reports that we file or submit is accumulated and
communicated to our management, including our principal executive and principal
financial officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. Furthermore, we concluded that our
disclosure controls and procedures were effective to ensure that information required
to be disclosed in the reports filed under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified in
the U.S. Securities and Exchange Commission’s rules and forms.

34Internal Control over Financial Reporting

Management is responsible for establishing and maintaining an adequate internal
control structure and procedures for financial reporting. Under the supervision and
with the participation of management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of our 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. Based on our evaluation under the framework in “Internal
Control – Integrated Framework”, management concluded that our internal control
structure and procedures over financial reporting were effective as of December 31,
2011.

The effectiveness of our internal controls over financial reporting as of December 31,
2011 has been audited by KPMG LLP, the independent registered public accounting
firm that audited our December 31, 2011 consolidated annual financial statements,
as stated in their report, which is included in our consolidated financial statements.

Changes in Internal Controls Over Financial Reporting

There has been no change in our internal control over financial reporting during 2011
that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and uncertainties.
These statements are based on current expectations and estimates about our
business, and include, among others, statements relating to:



our future performance;

impact of market uncertainty on equipment seller behaviour;

competition in used equipment market in the future;

anticipated pricing environment for late model equipment in the future;

impact of market uncertainty on equipment seller behaviour;

growth of our operations, including replacement of existing auction sites and
adding at least one auction site per year;

growth of used equipment and truck markets;

increases in the number of consignors and bidders participating in our
auctions;

our principal operating strengths, our competitive advantages, and the appeal
of our auctions to buyers and sellers of industrial assets;

our ability to draw consistently significant numbers of local and international
end-user bidders to our auctions;

our ability to continue to grow our share of the used equipment market and to
meet the needs of our customers;

35



our ability to utilize the excess capacity in our sales team and auction site
network to help sustain our growth;

our ability to grow our core auction business, including our ability to increase
our market share with traditional customer groups and do more business with
new customer groups in new markets, among others;

our ability to add new business and information solutions, including utilizing
technology to enhance our auction services and support additional value
added services, among others;

our ability to perform by building an inspired high-performance customer
focused team, to improve sales force productivity and growth in our sales
force, among others;

our ability to improve sales force productivity and increase operational
efficiency by realigning our sales and operations teams;

the relative percentage of gross auction proceeds represented by straight
commission, guarantee and inventory contracts, and its impact on auction
revenues and profitability;

our auction revenue rates, the sustainability of those rates, the impact of our
commission rate and fee changes, and the seasonality of gross auction
proceeds and auction revenues;

our direct expense and income tax rates, depreciation expenses and general
and administrative expenses;

our future capital expenditures;

our internet initiatives and the level of participation in our auctions by internet
bidders;

the proportion of our revenues and operating costs denominated in currencies
other than the U.S. dollar or the effect of any currency exchange and interest
rate fluctuations on our results of operations;

impact of new initiatives and services on the Company and its customers; and

financing available to us and the sufficiency of our working capital to meet our
financial needs.

Forward-looking statements are typically identified by such words as “anticipate”,
“believe”, “could”, “feel”, “continue”, “estimate”, “expect”, “intend”, “may”,
“ongoing”, “plan”, “potential”, “predict”, “will”, “should”, “would”, “could”, “likely”,
“generally”, “future”, “period to period”, “long term”, or the negative of these terms,
and similar expressions intended to identify forward-looking statements. Our
forward-looking statements are not guarantees of future performance and involve
risks, uncertainties and assumptions that are difficult to predict. While we have not
described all potential risks related to our business and owning our common shares,
the important factors listed under “Risk Factors” below are among those that we
consider may affect our performance significantly or could cause our actual financial
and operational results to differ significantly from our predictions. Except as required
by applicable securities law and regulations of relevant securities exchanges, we do
not intend to update publicly any forward-looking statements, even if our predictions
have been affected by new information, future events or other developments. You
should consider our forward-looking statements in light of these and other relevant
factors.

36Risk Factors

Our business is subject to a number of risks and uncertainties, and our past
performance is no guarantee of our performance in future periods. Some of the more
important risks that we face are outlined below and holders of our common shares
should consider these risks. The risks and uncertainties described below are not the
only risks and uncertainties we face. Additional risks and uncertainties not currently
known to us or that we currently deem immaterial may also adversely affect our
financial condition or impair our business or results of operations. If any of the
following risks actually occur, our business, results of operations and financial
condition would suffer.

Damage to our reputation for fairness, integrity and conducting only
unreserved auctions could harm our business.

Strict adherence to the unreserved auction process is one of our founding principles
and, we believe, one of our most significant competitive advantages. Closely related
to this is our reputation for fairness and honesty in our dealings with our customers.
Our ability to attract new customers and continue to do business with existing
customers could be harmed if our reputation for fairness, integrity and conducting
only unreserved auctions was damaged. If we are unable to maintain our reputation
and enforce our unreserved auction policy we could lose business and our results of
operations and financial condition would suffer.

Competition in our core markets could result in reductions in our future
revenues and profitability.

The used truck and equipment sectors of the global industrial equipment market, and
the auction segment of those markets, are highly fragmented. We compete directly
for potential purchasers of industrial equipment with other auction companies. Our
indirect competitors include equipment manufacturers, other third party methods,
and equipment rental companies. When sourcing equipment to sell at our auctions,
we compete with other auction companies, other third party methods, and
equipment owners that have traditionally disposed of equipment in private sales.

Our direct competitors are primarily regional auction companies. Some of our indirect
competitors have significantly greater financial and marketing resources and name
recognition than we do. New competitors with greater financial and other resources
may enter the industrial equipment auction market in the future. Additionally,
existing or future competitors may succeed in entering and establishing successful
operations in new geographic markets prior to our entry into those markets. They
may also compete against us through internet-based services. If existing or future
competitors seek to gain or retain market share by reducing commission rates, or
our strategy to compete against them is not effective, we may also be required to
reduce commission rates, which may reduce our revenues and harm our results of
operations and financial condition, or we may lose market share.

We currently generate the majority of our revenues through unreserved auctions. We
may be susceptible to loss of business as a result of our restrictive service offering if
competing models become more appealing to customers. If our selling model
becomes undesirable or we are not successful adding services complimentary to our
existing selling model and business, we may not be successful increasing market

37penetration over the long term, which could prevent us from achieving our long-term
earnings growth targets.

Decreases in the supply of, demand for, or market values of industrial
assets, primarily used industrial equipment, could harm our business.

Our auction revenues could decrease if there was significant erosion in the supply of,
demand for, or market values of used industrial equipment, which could adversely
affect our financial condition and results of operations. We have no control over any
of the factors that affect the supply of, and demand for, used industrial equipment,
and the circumstances that cause market values for industrial equipment to fluctuate
– including, among other things, economic uncertainty, disruptions to credit and
financial markets, lower commodity prices, and our customers’ restricted access to
capital – are beyond our control. Recent economic conditions have caused
fluctuations in the supply, mix and market values of used equipment available for
sale, which has a direct impact on our auction revenues. In addition, price
competition and the availability of industrial equipment directly affect the supply of,
demand for, and market value of used industrial equipment. Climate change
initiatives, including significant changes to engine emission standards applicable to
industrial equipment, may also adversely affect the supply of, demand for or market
values of industrial equipment.

We may incur losses as a result of our guarantee and outright purchase
contracts and advances to consignors.

In recent periods, approximately 60-80% of our annual business has been conducted
on a straight commission basis. In certain other situations we will either offer to:



guarantee a minimum level of sale proceeds to the consignor, regardless of
the ultimate selling price of the consignment at the auction; or

purchase the equipment outright from the consignor for sale in a particular
auction.

The level of guaranteed proceeds or inventory purchase price is based on appraisals
performed on equipment by our internal personnel. Inaccurate appraisals could result
in guarantees or inventory values that exceed the realizable auction proceeds. If
auction proceeds are less than the guaranteed amount, our commission will be
reduced and, in certain circumstances, we could incur a loss. If auction proceeds are
less than the purchase price we paid for equipment that we take into inventory
temporarily, we will incur a loss. Because all of our auctions are unreserved, there is
no way for us to protect against these types of losses by bidding on or acquiring any
of the items at the auction. In addition, we do not hold inventory indefinitely waiting
for market conditions to improve. We expect that competitive forces and supply
imbalances will likely encourage us to increase our exposure to at risk contracts. If
our exposure increases, this risk would be compounded.

Occasionally we advance to consignors a portion of the estimated auction proceeds
prior to the auction. We generally make these advances only after taking possession
of the assets to be auctioned and upon receipt of a security interest in the assets to
secure the obligation. If we were unable to auction the assets or if auction proceeds
were less than amounts advanced, we could incur a loss.

38We may have difficulties sustaining and managing our growth.

One of the main elements of our strategy is to continue to grow our core auction
business, primarily by increasing our presence in markets in which we already
operate and by expanding into new geographic markets and market segments in
which we have not had a significant presence in the past. As part of this strategy, we
may from time to time acquire additional assets or businesses from third parties. We
may not be successful in growing our business or in managing this growth. For us to
grow our core auction business successfully, we need to accomplish a number of
objectives, including:



recruiting and retaining suitable sales and managerial personnel;

developing and enhancing an appropriate sales strategy;

identifying and developing new geographic markets and market sectors;

expanding awareness of our brand, including value proposition and
competitive advantages, in existing and new markets;

successfully executing the realignment of our sales and operations teams;

identifying and acquiring, on terms favourable to us, suitable land on which to
build new auction facilities and, potentially, businesses that might be
appropriate acquisition targets;

obtaining necessary financing on terms favourable to us, and securing the
availability of our credit facilities to fund our growth initiatives;

receiving necessary authorizations and approvals from governments for
proposed development or expansion;

integrating successfully new facilities and any acquired businesses into our
existing operations;

achieving acceptance of the auction process in general by potential
consignors, bidders and buyers;

establishing and maintaining favourable relationships with and meeting the
needs of consignors, bidders and buyers in new markets and market sectors,
and maintaining these relationships in our existing markets;

capturing relevant market data and utilizing it to generate insight and
understanding of key company and industry drivers and market trends;

developing appropriate responses based on data collected to meet the needs
of existing and potential customers to achieve customer retention targets;

succeeding against local and regional competitors in existing and new
geographic markets;

capitalizing on changes in the supply of and demand for industrial assets, and
understanding and responding to changing market dynamics, in our existing
and new markets; and

designing and implementing business processes and operating systems that
are able to support profitable growth.

We will likely need to hire additional employees to manage our growth. In addition,
growth may increase the geographic scope of our operations and increase demands
on both our operating and financial systems. These factors will increase our

39operating complexity and the level of responsibility of existing and new management
personnel. It may be difficult for us to attract and retain qualified sales personnel,
managers and employees, and our existing operating and financial systems and
controls may not be adequate to support our growth. We may not be able to improve
our systems and controls as a result of increased costs, technological challenges, or
lack of qualified employees. Our past results and growth may not be indicative of our
future prospects or our ability to expand into new markets, many of which may have
different competitive conditions and demographic characteristics than our existing
markets.

We are pursuing a long-term growth strategy that requires upfront
investment, with no guarantee of long-term returns.

We continue to pursue a long-term growth strategy that contemplates investments in
growing our core business, including investments in frontier markets that may not
generate profitable growth in the near term, adding new business and information
solutions, and developing our people. Planning for future growth requires
investments to be made now in anticipation of growth that may not materialize, and
if our strategies do not successfully address the needs of current and potential
customers we may not be successful growing our gross auction proceeds and our
earnings may be adversely impacted. A large component of our SG&A expenses is
considered fixed costs that we will incur regardless of gross auction proceeds growth.
There can be no assurances that our gross auction proceeds and auction revenues
will grow at a more rapid rate than our fixed costs. If we proceed with an acquisition
we may not be able to appropriately integrate that business into our existing
business.

Our future expenses may increase significantly and our operations and
ability to expand may be limited as a result of environmental and other
regulations.

A variety of federal, provincial, state and local laws, rules and regulations throughout
the world, including local tax and accounting rules, apply to our business. These
relate to, among other things, the auction business, imports and exports of
equipment, worker safety, privacy of customer information, and the use, storage,
discharge and disposal of environmentally sensitive materials. Complying with
revisions to laws, rules and regulations could result in an increase in expenses and a
deterioration of our financial performance. Failure to comply with applicable laws,
rules and regulations could result in substantial liability to us, suspension or
cessation of some or all of our operations, restrictions on our ability to expand at
present locations or into new locations, requirements for the acquisition of additional
equipment or other significant expenses or restrictions.

The development or expansion of auction sites depends upon receipt of required
licenses, permits and other governmental authorizations. Our inability to obtain these
required items could harm our business. Additionally, changes or concessions
required by regulatory authorities could result in significant delays in, or prevent
completion of, such development or expansion.

Under some environmental laws, an owner or lessee of, or other person involved in,
real estate may be liable for the costs of removal or remediation of hazardous or
toxic substances located on or in, or emanating from, the real estate, and related
costs of investigation and property damage. These laws often impose liability without

40regard to whether the owner, lessee or other person knew of, or was responsible for,
the presence of the hazardous or toxic substances. Environmental contamination
may exist at our owned or leased auction sites, or at other sites on which we may
conduct auctions, or properties that we may be selling by auction, from prior
activities at these locations or from neighbouring properties. In addition, auction
sites that we acquire or lease in the future may be contaminated, and future use of
or conditions on any of our properties or sites could result in contamination. The
costs related to claims arising from environmental contamination of any of these
properties could harm our financial condition and results of operations.

Climate change may not affect us directly, but government regulation in response to
this area of global concern may affect the ability of equipment owners to transport
certain equipment between specified jurisdictions or the saleability of older
equipment. One example of these restrictions is environmental certification
requirements in the United States, which prevent non-certified equipment from
entering into commerce in the United States. These restrictions, or changes to
environmental laws, could inhibit materially the ability of customers to ship
equipment to or from our auction sites, reducing our gross auction proceeds and
harming our business, financial condition and results of operations.

International bidders and consignors could be deterred from participating in our
auctions if governmental bodies impose additional export or import regulations or
additional duties, taxes or other charges on exports or imports. Reduced
participation by international bidders and consignors could reduce gross auction
proceeds and harm our business, financial condition and results of operations.

Our substantial international operations expose us to foreign exchange rate
fluctuations and political and economic instability that could harm our
results of operations.

