Read Report - Nuinsco Resources Limited

26
2005 ANNUAL REPORT
These costs are capitalized and accumulated on a property-by-property basis and will be amortized as operating
expenses against such future revenue using a unit of production method based upon estimated proven and
probable mineral reserves.
On an ongoing basis, the Company evaluates each property based on results to date to determine the nature of
exploration and development activities that are warranted in the future or if there is any impairment in the carrying
value. An impairment loss would be recognized when the carrying amount of a long-lived asset is not recoverable
and exceeds its fair value.
The carrying values of exploration and development projects represent unamortized net costs incurred to date
and do not necessarily reflect present or future values. The recoverability of these amounts is dependent upon the
existence of economically recoverable reserves, upon the Company’s ability to obtain the necessary financing to
complete the development and upon future profitable production.
Buildings and Equipment
Buildings and equipment are recorded at cost. Amortization is provided over the related assets’ estimated useful
life using the declining-balance method at an annual rate of 10% for buildings and 20% for equipment.
Cash and Short-Term Deposits
Cash and short-term investments consist of balances with banks and investments in money market instruments.
These investments are carried at cost, which approximates market value. Cash and cash equivalents consist of
investments with maturities of up to 90 days at the date of purchase. Short-term deposits consist of investments
with maturities greater than 90 days at the date of purchase.
Cash raised for exploration activities through the issuance of flow-through shares is restricted and is shown on the
balance sheet as “Cash for exploration expenditures.”
Marketable Securities
Short-term investments in marketable securities are recorded at the lower of cost or market value. The market
values of investments are determined based on the closing prices reported on recognized securities exchanges and
over-the-counter markets. Such individual market values do not necessarily represent the realizable value of the
total holding of any security, which may be more or less than that indicated by market quotations. When there has
been a loss in the value of an investment in marketable securities that is determined to be other than a temporary
decline, the investment is written down to recognize the loss. The securities are valued at cost. The market value of
the marketable securities holdings at December 31, 2005 exceeds cost.
Asset Retirement Obligations
On January 1, 2004, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”) Handbook
Section 3110 – “Asset Retirement Obligations” (“CICA 3110”) which requires that the fair value of liabilities for
asset retirement obligations be recognized in the period in which they are incurred. The adoption of CICA 3110 has
been applied retroactively without any material change to the consolidated financial statements since it has been
determined there are no asset retirement obligations.
Stock-based Compensation Plans
Stock Option Plan
The Company has in effect a stock option plan which is described in Note 7(b) and which is accounted for using the
recommendations issued by the Canadian Institute of Chartered Accountants, handbook section 3870 “Stock-based
compensation and other stock-based payments.” The standard requires that all stock-based awards made to
employees and non-employees be measured and recognized at the date of grant using a fair value-based method
to calculate compensation expense. Compensation expense is charged to income over the vesting period of the
options or service period, whichever is shorter.
NOTES TO FINANCIAL STATEMENTS