We conduct business in many countries around the world and intend to continue to
expand our presence in international markets, including emerging markets.
Fluctuating currency exchange rates, acts of terrorism or war, and changing social,
economic and political conditions and regulations, including income tax and
accounting regulations, and political interference, may negatively affect our business
in international markets and our related results of operations. Currency exchange
rate fluctuations between the different countries in which we conduct our operations
impact the purchasing power of buyers, the motivation of consignors, asset values
and asset flows between various countries, including those in which we do not have
operations. These factors and other global economic conditions may harm our
business and our results of operations.

Although we report our financial results in U.S. dollars, a significant portion of our
auction revenues are generated at auctions held outside the United States, mostly in
currencies other than the U.S. dollar. Currency exchange rate changes against the
U.S. dollar, particularly for the Canadian dollar and the Euro, could affect the
presentation of our results in our financial statements and cause our earnings to
fluctuate.

41Our business could be harmed if we lost the services of one or more key
personnel.

The growth and performance of our business depends to a significant extent on the
efforts and abilities of our executive officers and senior managers. Our business
could be harmed if we lost the services of any of these individuals. We do not
maintain key man insurance on the lives of any of our executive officers. Our future
success largely depends on our ability to attract, develop and retain skilled
employees in all areas of our business, as well as to design an appropriate
organization structure and plan effectively for succession.

Our internet-related initiatives are subject to technological obsolescence
and potential service interruptions and may not contribute to improved
operating results over the long-term; in addition, we may not be able to
compete with technologies implemented by our competitors.

We have invested significant resources in the development of our internet platform,
including our online bidding service and website. We use and rely on intellectual
property owned by third parties, which we license for use in providing our online
bidding service. Our internet technologies may not result in any material long-term
improvement in our results of operations or financial condition and may require
further significant investment to avoid obsolescence. We may not be able to continue
to adapt our business to new technologies, including but not limited to internet
commerce and we may not be able to compete effectively against internet auction
services offered by our competitors.

The success of our online bidding service and other services that we offer over the
internet, including equipment-searching capabilities and historical price information,
will continue to depend largely on the performance and reliability of the hardware
and software we utilize, our ability to use suitable intellectual property licensed from
third parties, further development and maintenance of our information technology
infrastructure and the internet in general. Our ability to offer online services depends
on the performance of the internet, as well as our internal hardware and software
systems.

“Viruses”, “worms”, denial of service attacks and other similar cyber threats, which
have in the past caused periodic outages and other internet access delays, may in
the future interfere with the performance of the internet and some of our internal
systems. These outages and delays could reduce the level of service we are able to
offer over the internet. We could lose customers and our reputation could be harmed
if we were unable to provide services over the internet at an acceptable level of
performance or reliability.

Our business is subject to risks relating to our ability to safeguard the
security and privacy of our customers' confidential information.

We maintain proprietary databases containing confidential personal information
about our customers and the results of our auctions, and we must safeguard the
security and privacy of this information. Despite our efforts to protect this
information, we face the risk of inadvertent disclosure of this sensitive information or
an intentional breach of our security measures.

42Security breaches could damage our reputation and expose us to a risk of loss or
litigation and possible liability for damages. We may be required to make significant
expenditures to protect against security breaches or to alleviate problems caused by
any breaches. Our insurance policies may not be adequate to reimburse us for losses
caused by security breaches.

The availability and performance of our internal technology infrastructure
are critical to our business.

The satisfactory performance, reliability and availability of our website, enterprise
resource planning system, processing systems and network infrastructure are
important to our reputation and our business. We will need to continue to expand
and upgrade our technology, transaction processing systems and network
infrastructure both to meet increased usage of our online bidding service and other
services offered on our website and to implement new features and functions. Our
business and results of operations could be harmed if we were unable to expand and
upgrade in a timely manner our systems and infrastructure to accommodate any
increases in the use of our internet services, or if we were to lose access to or the
functionality of our internet systems for any reason.

We use both internally developed and licensed systems for transaction processing
and accounting, including billings and collections processing. We have recently
improved these systems to accommodate growth in our business. If we are
unsuccessful in continuing to upgrade our technology, transaction processing
systems or network infrastructure to accommodate increased transaction volumes, it
could harm our operations and interfere with our ability to expand our business.

We may incur losses as a result of legal and other claims.

We are subject to legal and other claims that arise in the ordinary course of our
business. While the results of these claims have not historically had a material effect
on our business, financial condition or results of operations, we may not be able to
defend ourselves adequately against these claims in the future and we may incur
losses. Aggregate losses from and the legal fees associated with these claims could
be material.

Our business continuity plan may not operate effectively in the event of a
significant interruption of our business.

We depend on our information and other systems and processes for the continuity
and effective operation of our business. We have implemented a formal business
continuity plan covering most significant aspects of our business that would take
effect in the event of a significant interruption to our business, or the loss of key
systems as a result of a natural or other disaster. Although we have tested our
business continuity plan as part of the implementation, there can be no assurance
that it will operate effectively or that our business, results of operations and financial
condition will not be materially affected in the event of a significant interruption of
our business.

We are in the process of implementing a formal disaster recovery plan, including a
data center co-location that went into effect in 2009. However, our disaster recovery
plan is not yet complete. If we were subject to a disaster or serious security breach,
it could materially damage our business, results of operations and financial condition.

43Our insurance may be insufficient to cover losses that may occur as a result
of our operations.

We maintain property and general liability insurance. This insurance may not remain
available to us at commercially reasonable rates, and the amount of our coverage
may not be adequate to cover all liabilities that we may incur. Our auctions generally
involve the operation of large equipment close to a large number of people, and
despite our focus on safe work practices, an accident could damage our facilities or
injure auction attendees. Any major accident could harm our reputation and our
business. In addition, if we were held liable for amounts exceeding the limits of our
insurance coverage or for claims outside the scope of our coverage, the resulting
costs could harm our results of operations and financial condition.

Certain global conditions may affect our ability to conduct successful
auctions.

Like most businesses with global operations, we are subject to the risk of certain
global conditions, such as pandemics or other disease outbreaks or natural disasters
that could hinder our ability to conduct our scheduled auctions, or restrict our
customers’ travel patterns or their desire to attend auctions. If this situation were to
occur, we may not be able to generate sufficient equipment consignments to sustain
our business or to attract enough bidders to our auctions to achieve world fair
market values for the items we sell. This could harm our results of operations and
financial condition.

Our operating results are subject to quarterly variations.

Historically, our revenues and operating results have fluctuated from quarter to
quarter. We expect to continue to experience these fluctuations as a result of the
following factors, among others:



the size, timing and frequency of our auctions;

the seasonal nature of the auction business in general, with peak activity
typically occurring in the second and fourth calendar quarters, mainly as a
result of the seasonal nature of the construction and natural resources
industries;

the performance of our underwritten business (guarantee and outright
purchase contracts);

general economic conditions in our markets; and

the timing of acquisitions and development of auction facilities and related
costs.

In addition, we usually incur substantial costs when entering new markets, and the
profitability of operations at new locations is uncertain as a result of the increased
variability in the number and size of auctions at new sites. These and other factors
may cause our future results to fall short of investor expectations or not to compare
favourably to our past results.

44We may not continue to pay regular cash dividends.

We declared and paid total quarterly cash dividends of $0.44 per outstanding
common share for the four quarters ended December 31, 2011. Any decision to
declare and pay dividends in the future will be made at the discretion of our Board of
Directors, after taking into account our operating results, financial condition, cash
requirements, financing agreement restrictions and other factors our Board may
deem relevant. We may be unable or may elect not to continue to declare and pay
dividends, even if necessary financial conditions are met and sufficient cash is
available for distribution.

45Consolidated Financial Statements of

RITCHIE BROS. AUCTIONEERS
INCORPORATED

Years ended December 31, 2011 and 2010

46KPMG LLP
Chartered Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada

Telephone (604) 691-3000
(604) 691-3031
Fax
www.kpmg.ca
Internet

Independent Auditor’s Report of Registered Public Accounting Firm

To the Shareholders and Board of Directors of Ritchie Bros. Auctioneers Incorporated

We have audited the accompanying consolidated financial statements of Ritchie Bros. Auctioneers
Incorporated and its subsidiaries, which comprise the consolidated balances sheets as at
December 31, 2011, December 31, 2010 and January 1, 2010, the consolidated income
statements, statements of comprehensive income, changes in equity and cash flows for the years
ended December 31, 2011 and December 31, 2010, and notes, comprising a summary of
significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board, and for such internal control as management determines
is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on our
judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we consider
internal control relevant to the entity’s preparation and fair presentation of the (consolidated)
financial statements in order to design audit procedures that are appropriate in the circumstances.
An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
provide a basis for our audit opinion.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated balance sheet of Ritchie Bros. Auctioneers Incorporation as at as at December 31,
2011, December 31, 2010 and January 1, 2010, and its consolidated financial performance and its
consolidated cash flows for the years ended December 31, 2011 and December 31, 2010 in
accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board.

Other Matters

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial reporting as of
December 31, 2011, based on the criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and
our report dated February 24, 2012 expressed an unmodified opinion on the effectiveness of the
Company’s internal control over financial reporting.

Chartered Accountants

Vancouver, Canada

February 24, 2012

KPMG LLP
Chartered Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada

Telephone (604) 691-3000
(604) 691-3031
Fax
www.kpmg.ca
Internet

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Ritchie Bros. Auctioneers Incorporated

We have audited Ritchie Bros. Auctioneers Incorporated’s (“the Company”) internal control over
financial reporting as of December 31, 2011, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Annual Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.

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

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

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

In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2011, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the Company and
subsidiaries as of December 31, 2011 and 2010, and the related consolidated income
statements, comprehensive income, equity and cash flows for the years ended December 31,
2011 and December 31, 2010, and our report dated February 24, 2012 expressed an unqualified
opinion on those consolidated financial statements.

Chartered Accountants

Vancouver, Canada
February 24, 2012

RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Income Statements
(Expressed in thousands of United States dollars, except share and per share amounts)

Years ended December 31,

Auction revenues (note 5)
Direct expenses (note 6)

Selling, general and administrative expenses (note 6)

Earnings from operations

Other income (expense):

Foreign exchange loss
Gain on disposition of property, plant and equipment
Other

Finance income (costs) (note 7):

Finance income
Finance costs

Earnings before income taxes

Income tax expense (note 8):

Current
Deferred
Deferred

Net earnings

Net earnings per share (note 9):

Basic
Diluted

2011

2010

396,099
48,044
348,055

244,343

103,712

(585)
3,861
4,242
7,518

2,326
(5,541)
(3,215)

108,015

26,096
5,286
5,286
31,382

76,633

0.72
0.72

357,369
47,021
310,348

218,833

91,515

(49)
250
1,823
2,024

2,035
(5,216)
(3,181)

90,358

21,992
2,691
2,691
24,683

65,675

0.62
0.62

Weighted average number of shares outstanding

Basic
Diluted

106,164,237
106,983,757

105,521,960
106,169,199

See accompanying notes to consolidated financial statements.

These consolidated financial statements are authorized for issue by the Board of Directors on February 24, 2012.

Beverley A Briscoe
Director

Peter J Blake
Chief Executive Officer

51RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Comprehensive Income
(Expressed in thousands of United States dollars)

Years ended December 31,

2011

2010

Net earnings

76,633

65,675

Other comprehensive income (loss):

Foreign currency translation adjustment, net

of tax (note 8(c))

(6,070)

4,520

Total comprehensive income for the year

70,563

70,195

See accompanying notes to consolidated financial statements.

52RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Balance Sheets
(Expressed in thousands of United States dollars)

Assets

Current assets:

Cash and cash equivalents
Trade and other receivables (note 10)
Inventory (note 11)
Advances against auction contracts
Prepaid expenses and deposits (note 12)
Assets held for sale (note 13)
Current portion of loan receivable (note 14)
Other current assets
Income taxes receivable

Property, plant and equipment (note 15)
Investment properties (note 16)
Loan receivable (note 14)
Other non-current assets
Goodwill (note 17)
Deferred tax assets (note 8)

Liabilities and Shareholders' Equity

Current liabilities:

Auction proceeds payable
Trade and other payables (note 18)
Income taxes payable
Current borrowings (note 19)

Non-current borrowings (note 19)
Other non-current liabilities
Deferred tax liabilities (note 8)

Shareholders' equity:

Share capital (note 21)
Additional paid-in capital
Retained earnings
Foreign currency translation reserve

Commitments (note 23) and contingencies (note 24)
See accompanying notes to consolidated financial statements.

December 31,
2011

December 31,
2010

January 1,
2010

109,323
60,980
49,212
11,784
9,923
-
111
81
12,426
253,840

644,333
7,890
4,915
8,857
45,957
1,449
967,241

69,004
100,868
8,077
12,595
190,544

133,881
4,309
20,601
349,335

115,961
22,777
480,718
(1,550)
617,906

68,185
59,818
26,533
2,379
10,565
421
105
37
14,635
182,678

618,984
8,246
5,026
6,227
46,254
5,143
872,558

46,463
87,685
1,900
1,087
137,135

135,886
1,659
18,011
292,691

103,978
21,101
450,268
4,520
579,867

122,596
51,963
6,640
4,574
8,131
3,675
99
166
3,824
201,668

590,108
7,837
5,131
5,666
45,593
3,485
859,488

74,726
88,402
-
19,326
182,454

116,137
1,254
13,565
313,410

99,980
18,239
427,859
-
546,078

967,241

872,558

859,488

53RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Changes in Equity
(Expressed in thousands of United States dollars, except share amounts)

Balance, January 1, 2010

Total comprehensive income

Net earnings
Foreign currency translation adjustment

Exercise of stock options
Share-based compensation tax adjustment
Share-based compensation expense (note 22(b))
Cash dividends paid (note 20)

Balance, December 31, 2010

Total comprehensive income

Net earnings
Foreign currency translation adjustment

Exercise of stock options
Share-based compensation tax adjustment
Share-based compensation expense (note 22(b))
Cash dividends paid (note 20)

Share Capital

Number of
Shares

Amount

Additional
Paid-In
Capital

Retained
Earnings

Foreign
Currency
Translation
Reserve

Total
Shareholders'
Equity

105,378,620

99,980

18,239

427,859

546,078

269,415

3,998

(719)
189
3,392

65,675

4,520
4,520

(43,266)

65,675
4,520
70,195

3,279
189
3,392
(43,266)

105,648,035

103,978

21,101

450,268

4,520

579,867

738,304

11,983

(2,260)
61
3,875

76,633

(6,070)
(6,070)

(46,183)

76,633
(6,070)
70,563

9,723
61
3,875
(46,183)

Balance, December 31, 2011

106,386,339

115,961

22,777

480,718

(1,550)

617,906

See accompanying notes to consolidated financial statements.

54RITCHIE BROS. AUCTIONEERS INCORPORATED
Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)

Years ended December 31,

Cash generated by (used in):
Operating activities:
Net earnings
Items not involving cash:

Depreciation
Share-based compensation expense
Deferred income tax expense
Foreign exchange loss
Net gain on disposition of property, plant and equipment

Changes in non-cash working capital:

Trade and other receivables
Inventory
Advances against auction contracts
Prepaid expenses and deposits
Income taxes receivable
Income taxes payable
Auction proceeds payable
Trade and other payables
Other

Interest paid
Income taxes paid

Net cash generated by operating activities

Investing activities:

Property, plant and equipment additions
Proceeds on disposition of property, plant and equipment
Increase in other assets

Net cash used in investing activities

Financing activities:

Issuance of share capital
Dividends on common shares
Issuance of short-term borrowings
Repayment of short-term borrowings
Issuance of long-term borrowings
Repayment of long-term borrowings
Other

Net cash used in financing activities

Effect of changes in foreign currency rates on

cash and cash equivalents

Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

See accompanying notes to consolidated financial statements.

2011

2010

76,633

65,675

42,408
3,875
5,286
585
(3,861)
48,293

(3,653)
(23,011)
(9,520)
625
2,209
21,096
27,804
20,224
1,606
37,380

(6,115)
(15,045)
141,146

(77,053)
10,072
(3,120)
(70,101)

9,723
(46,183)
56,170
(44,765)
-
-
381
(24,674)

37,813
3,392
2,691
49
(250)
43,695

(7,818)
(19,509)
2,273
(2,213)
(10,744)
29,052
(32,625)
4,524
259
(36,801)

(5,506)
(26,898)
40,165

(62,284)
8,479
(788)
(54,593)

3,279
(43,266)
31,636
(35,915)
15,000
(14,436)
360
(43,342)

(5,233)

3,359

41,138
68,185
109,323

(54,411)
122,596
68,185

55RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

1. General information:

Ritchie Bros. Auctioneers Incorporated and its subsidiaries (collectively referred to as the “Company”) sell

industrial equipment and other assets for the construction, transportation, material handling, mining,

forestry, petroleum, marine, real estate, and agricultural industries at its unreserved auctions worldwide.

Ritchie Bros. Auctioneers Incorporated is a company incorporated in Canada under the Canada Business

Corporations Act, whose shares are publicly traded on the Toronto Stock Exchange (“TSX”) and the New

York Stock Exchange (“NYSE”). The address of its registered office is located at 1300 – 777 Dunsmuir

Street, Vancouver, British Columbia, Canada. Its principal place of business is located at 9500 Glenlyon

Parkway, Burnaby, British Columbia, Canada.

2. Significant accounting policies:

The principal accounting policies applied in the preparation of these consolidated financial statements are

set out below. These policies have been consistently applied to the years presented, unless otherwise

stated.

(a) Basis of preparation:

These consolidated financial statements including comparatives present the consolidated income

statements, statements of comprehensive income, balance sheets, statements of changes in equity

and statements of cash flows of the Company. The consolidated financial statements have been

prepared on the historical cost basis, except for cash flows and the financial instrument valued at fair

value through profit and loss that is measured at fair value. A summary of the principal accounting

policies is set out below.

(b) Statement of compliance:

The consolidated financial statements of the Company have been prepared under International

Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board

(“IASB”) incorporating Interpretations issued by the IFRS Interpretations Committee (“IFRICs”), and

complying with the Canada Business Corporations Act 1997.

The disclosures concerning the transition from pre-changeover Canadian Generally Accepted

Accounting Principles (“previous GAAP”) to IFRS are included in the First-time adoption of IFRS note

(note 29).

(i) Subsidiaries:

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Ritchie

Bros. Auctioneers Incorporated as at December 31, 2011 and the results of all subsidiaries for the

year then ended.

Subsidiaries are all those entities that the Company controls, defined as having the power to govern

the financial and operating policies, generally accompanying an equity holding of more than one-half

of the voting rights.

56RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

2. Significant accounting policies (continued):

(i) Subsidiaries (continued):

Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They

are de-consolidated from the date that control ceases. Inter-entity transactions, balances and

unrealized gains on transactions between entities within the consolidated company are eliminated.

Unrealized losses are also eliminated unless the transaction provides evidence of impairment of the

asset

transferred. The Company’s accounting policies are applied consistently throughout

the

organization.

(ii) Ultimate parent entity:

Ritchie Bros. Auctioneers Incorporated is the ultimate parent entity of the consolidated company.

(d) Revenue recognition:

Auction revenues are comprised mostly of auction commissions, which are earned by the Company

acting as an agent for consignors of equipment and other assets, but also include net profits on the

sale of inventory, as well as auction fees. Auction fees are made up of internet purchase fees

(incurred until June 2011), administrative and documentation fees on the sale of certain lots, and

auction advertising fees.

Auction commissions represent the percentage earned by the Company on the gross proceeds from

equipment and other assets sold at auction. The majority of auction commissions are earned as a pre-

negotiated fixed rate of the gross selling price. Other commissions are earned from at risk contracts,

when the Company guarantees a certain level of proceeds to a consignor or purchases inventory from

customers for sale at auction.

Guarantee contracts typically include a pre-negotiated percentage of the guaranteed gross proceeds

plus a percentage of proceeds in excess of the guaranteed amount. If actual auction proceeds are less

than the guaranteed amount, commission is reduced; if proceeds are sufficiently lower, the Company

can incur a loss on the sale. Losses, if any, resulting from guarantee contracts are recorded in the

period in which the relevant auction is completed. If a loss relating to a guarantee contract held at the

period end to be sold after the period end is known at the financial statement reporting date, the loss

is accrued in the financial statements for that period. The Company’s exposure from these guarantee

contracts fluctuates over time (note 24(b)).

For inventory contracts, the Company acquires title to items for a short time prior to a particular

auction sale. Revenue from inventory sales is presented net within auction revenues on the income

statement, as the Company takes title only for a short period of time and the risks and rewards of

ownership are not substantially different than the Company’s other revenue contracts.

Revenue is measured at the fair value of the consideration received or receivable. Revenue is shown

net of value-added tax and duties.

The Company recognizes revenue when the auction sale is complete and the Company has

determined that the auction proceeds are collectible.

57RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

2. Significant accounting policies (continued):

(e) Foreign currency translation:

The parent entity’s presentation and functional currency is the United States dollar. The functional

currency for each of the parent entity’s subsidiaries is the currency of the primary economic

environment, which is usually the currency of the country of residency. Accordingly, the financial

statements of the Company’s subsidiaries that are not denominated in United States dollars have

been translated into United States dollars using the exchange rate at the end of each reporting period

for asset and liability amounts and the monthly average exchange rate for amounts included in the

determination of earnings. Any gains or losses from the translation of asset and liability amounts are

included in foreign currency translation reserve in other comprehensive income, which is included as a

separate component of shareholders’ equity.

In preparing the financial statements of the individual subsidiaries, transactions in currencies other

than the entity’s functional currency are recognized at the rates of exchange prevailing at the dates of

the transaction. At the end of each reporting period, monetary items denominated in foreign

currencies are retranslated at the rates prevailing at that date. Foreign currency differences arising on

retranslation are recognized in earnings. Non-monetary items that are measured in terms of historical

cost in a foreign currency are not retranslated.

(f) Cash and cash equivalents:

Cash and cash equivalents is comprised of cash on hand, deposits with financial

institutions, and

other short-term, highly liquid investments with original maturities of three months or less when

acquired, that are readily convertible to known amounts of cash.

(g) Inventory:

Inventory is represented by goods held for auction and has been valued at the lower of cost,

determined by the specific identification method, and net realizable value.

(h) Financial instruments:

(i) Recognition of financial instruments:

Financial

instruments are recognized when the Company becomes a party to the contractual

provisions of the instrument.

Financial assets are derecognized when the contractual rights to the cash flows from the asset expire,

or when it transfers the financial asset, and substantially all the risks and rewards of ownership of the

asset, to another entity.

Financial

liabilities are derecognized when the Company’s obligations are discharged, cancelled or

they expire.

(ii) Financial assets at fair value through profit or loss:

Financial assets at fair value through profit or loss are financial assets held for trading. A financial

asset is classified as held for trading if it has been acquired principally for the purpose of selling in the

short term or if so designated by management and meets the criteria to designate at fair value. The

policy of management is to designate a financial asset as held for trading if the possibility exists that

it will be sold in the short term and the asset is subject to frequent changes in fair value.

58RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

2. Significant accounting policies (continued):

(h) Financial instruments (continued):

(ii) Financial assets at fair value through profit or loss (continued):

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or

loss recognized in earnings. The net gain or loss recognized in earnings incorporates any dividends or

interest earned on the financial asset.

Assets in this category are classified as current assets on the balance sheet. For all periods presented,

the assets included in this category are cash and cash equivalents.

(iii) Loans and receivables:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that

are not quoted in an active market. They arise when the Company provides services with no intention

of selling the receivable. They are measured at amortized cost using the effective interest method,

less any impairment. Interest income is recognized by applying the effective interest rate, except for

short term receivables when the recognition of interest would be immaterial.

Assets in this category are classified as current assets, except for those with maturities greater than

12 months after the balance sheet date, which are classified as non-current assets. Loans and

receivables are comprised of trade and other receivables, advances against auction contracts, other

current assets, and loan receivable on the balance sheet.

(iv) Effective interest method:

The effective interest method is a method of calculating the amortized cost of a financial asset or

financial liability and of allocating interest income or interest expense over the relevant period. The

effective interest rate is the rate that discounts estimated future cash receipts or payments (including

all fees on points paid or received that form an integral part of the effective interest rate, transaction

costs, and other premiums or discounts) through the expected life of the financial asset or financial

liability, or, where appropriate, a shorter period.

Income is recognized on an effective interest basis for debt instruments other than those financial

assets designated as fair value through profit or loss.

(v) Impairment of financial assets:

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of

impairment at each balance sheet date. Financial assets are impaired where there is objective

evidence that, as a result of one or more events that occurred after the initial recognition of the

financial asset, the estimated future cash flows of the investment have been impacted. Objective

evidence of impairment could include:

a. Significant financial difficulty of the issuer or counterparty;

b. Default or delinquency in interest or principal payments; or

It becomes probable that the borrower will enter bankruptcy or financial re-organization.

59RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

2. Significant accounting policies (continued):

(h) Financial instruments (continued):

(v) Impairment of financial assets (continued):

For financial assets carried at amortized cost, the amount of the impairment is the difference between

the asset’s carrying amount and the present value of estimated future cash flows, discounted at the

financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial

assets. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can

be related objectively to an event occurring after the impairment was recognized, the previously

recognized impairment loss is reversed through the earnings to the extent that the carrying amount

of the investment at the date the impairment is reversed does not exceed what the amortized cost

would have been had the impairment not been recognized.

(vi) Financial liabilities:

Auction proceeds payable, trade and other payables, and borrowings are measured at amortized cost

using the effective interest method. Transaction costs are offset against the outstanding principal of

the related borrowings and are amortized using the effective interest rate method.

(i) Property, plant and equipment:

All property, plant and equipment are stated at cost less accumulated depreciation. Cost includes all

expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed

assets includes the cost of materials and direct labour, any other costs directly attributable to bringing

the assets to working condition for their intended use, the costs of dismantling and removing items

and restoring the site on which they are located (if applicable) and capitalized interest on qualifying

assets. Subsequent costs are included in the asset’s carrying amount or recognized as a separate

asset, as appropriate, only when it is probable that future economic benefits associated with the item

will flow to the Company and the cost of the item can be measured reliably. All repairs and

maintenance costs are charged to earnings during the financial period in which they are incurred.

Gains and losses on disposal of an item of property, plant and equipment are determined by

comparing the proceeds from disposal with the carrying amount of property, plant and equipment,

and are recognized net within other income on the income statement.

When major components of an item of property, plant and equipment have different useful lives, they

are accounted for as separate items of property, plant and equipment and depreciated over their

respective lives. Depreciation is provided to charge the cost of the assets to operations over their

estimated useful lives based on their usage as follows:

Asset
Land improvements
Buildings
Computer software
Yard equipment
Automotive equipment
Computer equipment
Office equipment
Leasehold improvements

Basis
declining balance
straight-line
straight-line
declining balance
declining balance
straight-line
declining balance
straight-line

Rate/term

10%
15 - 30 years
3 - 5 years
20 - 30%
30%
3 - 5 years
20%
Terms of leases

60RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

2. Significant accounting policies (continued):

(i) Property, plant and equipment (continued):

No depreciation is provided on freehold land or on assets in the course of construction or

development.

Property, plant and equipment

is reviewed for

impairment whenever events or changes in

circumstances indicate that the carrying amount of the asset may not be recoverable. Where assets

are to be taken out of use, an impairment charge is levied. Where assets’ useful lives are changed, an

estimate is made of their new lives and the depreciation is charged at the new rate.

At the end of each reporting period, the Company reviews the carrying amounts of property, plant

and equipment to determine whether depreciation policies and useful lives remain appropriate and

also if there is any indication that those assets have suffered an impairment loss. If any such

indication exists, the recoverable amount of the asset is estimated in order to determine the extent of

the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an

individual asset, the Company estimates the recoverable amount of the cash-generating unit (“CGU”)

to which the asset belongs. CGUs are identified as the smallest group of assets that includes the asset

and generates cash inflows that are largely independent of the cash inflows from other assets or

groups of assets. The recoverable amount of the CGU is determined as the higher of fair value less

costs to sell and value in use. The value in use is calculated by applying a pre-tax discounted cash

flow modeling to management’s projection of future cash flows and any impairment is determined by

comparing the carrying value with the value in use. If the recoverable amount of an asset (or CGU) is

estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced

to its recoverable amount. An impairment loss is recognized immediately in earnings.

Legal obligations to retire and constructive obligations to restore property, plant and equipment and

assets under operating leases are recorded at management’s best estimate in the period in which

they are incurred, if a reasonable estimate can be made, with a corresponding increase in asset

carrying value. The liability is accreted to face value over the remaining estimated useful life of the

asset. The Company does not have any significant asset retirement obligations.

(j) Goodwill:

Goodwill represents non-identifiable intangible assets acquired on business combinations. Goodwill is

not amortized and is tested for impairment at least annually, or more frequently if events or changes

in circumstances indicate that

the asset might be impaired. Goodwill acquired in a business

combination is allocated to the CGU, or the group of CGUs, that is expected to benefit from the

synergies of the combination. This allocation is subject to an operating segment ceiling test and

reflects the lowest level at which that goodwill

is monitored for internal reporting purposes. The

impairment test compares the carrying amount of the goodwill against its implied fair value. To the

extent that the carrying amount of goodwill exceeds its fair value, an impairment loss is charged

against earnings.

(k) Investment property:

The Company’s investment property is held for capital appreciation, not for sale in the ordinary course

of business or for administrative purposes, and is carried at cost.

61RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

2. Significant accounting policies (continued):

(l) Non-current assets held for sale:

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be

recovered primarily through sale rather than through continuing use, are classified as held for sale.

Immediately before classification as held for sale, the assets, or components of a disposal group, are

measured at carrying amount in accordance with the Company’s accounting policies. Thereafter the

assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost

to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining

assets and liabilities on a pro rata basis. Impairment losses on initial classification as held for sale and

subsequent gains or losses on remeasurement are recognized in earnings.

(m) Share-based payments:

The Company has a stock-based compensation plan, which is described in the share-based payment

note. The Company uses a fair value method to account for employee share-based compensation;

cost attributable to options granted to employees is measured at the fair value of the underlying

option at the grant date using the Black-Scholes option pricing model. Details regarding this

determination are described in note 22. Compensation expense is recognized over the period in which

the service conditions are fulfilled with a corresponding increase to equity, ending on the date the

employees become fully entitled to the award. At the end of each reporting period, the Company

revises its estimate of the number of equity instruments expected to vest. The impact of the revision

of the original estimates, if any, is recognized in earnings such that the cumulative expense reflects

the revised estimate, with a corresponding adjustment to equity.

(n) Taxes:

Income tax expense represents the sum of current tax expense and deferred tax expense.

(i) Current tax:

The current tax expense is based on taxable profit for the period and includes any adjustments to tax

payable in respect of previous years. Taxable profit differs from earnings before income taxes as

reported in the condensed consolidated income statement because it excludes items of income or

expense that are taxable or deductible in other years and it further excludes items that are never

taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have

been enacted or substantively enacted by the balance sheet date.

(ii) Deferred tax:

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the

financial statements and the corresponding tax bases used in the computation of taxable profit, and is

accounted for using the balance sheet

liability method. Deferred tax liabilities are generally

recognized for all taxable temporary differences, and deferred tax assets are generally recognized for

all deductible temporary differences to the extent that it is probable that taxable profits will be

available against which those deductible temporary differences can be utilized. Such assets and

liabilities are not recognized if the temporary difference arises from goodwill or from the initial

recognition (other than in a business combination) of other assets and liabilities in a transaction that

affects neither the taxable profit nor earnings before income taxes.

62RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

2. Significant accounting policies (continued):

(n) Taxes (continued):

(ii) Deferred tax (continued):

Deferred tax liabilities are recognized for taxable temporary differences associated with investments

in subsidiaries except where the Company is able to control the reversal of the temporary difference

and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred

tax assets arising from deductible temporary differences associated with such investments and

interests are only recognized to the extent that it is probable that there will be sufficient taxable

profits against which to utilize the benefits of the temporary differences and they are expected to

reverse in the foreseeable future.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary

differences, to the extent that it is probable that future taxable profits will be available against which

they can be utilized. The carrying amount of deferred tax assets is reviewed at each balance sheet

date and reduced to the extent that it is no longer probable that sufficient taxable profits will be

available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the

period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that

have been enacted or substantively enacted by the balance sheet date. The measurement of deferred

tax liabilities and assets reflects the tax consequences that would follow from the manner in which the

Company expects, at the reporting date, to recover or settle the carrying amount of its assets and

liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current

tax assets against current tax liabilities and when they relate to income taxes levied by the same

taxation authority and the Company intends to settle its current tax assets and liabilities on a net

basis.

(iii) Current and deferred tax for the period:

Current and deferred tax are recognized as an expense or income in earnings, except when they

relate to items credited or debited directly to equity, in which case the tax is also recognized directly

in equity, or where they arise from the initial accounting for a business combination.

(o) Net earnings per share:

Net earnings per share has been calculated based on the weighted average number of common

shares outstanding. Diluted net earnings per share has been calculated after giving effect to

outstanding dilutive options calculated by adjusting the earnings attributable to shareholders and the

weighted average number of shares outstanding for all dilutive shares.

(p) New and amended accounting standards:

At the date of authorization of these financial statements, the following applicable standards and

interpretations were issued but not yet effective:

63RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

2. Significant accounting policies (continued):

(p) New and amended accounting standards (continued):



In 2009, the IASB issued the first part of IFRS 9 Financial Instruments. This standard is

anticipated to be effective for periods starting on or after January 1, 2015. The Company is

currently evaluating the impact of this new standard on its consolidated financial statements.

In May 2011, the IASB issued new standards addressing scope of reporting entity. IFRS 10

Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests

in Other Entities. These new standards are effective for years beginning on or after January 1,

2013 with early adoption permitted under certain circumstances. The IASB also renamed IAS 27

as Separate Financial Statements, to reflect that the content now only deals with such, and

revised and reissued IAS 28 Investments in Associates and Joint Ventures to align with the new

consolidation guidance. The Company is currently evaluating the impact of these new standards

on its consolidated financial statements.



In May 2011, the IASB also issued IFRS 13 Fair Value Measurement intended to provide a single

source of guidance on how to measure fair value where it is already required or permitted by

another IFRS, enhancing disclosure requirements for information about fair value measurements.

This new standard is effective for years beginning on or after January 1, 2013. The Company is

currently evaluating the impact of this new standard on its consolidated financial statements.



The IASB has a number of other projects outstanding that will result in exposure drafts and

eventually new standards issued. However, the timing and outcome of these projects are too

uncertain to list here.

3. Critical accounting estimates and judgments:

The preparation of financial statements in conformity with IFRS requires the use of certain critical

accounting estimates. It also requires management to exercise its judgment in the process of applying the

Company’s accounting policies and assumptions. Estimates and judgments are continually evaluated and

are based on historical experience and other factors including expectations of future events that are

believed to be reasonable under the circumstances.

Key sources of estimation uncertainty are the areas where assumptions and estimates have a significant

risk of causing a material adjustment to the carrying amount of assets and liabilities. These are

depreciation methods; valuation of at risk business contracts including inventory held at the period end

and commitments under guarantee; valuation and recognition of income taxes; and the calculation of

share-based payments. The methods of calculating these estimates are discussed elsewhere in these

consolidated financial statements. Actual results may differ from these estimates.

Critical

judgments that have a higher degree of

judgment and the most significant effect on the

Company’s financial

reporting, apart

from those involving estimates (discussed below),

include:

determination of operating segments and identification of cash-generating units.

64RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

4. Segmented information:

The Company’s principal business activity is the sale of industrial equipment and other assets at auctions.

This business represents a single reportable segment.

The Company determines its activities by geographic segment based on the location of its auctions.

Summarized information by geographic segment is as follows:

Year ended December 31, 2011:

Auction revenues
Property, plant and equipment,

investment property and
goodwill
Liabilities

Year ended December 31, 2010:

Auction revenues
Property, plant and equipment,

investment property and
goodwill
Liabilities

As at January 1, 2010:

Property, plant and equipment,

investment property and
goodwill
Liabilities

United States

C anada

Europe

Other

C ombined

195,274

100,404

51,403

49,018

396,099

352,463
(111,591)

168,924
(182,495)

105,086
(30,479)

71,707
(24,770)

698,180
(349,335)

185,486

82,894

51,428

37,561

357,369

317,809
(65,866)

175,928
(172,563)

109,875
(26,941)

69,872
(27,321)

673,484
(292,691)

298,625
(77,812)

176,906
(168,146)

105,360
(33,446)

62,647
(34,006)

643,538
(313,410)

5. Auction revenues:

Years ended December 31,

2011

2010

Auction commissions
Auction fees

342,774
53,325
396,099

326,768
30,601
357,369

6. Expenses by nature:

The Company classifies expenses according to function in the consolidated income statements. The

following items are listed by function into additional components by nature:

Direct expenses:

Years ended December 31,

2011

2010

Employee compensation expense
Travel, advertising and promotion
Other direct expenses

17,574
19,407
11,063

48,044

17,371
20,525
9,125

47,021

65RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

6. Expenses by nature (continued):

Selling, general and administrative expenses:

Years ended December 31,

2011

2010

Employee compensation expense
Buildings and facilities
Travel, advertising and promotion
Other general and administrative expenses

Depreciation

(a) Employee compensation expense:

127,780
38,723
15,485
19,947
201,935
42,408

244,343

111,279
37,795
13,714
18,232
181,020
37,813

218,833

Years ended December 31,

2011

2010

Wages, salaries and other benefits
Annual leave and other short-term compensated

absences

Social security costs
Pension costs – defined contribution plans
Employee share purchase plan contributions
Share-based compensation expense
Incentive compensation

113,850

104,676

500
8,877
2,195
1,203
3,875
14,854

386
8,280
1,612
1,127
3,392
9,177

145,354

128,650

(b) Defined contribution plans:

The employees of the Company are members of retirement benefit plans to which the Company

matches up to a specified percentage of employee contributions or,

in certain jurisdictions,

contributes a specified percentage of payroll costs as mandated by the local authorities. The only

obligation of the Company with respect to the retirement benefit plans is to make the specified

contributions.

During the year, a total expense of $2,195,000 (2010: $1,612,000) was recognized in earnings,

representing Company contributions to these defined contribution plans at rates specified in the terms

of the plans.

7. Finance income and costs:

The finance income and costs for the Company are disaggregated as follows:

Years ended December 31,

2011

2010

Finance income:

Interest income on short-term bank deposits
Other interest income

Finance costs:

Interest on borrowings
Other interest expense

734
1,592

2,326

5,382
159

5,541

377
1,658

2,035

5,043
173

5,216

66RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

Income taxes:

(a) Income tax recognized in earnings:

Years ended December 31,

2011

2010

C urrent tax expense:
C urrent period
Adjustments recognized in the current year in relation

to the current tax of prior years

Deferred tax expense (recovery):

Origination and reversal of temporary differences
Adjustments recognized in the current year in relation

to the deferred tax of prior years

C hange in unrecognized deferred tax assets:

Deferred income tax assets previously unrecognized

used to reduce current tax

Other changes in unrecognized deferred income

tax assets

27,550

23,868

(1,454)

(1,876)

26,096

21,992

(1,078)

(857)

1,744

1,751

494

4,126

5,286

788

1,009

2,691

Total income tax expense

31,382

24,683

The expense for the year can be reconciled to earnings before income taxes as follows:

Years ended December 31,

2011

2010

Earnings before income taxes
Statutory federal and state tax rate in the United States

Expected income tax expense
Non-deductible expenses
C hange in unrecognized deferred income tax assets
Different tax rates of subisidaries operating in foreign

jurisdictions

Other

108,015
38.50%

41,586
2,715
4,620

(17,967)
428

90,358
38.50%

34,788
2,306
1,797

(14,519)
311

31,382

24,683

(b) Income tax recognized directly in equity:

Years ended December 31,

2011

2010

C urrent tax:

Excess tax deductions related to share-based compensation

(1,485)

(147)

Deferred tax:

Arising on income and expenses taken directly to equity:

Translation of net investments of foreign operations

Arising on transactions with equity participants:

Share-based compensation

(155)

1,428

(212)

(343)

273

(217)

67RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

Income taxes (continued):

December 31, 2011

Opening
Balance

Recognized
in Net
Income

Recognized
in Equity

Recognized in other
comprehensive
income

C losing
Balance

Working capital
Property, plant and equipment
Goodwill
Unused tax losses
Share-based compensation
Other

210
(11,030)
(9,044)
5,131
3,318
(1,453)

864
(1,386)
(1,054)
(3,236)
(301)
(173)

-
-
-
-
(1,428)
-

13
143
17
(29)
-
286

1,087
(12,273)
(10,081)
1,866
1,589
(1,340)

(12,868)

(5,286)

(1,428)

430

(19,152)

December 31, 2010

Opening
Balance

Recognized
in Net
Income

Recognized
in Equity

Recognized in other
comprehensive
income

C losing
Balance

Working capital
Property, plant and equipment
Goodwill
Unused tax losses
Share-based compensation
Other

1,227
(6,684)
(8,224)
3,025
3,003
(2,427)

(1,026)
(3,836)
(824)
2,065
588
342

-
-
-
-

(273)

9
(510)
4
41

-
632

210
(11,030)
(9,044)
5,131
3,318
(1,453)

(10,080)

(2,691)

(273)

176

(12,868)

December 31,

Working capital
Property, plant and

equipment

Goodwill
Unused tax losses
Share-based compensation
Other
Netting of tax assets and

Assets

2011

2010

Liabilities
2011

2010

2011

2010

Net

1,087

210

1,087

210

669
-
1,866
1,589
1,663

-
5,131
3,318
888

(12,942)
(10,081)
-
-
(3,003)

(11,057)
(9,044)
-
-
(2,341)

(12,273)
(10,081)
1,866
1,589
(1,340)

(11,030)
(9,044)
5,131
3,318
(1,453)

liabilities

(5,425)

(4,431)

5,425

4,431

1,449

5,143

(20,601)

(18,011)

(19,152)

(12,868)

The following deferred tax assets have not been recognized at the balance sheet date:

December 31,

2011

2010

Tax losses that expire on or before December 31, 2030
Tax losses that do not expire
Deductible temporary differences

4,477
4,157
528

9,162

1,348
2,998
427

4,773

68RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

Income taxes (continued):

Earnings retained by subsidiaries and equity-accounted investments amount

to approximately

$381,000,000 (2010: $342,000,000). The Company accrues withholding and other taxes that would

become payable on the distribution of these earnings only to the extent that either the Company does

not control the relevant entity or it is expected that these earnings will be remitted in the foreseeable

future.

9. Net earnings per share:

Year ended December 31, 2011

Net earnings

Per share amount

Basic net earnings per share
Effect of dilutive securities:

Stock options

Diluted net earnings per share

Year ended December 31, 2010

Basic net earnings per share
Effect of dilutive securities:

Stock options

Diluted net earnings per share

76,633

106,164,237

819,520

76,633

106,983,757

0.72

Net earnings

Per share amount

65,675

105,521,960

647,239

65,675

106,169,199

0.62

For the year ended December 31, 2011, stock options to purchase 884,811 common shares were

outstanding but were excluded from the calculation of diluted earnings per share as they were anti-dilutive

(2010: 1,027,463).

10. Trade and other receivables:

December 31,
2011

December 31,
2010

January 1,
2010

Trade receivables
C onsumption taxes receivable
Other receivables

33,139
26,157
1,684

33,034
24,837
1,947

60,980

59,818

23,879
26,084
2,000

51,963

Trade receivables are secured by the equipment they relate to as it is Company policy that equipment is

not released until payment has been collected. Furthermore, trade receivables are interest bearing after

the seven day settlement period. Other receivables are unsecured and non-interest bearing.

Trade receivables are due for settlement no more than seven days from the date of recognition. Trade

receivables of $33,139,000 (2010: $33,034,000) are more than seven days past due but not considered

impaired. As at December 31, 2011 there are $2,653,000 impaired receivables which have been provided

for in the balance sheet because they are over six months old or specific situations where recovering the

debt is considered unlikely (2010: $4,033,000).

69RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

10. Trade and other receivables (continued):

Consumption taxes receivable are deemed fully recoverable unless disputed by the relevant tax authority

at which point they are written off as appropriate. The other classes within trade and other receivables do

not contain impaired assets.

11. Inventory:

Every period end inventory is reviewed to ensure that it is recorded at the lower of cost and net realizable

value. At December 31, 2011, a write-down of $469,000 (2010: $nil) was recorded. The cost of inventory

purchases made during the year relating to inventory that was sold was $763,121,000 (2010:

$322,555,000). The cost of inventory purchases is netted against proceeds from inventory sales and

included in auction revenues.

Of inventory held at December 31, 2011, 99% is expected to be sold by the end of March 2012, with the

remainder to be sold by the end of April 2012. Of inventory held at December 31, 2010, 96% was sold by

the end of March 2011, with the remainder sold by the end of May 2011. Inventory is held for an average

of approximately three weeks.

12. Prepaid expenses and deposits:

Prepaid expenses
Refundable deposits

13. Assets held for sale:

December 31,
2011

December 31,
2010

January 1,
2010

6,378
3,545

9,923

6,282
4,283

10,565

6,167
1,964

8,131

December 31,
2011

December 31,
2010

January 1,
2010

Assets held for sale

421

3,675

As at January 1, 2010, the Company held land and buildings relating to the former Houston permanent

auction site and Lincoln administrative offices, which it intended to sell as these locations had been

replaced by other facilities. These assets were sold during 2010 achieving profit on disposal of

$1,231,000.

As at December 31, 2010, the Company had the intention of disposing of land and buildings held relating

to the former Vancouver, British Columbia, permanent auction site, which it intended to sell as this

location had been replaced by a new facility. This site was sold during 2011 achieving profit on disposal of

$3,482,000.

70RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

14. Loan receivable:

The loan receivable is a secured promissory note of $5,300,000 repayable by the debtor in monthly

instalments with the final payment due February 28, 2014. The note is secured by a first-ranking deed of

trust registered against the property owned by the debtor and leased to the Company. The note bears

interest at a fixed rate of 6.00% per annum and can be repaid early without penalty.

71RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

15. Property, plant and equipment:

Land and
improvements

Buildings

Land, buildings
and leasehold
improvements
under
development

Yard and
automotive
equipment

C omputer
software and
equipment

C omputer
software and
equipment
under
development

Office
equipment

Leasehold
improvements

Total

C ost:

Balance, January 1, 2010

Additions
Disposals
Transfers from property under

development to completed assets

Reclassified as held for sale
Foreign exchange movement

Balance, December 31, 2010

Additions
Disposals
Transfers from property under

286,297
51
(544)

232,160
109
(2,812)

57,367
44,810
-

49,069
7,116
(5,160)

44,184
843
(4,229)

14,084
11,067
-

17,275
540
(727)

4,396
1,066
-

47,285
(436)
5,617

24,059
(87)
4,662

(84,518)
-
(2,356)

2,842
-
663

23,836
-
2,874

(23,836)
-
473

2,848
-
372

7,484
-
(12)

338,270
2,007
(2,857)

258,091
277
(155)

15,303
55,953
-

54,530
8,971
(7,395)

67,508
894
(154)

1,788
9,918
(224)

20,308
460
(315)

12,934
97
(204)

development to completed assets

Foreign exchange movement

5,169
(2,652)

700
(2,604)

(9,367)
(11)

719
(822)

8,042
(1,715)

(8,042)
(56)

206
(359)

2,573
(221)

704,832
65,602
(13,472)
-
-

(523)
12,293

768,732
78,577
(11,304)
-
-
(8,440)

Balance, December 31, 2011

339,937

256,309

61,878

56,003

74,575

3,384

20,300

15,179

827,565

72RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

15. Property, plant and equipment (continued):

Accumulated depreciation:
Balance, January 1, 2010

Depreciation for the year
Disposals
Reclassified as held for sale
Foreign exchange movement

Balance, December 31, 2010
Depreciation for the period
Disposals
Foreign exchange movement

Land and
improvements

Buildings

(19,684)
(5,109)
117
71
13

(40,882)
(8,866)
1,579
33
(661)

(24,592)
(7,341)
72
331

(48,797)
(9,256)
72
618

Balance, December 31, 2011

(31,530)

(57,363)

Land, buildings
and leasehold
improvements
under
development

Yard and
automotive
equipment

C omputer
software and
equipment

C omputer
software and
equipment
under
development

Office
equipment

Leasehold
improvements

Total

(21,756)
(7,835)
3,240
-

(297)

-
-
-
-

(26,648)
(7,876)
4,782
411

-
-
-
-

(22,853)
(12,556)
(313)

-
(1,599)

(37,321)
(14,090)
706
1,228

(6,998)
(2,603)
694
-
(94)

(9,001)
(2,383)
228
197

(2,551)
(844)

-
-

(114,724)
(37,813)
5,317
104
(2,632)

(3,389)
(1,462)
201
78

(149,748)
(42,408)
6,061
2,863

-
-
-
-

(29,331)

(49,477)

(10,959)

(4,572)

(183,232)

Net carrying amount:

As at January 1, 2010

As at December 31, 2010

As at December 31, 2011

266,613

191,278

313,678

209,294

308,407

198,946

57,367

15,303

61,878

27,313

27,882

26,672

21,331

30,187

25,098

14,084

1,788

3,384

10,277

11,307

9,341

1,845

9,545

10,607

590,108

618,984

644,333

73RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

15. Property, plant and equipment (continued):

During the year, interest of $1,171,000 (2010: $2,014,000) was capitalized to the cost of assets under

development. These interest costs relating to qualifying assets are capitalized at a weighted average rate of

3.96% (2010: 6.17%).

16. Investment property:

C ost:

Balance, January 1, 2010

Foreign exchange movement

Balance, December 31, 2010

Foreign exchange movement

Balance, December 31, 2011

7,837
409

8,246
(356)

7,890

Investment property held at the balance sheet date is comprised of land and site improvements which are non-

depreciated asset categories. The fair value of investment property as at January 1, 2010 was approximately $36

million; there was no significant change in real estate prices in the geographies where investment property is

held for the period from January 1, 2010 to December 31, 2011. The fair value of the Company’s investment

property has been arrived at on the basis of a valuation carried out on January 1, 2010 by local real estate

agents not related to the Company. These agents are members of appropriate real estate associations for their

jurisdiction, and have the appropriate recent experience in the valuation of properties in the relevant locations.

The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

17. Goodwill:

C ost:

Balance, January 1, 2010

Foreign exchange movement

Balance, December 31, 2010

Foreign exchange movement

Balance, December 31, 2011

45,593
661

46,254
(297)

45,957

Goodwill is subject to annual impairment reviews. Goodwill is attributed to the Company’s CGUs or groups of

CGUs and the recoverable amount of each CGU or group of CGUs is determined based on calculating its value in

use. This is calculated by applying discounted cash flow modeling to management’s own projections, adjusted to

remove the effect of future capital expenditures, covering a five year period. Management’s five year projections

are based on historical results and have been prepared on the basis of strategic plans, knowledge of the market

and management’s views on achievable growth in market share over the longer term. Cash flows beyond the five

year period are extrapolated using a long term growth rate estimated to be 2.00%. A weighted average pre-tax

discount rate of 12.57% is used, which is the Company’s discount rate with a risk premium reflecting the relative

risks in the markets in which the CGU’s with goodwill operate. The value in use is compared to the carrying

amount in order to determine whether impairment has occurred.

74RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

17. Goodwill (continued):

The carrying value of goodwill has been allocated for impairment testing purposes to the following CGU or group

of CGUs:

USA group of C GUs
C anada C GU

December 31,
2011

December 31,
2010

January 1,
2010

33,326
12,631

45,957

33,326
12,928

46,254

33,326
12,267

45,593

There has been no impairment of goodwill.

A sensitivity analysis had been performed on the base case assumptions used for assessing the goodwill.

Management has concluded that there are no reasonably possible changes in key assumptions which would

cause the carrying amount of any component of goodwill to exceed its value in use.

18. Trade and other payables:

December 31,
2011

December 31,
2010

January 1,
2010

Trade payables
Accrued liabilities
Social security and sales taxes payable
Net consumption taxes payable
Other payables

22,168
40,637
21,490
7,422
9,151

34,625
21,200
14,034
6,866
10,960

100,868

87,685

26,223
31,355
16,368
7,953
6,503

88,402

Trade payables are normally settled on 30 day terms and accrued liabilities have an average term of two

months. All current trade and other payables are interest-free and payable within 12 months.

75RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

19. Borrowings:

C urrent Borrowings
Non-current Borrowings

Term loan, denominated in C anadian dollars,
unsecured, bearing interest at 6.385%, due
in quarterly installments of interest only,
with the full amount of the principal due
in 2016.

Term loan, denominated in United States
dollars, unsecured, bearing interest at
5.61%, due in quarterly installments of
interest only with the full amount of the
principal due in 2011.

Revolving loan, denominated in C anadian
dollars, unsecured, bearing interest at
C anadian bankers' acceptance rate plus a
margin between 0.65% and 1.00%, due in
monthly installments of interest only. The
revolving credit facility is available until
January 2014. As at December 31, 2011,
the effective rate of interest on this loan,
including the margin, was 2.00%.

Term loan, denominated in United States
dollars, unsecured, bearing interest at a
base rate of 1.65% plus a margin between
0.65% and 1.00%, due in quarterly
installments of interest only, with the full
amount of the principal due in 2013.

Term loan, denominated in United States
dollars, unsecured, bearing interest at a
base rate of 1.16% plus a margin between
0.65% and 1.00%, due in quarterly
installments of interest only, with the full
amount of the principal due in 2013.

Total Borrowings

December 31,
2011

C arrying value
December 31,
2010

January 1,
2010

12,595

1,087

19,326

58,627

59,977

56,889

29,998

29,966

30,254

30,911

29,282

15,000

30,000

133,881

146,476

135,886

136,973

116,137

135,463

Current borrowings at December 31, 2011 are comprised of drawings in different currencies on the Company’s

committed revolving credit facility. These have a weighted average interest rate of 2.48% at the end of this

reporting period.

76RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

19. Borrowings (continued):

As at December 31, 2011, principal repayments for the remaining period to the contractual maturity dates are as

follows:

2012
2013
2014
2015
2016
Thereafter

Face value

-
45,000
30,361
-
58,764
-

134,125

As at December 31, 2011, the Company had available committed revolving credit facilities aggregating

$146,687,000, of which $136,687,000 is available until January 2014. The Company also had uncommitted

credit facilities aggregating $261,215,000, of which $166,236,000 expires November 2014. During the fourth

quarter of 2011, the Company entered into a committed seasonal bulge credit facility for $50 million, which is

available in February, March, August and September until January 2014. This credit facility is not included in the

available credit facilities total as at December 31, 2011.

20. Dividends paid and proposed:

(a) Declared and paid:

Years ended December 31,

2011

2010

Dividends on common shares expressed in cents per share:

Final dividend for 2010: 10.5 (2009: 10.0)
Interim (first quarter) dividend for 2011: 10.5 (2010: 10.0)
Interim (second quarter) dividend for 2011: 11.25 (2010: 10.5)
Interim (third quarter) dividend for 2011: 11.25 (2010: 10.5)

11,109
11,149
11,962
11,963

10,540
10,553
11,085
11,088

46,183

43,266

(b) Declared and undistributed:

In addition to the above dividends, since the end of the year the Directors have recommended the payment

of a final dividend of 11.25 cents per share (2010: 10.5 cents per share), accumulating to a total dividend of

$11,969,000 (2010: $11,109,000). The aggregate amount of the proposed final dividend is expected to be

paid on March 9, 2012 out of retained earnings. This dividend payable has not been recognized as a liability

in the financial statements. The payment of this dividend will not have any tax consequence for the

Company.

21. Share capital:

(a) Authorized:

Unlimited number of common shares, without par value.

Unlimited number of senior preferred shares, without par value, issuable in series.

Unlimited number of junior preferred shares, without par value, issuable in series.

77RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

21. Share capital (continued):

(b) Issued:

All issued shares are fully paid. No preferred shares have been issued.

22. Share-based payment:

(a) Stock option plan:

The Company has a stock option plan that provides for the award of stock options to selected employees,

directors and officers of the Company and to other persons approved by the Board of Directors. Stock

options are granted at the fair market value of the Company’s common shares at the grant date, with

vesting periods ranging from immediate to five years and a term not exceeding 10 years. At December 31,

2011, there were 4,856,892 (2010: 5,368,589) shares authorized and available for grants of options under

the stock option plan.

Stock option activity for 2011 and 2010 is presented below:

Outstanding, January 1, 2010

Granted
Exercised
Forfeited

Outstanding, December 31, 2010

Granted
Exercised
Forfeited

Outstanding, December 31, 2011

Exercisable, December 31, 2010

Exercisable, December 31, 2011

C ommon Shares
Under Option

Weighted Average
Exercise Price

2,922,587
591,704
(269,415)
(10,100)
3,234,776
517,460
(738,304)
(5,763)

3,008,169

2,256,031

2,080,095

15.13
21.79
12.17
24.39
16.57
25.73
13.17
22.37

18.97

15.55

17.42

The options outstanding at December 31, 2011 expire on dates ranging to September 8, 2021.

The following is a summary of stock options outstanding and exercisable at December 31, 2011:

Range of
Exercise Prices

$5.18
$8.82 - $10.80
$14.23 - $14.70
$18.67 - $19.23
$21.66 - $23.11
$24.39 - $25.91

Options Outstanding

Options Exercisable

Weighted
Average
Remaining Life

Weighted
Average
Exercise Price

Number

Weighted
Average
Exercise Price

Number

66,724
207,781
960,835
328,241
559,777
884,811
3,008,169

1.1
2.6
6.4
5.2
8.3
7.8

5.18
9.85
14.54
18.68
21.87
25.24

66,724
207,781
764,561
328,241
315,627
397,161
2,080,095

5.18
9.85
14.56
18.68
21.82
24.41

78RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

22. Share-based payment (continued):

(b) Share-based compensation:

During the year, the Company recognized compensation cost of $3,875,000 (2010: $3,392,000) in respect

of options granted under its stock option plan. This amount was calculated in accordance with the fair value

method of accounting.

The fair value of the stock option grants was estimated on the date of the grant using the Black-Scholes

option pricing model with the following assumptions:

Years ending December 31,

Risk free interest rate
Expected dividend yield
Expected lives of options
Expected volatility

2011

2.5%
1.64%
5 years
34.9%

2010

2.7%
1.84%
5 years
34.4%

Risk free interest rate is the US Treasury Department five year treasury yield curve rate on the date of the

grant. Expected dividend yield assumes a continuation of the most recent dividend payment for the coming

quarterly dividends. Expected lives of options is based on the age of the options on the exercise date over

the past five years. Expected volatility is based on the historical share price volatility over the past five

years.

The weighted average grant date fair value of options granted during the year was $7.69 per option (2010:

$6.40). The fair value method requires that this amount be amortized over the relevant vesting periods of

the underlying options.

The Company has an employee share purchase plan that allows all employees that have completed one year

of service to contribute funds to purchase common shares at the current market value at the time of share

purchase. Employees may contribute up to 4% of their salary. The Company will match between 50% and

100% of the employee’s contributions, depending on the employee’s length of service with the Company.

The Company has an Executive Long Term Incentive Plan (“ELTIP”) available to the Company's executives

and certain other members of senior management, to facilitate their direct investment in and ownership of

common shares of the Company. The maximum ELTIP award available to participants ranges from $50,000

to $125,000 and is only paid by the Company when a participant contributes an equivalent amount to the

ELTIP, which amount is invested by the ELTIP administrator in common shares purchased in the open

market on the NYSE. Award entitlement may be carried forward for one year should a participant choose not

to contribute to the ELTIP in a particular year; any unused entitlement expires after one year. Participants

generally may not withdraw shares from the ELTIP until retirement.

The Company also has a Long Term Incentive Plan for Non-Executive Directors (“LTIP”), to facilitate their

direct investment in and ownership of common shares of the Company. A designated portion of each non-

executive director's annual fee is paid into the LTIP: $80,000 for the Board Chairman and $60,000 for the

Board Members. These funds are invested by the LTIP administrator in open market purchases of common

shares of the Company. Participants may not withdraw shares from the LTIP until retirement.

79RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

23. Commitments:

(a) Commitments for expenditure:

As at December 31, 2011, the Company had committed to, but not yet incurred, $7,097,000 in capital

expenditure for property, plant and equipment (2010: $5,053,000).

(b) Operating lease commitments – the Company as lessee:

The Company has entered into commercial leases for various auction sites and offices located in Canada, the

U.S.A., the Netherlands, Spain, Germany, the U.K., Australia, China, Dubai, Turkey, Mexico, and Panama.

The majority of these leases are non-cancellable. The Company also has further operating leases for certain

motor vehicles and small office equipment where it is not in the best interest of the Company to purchase

these assets.

The majority of the Company’s operating leases have a fixed term with a remaining life between six months

and 22 years with renewal terms included in the contracts. The leases have varying contract terms,

escalation clauses and renewal rights. There are no restrictions placed upon the lessee by entering into

these leases, other than restrictions on use of property, sub-letting and alterations. In certain leases there

are options to purchase; if the intention to take this option changes subsequent to the commencement of

the lease, the Company re-assesses the classification of the lease as operating.

The future aggregate minimum lease payments under non-cancellable operating leases, excluding

reimbursed costs to the lessor, are as follows:

December 31,

2011

2010

Not later than one year
Later than one year and no later than five years
Later than five years

9,230
29,448
104,067

142,745

9,237
29,174
108,321

146,732

The lease expenditure charged to earnings during the year was $15,510,000 (2010: $15,331,000).

24. Contingencies:

(a) Legal and other claims:

The Company is subject to legal and other claims that arise in the ordinary course of its business. The

Company does not believe that the results of these claims will have a material effect on the Company’s

balance sheet or income statement.

(b) Guarantee contracts:

In the normal course of its business, the Company will

in certain situations guarantee to a consignor a

minimum level of proceeds in connection with the sale at auction of that consignor’s equipment.

At December 31, 2011, total outstanding guarantees under contract were $23,537,000 for industrial

equipment, 76% of which are due to be sold prior to the end of March 2012, with the remainder to be sold in

April 2012 (2010: $7,860,000 of which 90% sold prior to the end of March 2011, with the remainder sold in

April 2011).

80RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

24. Contingencies (continued):

(b) Guarantee contracts (continued):

The Company also had guarantees under contract totalling $21,187,000 relating to agricultural auctions,

79% of which are due to be sold prior to the end of April 2012, with the remainder to be sold in June 2012

(2010: $21,008,000 of which 80% sold prior to the end of April 2011, with the remainder sold in June

2011).

The outstanding guarantee amounts are undiscounted and before estimated proceeds from sale at auction.

25. Related party transactions:

There have been no guarantees provided or received for any related party receivables.

(a) Transactions with subsidiaries:

The names of the Company’s subsidiaries are set out in note 28.

There are no outstanding balances as at December 31, 2011 and 2010 as all significant inter-company

balances and transactions have been eliminated upon consolidation.

(b) Transactions with key management personnel:

The Company’s key management personnel

include the directors of the Company and Board appointed

officers.

Total aggregate compensation made to key management personnel of the Company is set out below:

Years ended December 31,

2011

2010

Short-term employee benefits
Post-employment benefits
Share-based payment

7,726
59
1,568

9,353

5,810
59
1,355

7,224

26. Capital risk management:

The Company’s objectives when managing its capital are to maintain a financial position suitable for providing

financial capacity and flexibility to meet its growth strategies, to provide an adequate return to shareholders, and

to return excess cash through the payment of dividends. The Company’s invested capital is defined as the sum of

shareholders’ equity and long-term borrowings.

The Company executes a planning and budgeting process to determine the funds required to ensure the

Company has appropriate liquidity to meets its operating and growth objectives. The Company ensures that

there are sufficient credit facilities to meet its current and future business requirements, taking into account its

anticipated cash flows from operations and its holding of cash and cash equivalents.

The Company complies with covenant criteria established by its lenders. These include tangible net worth and

leverage ratio measurements. As at December 31, 2011 and 2010, the Company is in compliance with these

covenants.

81RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

26. Capital risk management (continued):

The Company is not subject to any statutory capital requirements, and has not made any changes with respect

to its overall capital management strategy during the years ended December 31, 2011 and 2010.

27. Financial instruments:

(a) Fair value:

The fair value of financial instruments traded in active markets is based on quoted market prices at the

balance sheet date. The quoted market price used for financial assets held by the Company is the current

bid price: the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market is determined using valuation

techniques. The Company uses a variety of methods and makes assumptions that are based on market

conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar

instruments are used for non-current borrowings. Other techniques, such as estimated discounted cash

flows, are used to determine fair value for the remaining financial instruments, if any.

The carrying value of the Company’s trade and other current receivables, advances against auction

contracts, current portion of the loan receivable, auction proceeds payable, trade and other payables, and

current borrowings approximate their fair values due to their short terms to maturity. Based on this

methodology, the fair value of the non-current portion of its loan receivable as at December 31, 2011

approximates the carrying value of $4,915,000 (2010: $5,026,000). Based on this methodology, the fair

value of its non-current borrowings as at December 31, 2011 was approximately $139,633,000 (2010:

$141,622,000) as compared to the carrying value of $133,881,000 (2010: $135,886,000).

(b) Financial risk management:

The Company and its subsidiaries are exposed to a variety of financial risks by virtue of its activities,

including foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Board of Directors has

overall responsibility for the oversight of the Company’s risk management.

(i) Foreign currency risk:

The Company operates internationally and is exposed to foreign currency risk, primarily relating to the

Canadian and U.S. dollars, and the Euro, arising from sales, purchases and loans that are denominated in

currencies other than the respective functional currencies of the Company’s international operations. The

Company also has various investments in non-U.S. dollar functional currency subsidiaries, whose net assets

are exposed to foreign currency translation risk. The Company has elected not to actively manage this

exposure at this time.

82RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

27. Financial instruments (continued):

(b) Financial risk management (continued):

(i) Foreign currency risk (continued):

For the year ended December 31, 2011, with other variables unchanged, a 1.00% strengthening

(weakening) of the U.S. dollar against the Canadian dollar and Euro would impact the Company’s financial

statements as follows:



increase (decrease) net earnings by approximately $13,000 (2010: $142,000) due to the translation of

the foreign operations’ statements of operations into the Company’s reporting currency, the U.S. dollar;

decrease (increase) net earnings by approximately $94,000 (2010: $101,000) due to the revaluation of

significant foreign currency denominated monetary items; and

decrease (increase) other comprehensive income by approximately $3,010,000 (2010: $3,097,000).

(ii) Interest rate risk:

The Company’s interest rate risk mainly arises from the interest rate impact on the Company’s cash and

cash equivalents and floating rate debt. Cash and cash equivalents earn interest based on market interest

rates. As at December 31, 2011 and 2010, the Company is not exposed to significant interest rate risk on its

cash and cash equivalents.

The Company’s interest rate management policy is generally to borrow at fixed rates. However, floating rate

funding has been used if the terms of borrowings are favourable. The Company will consider utilizing

derivative instruments such as interest rate swaps to minimize its exposure to interest rate risk. As at

December 31, 2011, approximately 24.47% (2010: 23.36%) of the Company’s borrowings are at floating

rates of interest. The weighted average interest rate paid by the Company on its outstanding floating rate

borrowings during the year was 1.97% (2010: 1.44%).

During the year a portion of the Company’s interest was capitalized as it relates to the development of

various new and replacement auction sites as well as other capital expenditures. As a result, changes in

interest rates on these borrowings will have a smaller affect the Company’s net earnings or other

comprehensive income until such time as these developments are put into use and amortized. However,

cash outflows have the potential to be negatively impacted by increases in interest rates. For the year ended

December 31, 2011, with other variables unchanged, a 100 basis points or 1.00% increase (decrease) in

interest rates would decrease (increase) net earnings by approximately $108,000 (2010: $210,000).

(iii) Credit risk:

Credit risk is the risk of financial loss to the Company arising from the non-performance by counterparties of

contractual

financial obligations. The Company is not exposed to significant credit risk on accounts

receivable because it does not extend credit to buyers at its auctions, and it has a large diversified customer

base. The Company is not exposed to significant credit risk on advances against auction contracts because it

limits the amounts advanced to a percentage of the Company’s estimated value of the assets to be sold. In

addition, assets purchased at the Company’s auctions are not normally released to the buyers until they are

paid in full. The Company’s maximum exposure to credit risk on accounts receivable and advances against

auction contracts at the reporting date is the carrying value of its accounts receivable and advances against

auction contracts, less those receivables relating to assets that have not been released to the buyers.

83RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

27. Financial instruments (continued):

(b) Financial risk management (continued):

(iii) Credit risk (continued):

The Company’s credit risk exposure on liquid financial assets, being cash and cash equivalents, is limited

since it maintains its cash and cash equivalents in a range of large financial institutions around the world.

The Company limits its credit risk on its note receivable by performing credit verification procedures prior to

the issuance of the note receivable. In addition, the note receivable is secured by the underlying property

and a neighbouring property, and is monitored on an ongoing basis. To date, the counterparty has not failed

to meet its financial obligations to the Company.

(iv) Liquidity risk:

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.

The Company manages its liquidity risk by maintaining adequate cash and cash equivalent balances,

generally by releasing payments to consignors only after receivables from buyers have been collected. The

Company also utilizes its established lines of credit (note 19) for short-term borrowings on an as-needed

basis. The Company continuously monitors and reviews both actual and forecast cash flows to ensure there

is sufficient working capital to satisfy its operating requirements.

28. Subsidiaries:

The consolidated financial statements include financial statements of Ritchie Bros. Auctioneers Incorporated and

the subsidiaries listed in the following table:

Name of subsidiary

Ritchie Bros. Holdings Inc.
Ritchie Bros. Holdings (America) Inc.
Ritchie Bros. Auctioneers (America) Inc.
Ritchie Bros. Properties Inc.
Ritchie Bros. Auctioneers (International) Finance LLC
Ritchie Bros. Holdings Ltd.
Ritchie Bros. Auctioneers (C anada) Ltd.
Bridgeport Agencies Ltd.
Ritchie Bros. Properties Ltd.
Ritchie Bros. Financial Services Ltd.
Ritchie Bros. Auctioneers (International) Ltd.
Ritchie Bros. Holdings (C yprus) Limited
Ritchie Bros. Auctioneers Limited
Ritchie Bros. Auctioneers (ME) Limited
Ritchie Bros. (Hungary) Kft.
Ritchie Bros. Auctioneers India Private Limited
Ritchie Bros. Holdings B.V.
Ritchie Bros. Auctioneers B.V.
Ritchie Bros. Shared Services B.V.
Ritchie Bros. Properties B.V.
Ritchie Bros. Technical Servies B.V.
Ritchie Bros. Auctioneers (Poland) Sp.z.o.o.

C ountry of
incorporation

United States of
America ("USA")
USA
USA
USA
USA
C anada
C anada
C anada
C anada
C anada
C anada
C yprus
C yprus
C yprus
Hungary
India
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
Poland

Proportion of
ownership
interest

Principal activity

100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Holding company
Holding company
Auction services
Property management
Holding company
Holding company
Auction services
Asset management
Property management
Brokerage services
Holding company
Holding company
Holding company
Auction services
Holding company
Auction services
Holding company
Auction services
Administrative services
Property management
Administrative services
Auction services

84RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

28. Subsidiaries (continued):

Name of subsidiary (continued)

Ritchie Bros. Properties S.r.l.
Ritchie Bros. Auctioneers S.r.l.
Ritchie Bros. Auctioneers (Spain) S.L.
Ritchie Bros. Properties (Spain) S.L.
Ritchie Bros. Auctioneers (UK) Limited
Ritchie Bros. Auctioneers GmbH
Ritchie Bros. Auctioneers (Belgium) N.V.
SVV Ritchie Bros. Auctioneers France
Ritchie Bros. Services SARL
Ritchie Bros. Holdings SARL
Ritchie Bros. Properties EURL
Ritchie Bros. Holdings Pty Ltd.
Ritchie Bros. Auctioneers Pty Ltd.
Ritchie Bros. Properties Pty Ltd.
Ritchie Bros. Auctioneers (Japan) Ltd.
Ritchie Bros. Properties Japan K.K.
Ritchie Bros. Auctioneers (Japan) K.K.
Ritchie Bros. Auctioneers Pte Ltd.
Ritchie Bros. Auctioneers Mexico Services, S. de

R.L. de C .V.

Ritchie Bros. Auctioneers de Mexico, S. de R.L.

de C .V.

Ritchie Bros. Properties, S. de R.L. de C .V.
Ritchie Bros. Auctioneers (Panama) S.A.
Ritchie Bros. Auctioneers C omercial de

Equipamentos Industriais Ltda

C ountry of
incorporation

Italy
Italy
Spain
Spain
United Kingdom
Germany
Belgium
France
France
France
France
Australia
Australia
Australia
C anada
Japan
Japan
Singapore

Mexico

Mexico
Mexico
Panama

Brazil

Proportion of
ownership
interest

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Principal activity

Property management
Auction services
Auction services
Property management
Auction services
Auction services
Auction services
Auction services
Administrative services
Holding company
Property management
Holding company
Auction services
Property management
Auction services
Property management
Auction services
Auction services

100%

Administrative services

100%
100%
100%

Auction services
Property management
Auction services

100%

Auction services

Ritchie Bros. Auctioneers Muzayede Danismanlik ve

Ticaret Limited Sirketi

Ritchie Bros. Auctioneers LLC (Russia)
Ritchie Bros. Holdings Luxembourg SARL
Ritchie Bros. Luxembourg SARL

Turkey
Russia
Luxembourg
Luxembourg

100%
100%
100%
100%

Auction services
Auction services
Holding company
Holding company

85RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

29. First-time adoption of IFRS:

These are the Company’s first annual consolidated financial statements prepared in accordance with IFRS. The

significant accounting policies in note 2 have been applied in preparing these consolidated financial statements.

This includes the comparative information for the year ended December 31, 2010, and the preparation of an

opening IFRS balance sheet on the date of transition to IFRS (“Transition Date”), January 1, 2010.

The guidance for first-time adoption of IFRS is set out in IFRS 1 First-time Adoption of International Financial

Reporting Standards (“IFRS 1”). IFRS 1 requires that the standards are applied retrospectively at the Transition

Date with all adjustment to assets and liabilities taken to retained earnings, unless certain exemptions are

applied. The Company elected to take the following IFRS 1 optional exemptions:



to apply the requirements of IFRS 3 Business Combinations prospectively from the Transition Date;

to apply the requirements of IFRS 2 Share-based Payments only to equity instruments granted after

November 7, 2002 which had not vested as of the Transition date; and

to transfer all foreign currency translation differences recognized as a separate component of equity to

retained earnings as at the Transition Date.

IFRS 1 also outlines specific guidelines where a first-time adopter must not apply the standards retrospectively.

The Company has complied with these mandatory exceptions from retrospective application.

In preparing the opening IFRS balance sheet and comparative information for the year ended December 31,

2010, the Company has adjusted amounts reported previously in financial statements prepared in accordance

with previous GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected the

Company’s financial position, financial performance and cash flows is set out in the following tables and

discussion.

86RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

29. First-time adoption of IFRS (continued):

Reconciliation of net earnings:

Auction revenues
Direct expenses

Year ended December 31, 2010

Previous
GAAP

Effect of
Transition to
IFRS

Notes

IFRS

357,369
47,021
310,348

Selling, general and administrative expenses

218,345

488

(e)

218,833

Earnings from operations

92,003

(488)

91,515

Other income (expense):

Foreign exchange loss
Gain on disposition of property, plant and

equipment

Other

Finance income (costs):

Finance income
Finance costs

(49)

250
1,823
2,024

2,035
(5,216)
(3,181)

Earnings before income taxes

90,846

(488)

Income tax expense:

C urrent
Deferred

Net earnings

Net earnings per share:

Basic
Diluted

21,992
2,941
24,933

(250)
(250)

(d), (e)

65,913

(238)

0.62
0.62

$
$

(49)

250
1,823
2,024

2,035
(5,216)
(3,181)

90,358

21,992
2,691
24,683

65,675

0.62
0.62

$
$

87RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

29. First-time adoption of IFRS (continued):

Reconciliation of comprehensive income:

Year ended December 31, 2010

Previous
GAAP

Effect of
Transition to
IFRS

Notes

IFRS

Net earnings

65,913

(238)

65,675

Other comprehensive income:

Foreign currency translation adjustment,

net of tax

4,520

Total comprehensive income for the year

70,433

(238)

4,520

70,195

88RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

29. First-time adoption of IFRS (continued):

Reconciliation of balance sheets:

Assets

C urrent assets:

C ash and cash equivalents
Trade and other receivables
Inventory
Advances against auction contracts
Prepaid expenses and deposits
Assets held for sale
C urrent portion of loan receivable
C urrent other assets
Income taxes receivable
Deferred tax asset

Property, plant and equipment
Investment property
Loan receivable
Other non-current assets
Goodwill
Deferred tax assets

Liabilities and Shareholders' Equity

C urrent liabilities:

Auction proceeds payable
Trade and other payables
C urrent borrowings

Non-current borrowings
Other non-current liabilities
Deferred tax liabilities

Shareholders' equity:

Share capital
Additional paid-in capital
Retained earnings
Foreign currency translation reserve

January 1, 2010

Previous
GAAP

Effect of
Transition to
IFRS

Notes

IFRS

122,596
51,963
6,640
4,574
8,131
-
-
265
3,824
714
198,707

597,945
-
-
14,472
45,593
1,104
857,821

74,726
88,402
5,069
168,197

130,394
1,254
13,565
313,410

99,980
16,146
411,326
16,959
544,411

3,675
99
(99)

(714)
2,961

(7,837)
7,837
5,131
(8,806)

2,381
1,667

(a)
(g)
(g)

(b)

(b), (d)

14,257
14,257

(h)

(14,257)

(h)

2,093
16,533
(16,959)
1,667

(d), (e)
(e), (f)
(f)

122,596
51,963
6,640
4,574
8,131
3,675
99
166
3,824
-
201,668

590,108
7,837
5,131
5,666
45,593
3,485
859,488

74,726
88,402
19,326
182,454

116,137
1,254
13,565
313,410

99,980
18,239
427,859
-
546,078

857,821

1,667

859,488

89RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

29. First-time adoption of IFRS (continued):

Reconciliation of balance sheets (continued):

December 31, 2010

Previous
GAAP

Effect of
Transition to
IFRS

Notes

IFRS

Assets

C urrent assets:

Property, plant and equipment
Investment property
Loan receivable
Other non-current assets
Goodwill
Deferred tax assets

Liabilities and Shareholders' Equity

C urrent liabilities:

Auction proceeds payable
Trade and other payables
Income taxes payable
C urrent borrowings

Non-current borrowings
Other non-current liabilities
Deferred tax liabilities

Shareholders' equity:

Share capital
Additional paid-in capital
Retained earnings
Foreign currency translation reserve

68,185
59,818
26,533
2,379
10,565
-
-
142
14,635
211
182,468

627,230
-
-
11,674
46,254
3,192
870,818

46,463
87,685
1,900
1,087
137,135

135,886
1,659
18,011
292,691

103,978
18,697
433,973
21,479
578,127

68,185
59,818
26,533
2,379
10,565
421
105
37
14,635
-
182,678

618,984
8,246
5,026
6,227
46,254
5,143
872,558

46,463
87,685
1,900
1,087
137,135

135,886
1,659
18,011
292,691

103,978
21,101
450,268
4,520
579,867

421
105
(105)

(211)
210

(a)
(g)
(g)

(b)

(8,246)
8,246
5,026
(5,447)

1,951
1,740

(b), (d), (e)

2,404
16,295
(16,959)
1,740

(d), (e)
(d), (e), (f)
(f)

870,818

1,740

872,558

90RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

29. First-time adoption of IFRS (continued):

Reconciliation of cash flows:

The adoption of IFRS has had no impact on the net cash flows of the Company. The changes made to the

balance sheet and statements of consolidated income have resulted in reclassifications of various amounts on the

statements of cash flows, however as there have been no changes to the net operating, investing or financing

cash flows, no reconciliations have been presented.

Notes to the IFRS reconciliations above:

(a) Reclassification of assets held for sale:

As at January 1, 2010 and December 31, 2010 the Company held assets whose carrying amount would be

recovered principally through a sale transaction, rather than through continuing use, and therefore met the

criteria of ‘held for sale’. These are reclassified to current assets under IFRS.

(b) Deferred tax classification:

Under previous GAAP, deferred tax assets and liabilities are classified as current or non-current as

appropriate. IFRS does not allow the classification of a current portion of deferred tax, and therefore these

amounts have been reclassified as non-current.

The Company owns certain properties that were classified as property, plant and equipment under previous

GAAP and meet the definition of an investment property under IAS 40 Investment Property. This standard

requires the carrying value of investment properties to be separately disclosed on the face of the balance

sheet; therefore, these amounts have been reclassified on transition to IFRS. The Company has chosen to

continue to account for these assets using the cost method.

(d) Deferred tax on share-based payment:

The Company issues share purchase options to employees who are resident in certain tax jurisdictions where

the cost of granting this instrument is deductible for tax purposes when exercised. IAS 12 Income Taxes

requires the re-measurement of these options to reflect the value of the deduction based on the market

price of the shares at each reporting date, and an adjustment to the deferred tax asset to be created when

the award was issued. Previous GAAP required the measurement of the deferred tax asset to be recognized

based on the grant date fair value of the options. In revaluing the share purchase options vested but not

exercised at the balance sheet date, an adjustment to increase deferred tax assets and additional paid-in

capital has been recorded.

(e) Share-based payments:

Under previous GAAP, the Company recognized share-based compensation expense of awards that vest in

multiple instalments as if it were a single award. IFRS requires that each instalment of option awards be

treated as a separate option grant, because each instalment has a different vesting period. Therefore the fair

value of each instalment is amortized over each instalment’s vesting period, with an impact of decreasing

net earnings. The cumulative impact is an increase in additional paid-in capital, a decrease in retained

earnings and an increase to the deferred tax asset for options that are tax deductible upon exercise.

91RITCHIE BROS. AUCTIONEERS INCORPORATED
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of United
States dollars, except share and per share amounts)

Years ended December 31, 2011 and 2010

29. First-time adoption of IFRS (continued):

Notes to the IFRS reconciliations above (continued):

(f) Cumulative translation differences:

On transition to IFRS, the Company has chosen to apply the election in IFRS 1 regarding IAS 21 The Effects

of Changes in Foreign Exchange Rates for cumulative translation differences that existed at the date of

transition to IFRS. This eliminates the cumulative translation difference and adjusts retained earnings by the

same amount at the Transition Date.

(g) Reclassification of financial assets:

Within other non-current assets the Company previously included a note receivable balance on a promissory

note due from a third party entity. As this is a financial asset which was included in a line with non-financial

assets, this has been reclassified for separate presentation under IFRS.

(h) Reclassification of non-current borrowings:

Borrowings held at the period end which are due to be settled within 12 months of the balance sheet date

are classified as current. Under previous GAAP, such obligations are classified as non-current when

contractual arrangements have been made for settlement by a means other than current assets. However

under IFRS they are only classified as non-current when the refinancing is with the same lender under same

or similar terms.

92SUPPLEMENTAL QUARTERLY DATA

(Unaudited; tabular dollar amounts expressed in thousands of United States dollars, except per share data)

2011 (1)

1st quarter
2nd quarter
3rd quarter
4th quarter

2010 (1)

1st quarter
2nd quarter
3rd quarter
4th quarter

2009 (1)

1st quarter
2nd quarter
3rd quarter
4th quarter

2008 (1)

1st quarter
2nd quarter
3rd quarter
4th quarter

2007 (1)

1st quarter
2nd quarter
3rd quarter
4th quarter

Gross
Auction Proceeds

Auction
Revenues

Net
Earnings

Net Earnings Per Share
Diluted

Basic

Closing
Stock Price

851,283
1,149,847
673,362
1,039,789
3,714,281

88,463
114,524
79,709
113,403
396,099

Gross
Auction Proceeds

Auction
Revenues

776,659
951,634
750,912
798,566
3,277,771

83,544
103,300
82,229
88,296
357,369

Gross
Auction Proceeds

Auction
Revenues

798,291
1,109,331
693,288
891,111
3,492,021

83,675
120,459
75,934
97,143
377,211

Gross
Auction Proceeds

Auction
Revenues

781,969
1,163,546
767,718
853,927
3,567,160

81,394
115,822
75,909
81,693
354,818

Gross
Auction Proceeds

Auction
Revenues (8)

700,368
945,256
667,553
873,306
3,186,483

68,549
94,054
67,174
82,129
311,906

16,570
26,763
6,533
26,767
76,633

(2)

0.16
0.25
0.06
0.25
0.72

(2)

0.16
0.25
0.06
0.25
0.72

(2)

28.15
27.49
20.19
22.08

Net
Earnings

Net Earnings Per Share
Diluted

Basic

Closing
Stock Price

12,707
26,054 (3)
13,375
13,539
65,675

(3)

Net
Earnings

(4)

19,879
38,847
12,892
21,834 (4)
(4)
93,452

Net
Earnings

(5)

16,407
45,919 (5)
11,934 (5)
27,140 (5)
(5)
101,400

Net
Earnings

(6)

17,559
26,555 (6)
14,903 (6)
16,966 (6)
(6)
75,983

0.12
0.25 (3)
0.13
0.13
0.62

(3)

0.12
0.25 (3)
0.13
0.13
0.62

(3)

21.53
18.22
20.77
23.05

Net Earnings Per Share
Diluted

Basic

Closing
Stock Price

(4)

0.19
0.37
0.12
0.21 (4)
(4)
0.89

(4)

0.19
0.37
0.12
0.21 (4)
(4)
0.88

18.59
23.45
24.54
22.43

Net Earnings Per Share
Diluted

Basic

(7)

Closing
Stock Price (7)

(5)

0.16
0.44 (5)
0.11 (5)
0.26 (5)
(5)
0.97

(5)

0.16
0.43 (5)
0.11 (5)
0.26 (5)
(5)
0.96

27.37
27.13
23.36
21.42

Net Earnings Per Share
Diluted

Basic

(7)

Closing
Stock Price (7)

(6)

0.17
0.25 (6)
0.14 (6)
0.16 (6)
(6)
0.73

(6)

0.17
0.25 (6)
0.14 (6)
0.16 (6)
(6)
0.72

19.51
20.87
21.70
27.57

(1)

(2)

(3)

(4)

2011 and 2010 figures presented in accordance with International Financial Reporting Standards. 2009, 2008 and 2007 figures presented in accordance with previous Canadian
Generally Accepted Accounting Principles.

Net earnings in the first quarter of 2011 include a gain of $3.5 million ($3.0 million after tax) recorded on the sale of excess property. Excluding the impact of this item, net
earnings for the first quarter of 2011 would have been $13.6 million ($0.13 per share, basic and diluted), and net earnings for the full year 2011 would have been $73.6 million
($0.69 per share, basic and diluted).

Net earnings in the second quarter of 2010 included a gain of $1.2 million ($0.7 million after tax) recorded on the sale of excess property. Excluding the impact of this item, net
earnings for the second quarter of 2010 would have been $25.3 million ($0.24 per share, basic and diluted), and net earnings for the full year 2010 would have been $65.2 million
($0.62 per basic share and $0.61 per diluted share).

Net earnings in the first quarter of 2009 included the impact of foreign exchange on U.S. dollar denominated bank debt held by a Canadian subsidiary, which was assigned in
January 2009 to an affiliate whose functional currency is the U.S. dollar to eliminate the impact of currency fluctuations on this debt in future periods. The foreign exchange
impact of this bank debt in the first quarter of 2009 was a $0.8 million gain ($0.7 million after tax). Excluding the impact of this item, net earnings for the first quarter of 2009
would have been $19.2 million ($0.18 per share, basic and diluted).

Additionally, net earnings in the fourth quarter of 2009 included a gain of $1.1 million ($0.7 million after tax) recorded on the sale of excess property. Excluding the impact of this
item, net earnings for the fourth quarter of 2009 would have been $21.1 million ($0.20 per share, basic and diluted).

Excluding the impact of all items above, net earnings for the full year 2009 would have been $92.0 million ($0.87 per share, basic and diluted).

(5)

Net earnings in the first, second, third and fourth quarters of 2008 included the foreign exchange impact of the U.S. dollar denominated bank debt held by a Canadian subsidiary.
The foreign exchange impact of this bank debt in the first, second, third and fourth quarters of 2008 was a $1.0 million ($0.8 million after tax) loss, $0.2 million ($0.2 million after
tax) gain, $1.3 million ($1.1 million after tax) loss, and $3.8 million ($3.2 million after tax) loss, respectively.

In addition, net earnings in the first, second and fourth quarters of 2008 included the reclassification of foreign currency translation gains relating to the settlement of foreign
currency denominated intercompany loans. The foreign exchange impact of this reclassification in the first, second and fourth quarters of 2008 was $2.1 million ($2.0 million after
tax), $0.7 million ($0.5 million after tax) and $12.3 million ($11.1 million after tax), respectively.

Finally, net earnings in the second quarter of 2008 included a gain of $8.3 million ($7.3 million after tax) recorded on the sale of excess property.

Excluding the impact of all items above, net earnings for the first, second, third and fourth quarters of 2008 would have been $15.3 million ($0.15 per basic share and $0.14 per
diluted share), $37.9 million ($0.36 per share, basic and diluted), $13.0 million ($0.12 per share, basic and diluted) and $19.2 million ($0.18 per share, basic and diluted),
respectively. Net earnings for the full year 2008 would have been $85.5 million ($0.82 per basic share and $0.81 per diluted share).

(6)

Net earnings in 2007 included the foreign exchange impact of the U.S. dollar denominated bank debt held by a Canadian subsidiary. The foreign exchange impact of this bank
debt in the first, second, third and fourth quarters of 2007 was a gain of $0.3 million ($0.3 million after tax), $2.4 million ($2.1 million after tax), $2.0 million ($1.7 million after
tax) and less than $0.1 million (less than $0.1 million after tax), respectively. Excluding the impact of these items, net earnings for the first, second, third and fourth quarters of
2007 would have been $17.3 million ($0.17 per basic share and $0.16 per diluted share), $24.5 million ($0.23 per share, basic and diluted), $13.2 million ($0.13 per basic share
and $0.12 per diluted share) and $16.9 million ($0.16 per share, basic and diluted), respectively. Net earnings for the full year 2007 would have been $71.9 million ($0.69 per
basic share and $0.68 per diluted share).

(7)

The Company's common shares split on a three-for one basis on April 24, 2008. All per share amounts in this table have been adjusted on a retroactive basis for the stock split.
As well, the closing stock prices presented in this table have been adjusted for ease of comparison.

(8)

Figures have been reclassified to conform with presentation adopted in 2008.

93SELECTED FINANCIAL AND OPERATING DATA

(Tabular dollar amounts expressed in thousands of United States dollars, except per share and operating data)

Years ended December 31,

2011(1)

2010(1)

2009(1)

2008(1)

2007(1)

Gross auction proceeds (unaudited)

3,714,281

3,277,771

3,492,021

3,567,160

3,186,483

Statement of operations data:

Auction revenues(5)
Direct expenses(5)

396,099
(48,044)
348,055

357,369
(47,021)
310,348

377,211
(49,890)
327,321

354,818
(49,750)
305,068

311,906
(46,481)
265,425

Depreciation and amortization
General and administrative(5)

(42,408)
(201,935)

(37,813)
(181,020)

(31,761)
(168,312)

(24,764)
(164,556)

(19,417)
(144,816)

Earnings from operations

103,712

91,515

127,248

115,748

101,192

Other income (expense)(5):

Foreign exchange gain (loss)(3)(5)
Gain (loss) on disposition of capital assets(2)
Other income (loss)
Finance income (costs)(5):

Interest expense
Interest income(5)

Earnings before income taxes
Income taxes

Net earnings(2)(3)

Net earnings per share-diluted(4)

Balance sheet data (end of year):
Working capital (including cash)
Total assets
Long-term debt
Total shareholders' equity

Selected operating data (unaudited):

Auction revenues as percentage of gross

auction proceeds

Number of consignors at industrial auctions(6)
Number of bidders at industrial auctions(6)
Number of buyers at industrial auctions(6)
Number of permanent auction
sites (end of year) (7)

(585)
3,861
4,242

(5,541)
2,326

108,015
(31,382)

76,633

0.72

63,296
967,241
133,881
617,906

10.66%
41,300
385,000
95,550

(49)
250
1,823

(5,216)
2,035

90,358
(24,683)

65,675

0.62

45,543
872,558
135,886
579,867

10.90%
40,360
340,600
95,100

(1,085)
647
2,857

(544)
2,400

131,523
(38,071)

93,452

0.88

30,510
857,821
130,394
544,411

10.80%
37,050
336,000
97,800

11,656
6,370
1,375

(859)
4,994

139,284
(37,884)

101,400

0.96

47,109
689,488
67,411
465,162

9.95%
36,580
378,500
83,950

2,802
243
1,471

(1,206)
7,393

111,895
(35,912)

75,983

0.72

58,207
672,887
44,844
435,116

9.79%
34,900
354,500
80,350

(1)

(2)

(3)

2011 and 2010 figures presented in accordance with International Financial Reporting Standards. 2009, 2008 and 2007 figures presented in
accordance with previous Canadian Generally Accepted Accounting Principles.

Net earnings for 2011, 2009, and 2008 included net gains on sales of excess properties of $3.5 million ($3.0 million after tax, or $0.03 per
diluted share), $1.1 million ($0.7 million after tax, or $0.01 per diluted share), and $8.3 million ($7.3 million after tax, or $0.07 per diluted
share), respectively.

Net earnings for the full year 2009 included the impact of foreign exchange on U.S. dollar denominated bank debt held by a Canadian
subsidiary, which was assigned in January 2009 to an affiliate whose functional currency is the U.S. dollar to eliminate the impact of currency
fluctuations on this debt in future periods. The foreign exchange impact of this bank debt in the first quarter of 2009 was a $0.8 million gain
($0.7 million, or less than $0.01 per diluted share, after tax). The equivalent amount in 2008 and 2007 was a foreign exchange loss of $5.8
million ($5.0 million after tax, or $0.05 per diluted share), and a foreign exchange gain of $4.8 million ($4.1 million after tax, or $0.04 per
diluted share), respectively.

Net earnings for the full year 2008 also included the reclassification of $15.0 million ($13.6 million after tax, or $0.13 per diluted share) of
foreign currency translation gains relating to the settlement of foreign currency denominated intercompany loans.

The Company does not expect such foreign exchange gains or losses relating to financial transactions to recur in future periods.

(4)

(5)

Share and per share amounts have been adjusted on a retroactive basis to reflect the three-for-one stock split that occurred on April 24,
2008.
Figures have been reclassified to conform with presentation adopted in 2008 and 2011.

(6)

Figures have been rounded to conform with presentation adopted in 2011.

(7)

Effective February 2012, the definition of permanent auction sites and regional auction sites (formerly known as regional auction units)
changed to better reflect recent investments, which resulted in the reclassification of four sites from regional auction sites to permanent
auction sites.

94Shareholder Information

Address

Ritchie Bros. Auctioneers Incorporated
9500 Glenlyon Parkway
Burnaby, BC
Canada, V5J 0C6
Telephone:
Canada (toll-free): 1.800.663.1739
1.800.663.8457
USA (toll-free):
778.331.5501
Facsimile:
www.rbauction.com
Web site:

778.331.5500

Board of Directors

Robert W. Murdoch

Chairman and Independent Director

Peter J. Blake

Director & Chief Executive Officer

Beverley A. Briscoe

Independent Director

Eric Patel

Independent Director

Edward B. Pitoniak

Independent Director

Christopher Zimmerman

Independent Director

James M. Micali

Independent Director

Shareholders wishing to speak to the Chairman should call
778.331.5500 or send an email to leaddirector@rbauction.com.

Corporate Governance Information

Further Corporate Governance information, including our Report on
Corporate Governance, which is included in our Information Circular for
our annual meeting of Shareholders, is available on our website at
www.rbauction.com.

Investor Relations

Analysts, portfolio managers, investors and representatives of financial
institutions seeking financial and operating information may contact:

Investor Relations Department
Ritchie Bros. Auctioneers
9500 Glenlyon Parkway
Burnaby, BC
Canada, V5J 0C6
Telephone:
Canada (toll-free):
USA (toll-free):
Email:

778.331.5500
1.800.663.1739
1.800.663.8457
ir@rbauction.com

Copies of the Company’s filings with the U.S. Securities & Exchange
Commission and with Canadian securities commissions are available to
shareholders and other interested parties on request or can be accessed
directly on the internet at www.rbauction.com.

Management Advisory Committee

Annual Meeting

Chief Executive Officer

Peter J. Blake (1)
Richard J. Aldersley
Robert S. Armstrong (1) Chief Strategic Development Officer
Bradley M. Bass

Senior Valuation Analyst – Europe

VP – US South West

The annual meeting of the Company’s shareholders will be held at 11am
on Thursday April 30, 2012 at the Company’s head office located at 9500
Glenlyon Parkway, Burnaby, BC, V5J 0C6.

Jeremy M.T. Black

VP – Business Development; Corporate Secretary

Stock Exchanges

Robert G. Blackadar

VP – National & Major Accounts

Joseph P. Boyle

VP – North East USA

Brent M. Bradshaw

VP – Group Operations (US West)

Stephen H. Branch

VP – Asia

Brian A. Butzelaar

VP – Northern Europe

R. Gary Caufield

Senior Advisor – Insolvency & Legal Affairs

William A. Cooksley

VP – Information Technology

Shane Eshuis

VP – Group Operations (Europe & Middle East)

Robert W. Giroux

VP – US North West

Brian L. Glenn

VP – Western Canada

Curtis C. Hinkelman

Senior VP – Eastern USA

David W. Hobbs

VP – South Central USA

Michael D. Johnston
Jacob W. Lawson
Kenton H. Low (1)
Robert K. Mackay (1)
Warwick N. Mackrell
Robert A. McLeod (1)
Andrew Muller (1)
David D. Nicholson

Doug W. Olive
Oliver E. Piekaar
Victor E. Pospiech

Senior VP – US West

VP – Eastern Canada

Chief Marketing Officer

President

VP – Australia

Chief Financial Officer

Chief People Officer

Senior VP – Central USA

VP – Pricing & Valuations

VP – Finance

Senior VP – Auction Services & Administration

Jeroen L.J. Rijk

VP – Southern Europe

Gary L. Seybold
Steven C. Simpson (1) Chief Sales Officer
Kevin R. Tink

VP – US South East

Senior VP – Canada & Agriculture

Robert G. Thompson

VP – Properties

Guylain Turgeon

Senior VP – Managing Director Europe & Middle East

Simon A. Wallan

VP – Agriculture

Darren J. Watt

VP – Legal Affairs

Karl W. Werner

Senior VP – Auction Operations

Frank D. Wilson

VP – Group Operations (US Central)

(1) Member of Senior Leadership Team

Ritchie Bros. Auctioneers Incorporated is listed on the New York Stock
Exchange and the Toronto Stock Exchange and on both exchanges,
trades under the symbol “RBA”.

Transfer Agent

Communications concerning transfer requirements, address
changes and lost certificates should be directed to:

Computershare Trust Company of Canada
510 Burrard Street
2nd Floor
Vancouver, British Columbia
Canada, V6C 3B9
Telephone:
Canada and USA (toll-free): 1.800.564.6253
Facsimile:
Facsimile (toll-free):
Self-service:

604.661.0226

604.661.9401
1.800.249.7775
www.computershare.com

Co-agent in the United States:

Computershare Trust Company of New York
New York, NY

Auditors

KPMG LLP
Vancouver, Canada

Dividends

All dividends paid by Ritchie Bros. Auctioneers are eligible dividends,
unless indicated otherwise in the Company’s quarterly reports or by
press release.