2011 Annual Illustrative IFRS Financial Statements - BDO Canada

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Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IAS 36.12g) Impairment of Non-Financial AssetsImpairment tests on intangible assets with indefinite useful economic lives are undertaken annually at thefinancial year-end. Other non-financial assets, including exploration and evaluation assets are subject toimpairment tests whenever events or changes in circumstances indicate that their carrying amount may notbe recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher ofvalue in use and fair value less costs to sell, the asset is written down accordingly.Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test iscarried out on the asset's cash-generating unit, which is the lowest group of assets in which the asset belongsfor which there are separately identifiable cash inflows that are largely independent of the cash inflows fromother assets. The Company has one cash-generating unit for which impairment testing is performed.An impairment loss is charged to profit or loss, except to the extent they reverse gains previously recognizedin accumulated other comprehensive loss/income.IAS 39.9 h) Financial InstrumentsFinancial AssetsFinancial assets are classified into one of the following categories based on the purpose for which the assetwas acquired. All transactions related to financial instruments are recorded on a trade date basis. TheCompany's accounting policy for each category is as follows:IFRS 7.21IAS 39.43IAS 39.46IFRS 7.21B5IAS 39.43IAS 39.44IAS 39.45IAS 39.46Loans and ReceivablesThese assets are non-derivative financial assets resulting from the delivery of cash or other assets by a lenderto a borrower in return for a promise to repay on a specified date or dates, or on demand. They are initiallyrecognized at fair value plus transaction costs that are directly attributable to their acquisition or issue andsubsequently carried at amortized cost, using the effective interest rate method, less any impairment losses.Amortized cost is calculated taking into account any discount or premium on acquisition and includes feesthat are an integral part of the effective interest rate and transaction costs. Gains and losses are recognizedin profit or loss when the loans and receivables are derecognized or impaired, as well as through theamortization process.Available-For-Sale InvestmentsNon-derivative financial assets that do not meet the definition of loans and receivables are classified asavailable-for-sale and comprise principally the Company's strategic investments in entities not qualifying assubsidiaries or associates. Available-for-sale investments are carried at fair value with changes in fair valuerecognized in other comprehensive loss/income. Where there is a significant or prolonged decline in the fairvalue of an available-for-sale financial asset (which constitutes objective evidence of impairment), the fullamount of the impairment, including any amount previously recognized in other comprehensive loss/income,is recognized in profit or loss. If there is no quoted market price in an active market and fair value cannot bereadily determined, available-for-sale investments are carried at cost.On sale or impairment, the cumulative amount recognized in other comprehensive loss/income is reclassifiedfrom accumulated other comprehensive loss/income to profit or loss.IFRS 7 B5IAS 39.58Impairment on Financial AssetsAt each reporting date the Company assesses whether there is any objective evidence that a financial asset ora group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired,if, and only if, there is objective evidence of impairment as a result of one or more events that has occurredafter the initial recognition of the asset and that event has an impact on the estimated future cash flows ofthe financial asset or the group of financial assets.PAGE 10 OF 35BDO CANADA LLP
Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 7.21h) Financial instruments (continued)Financial LiabilitiesFinancial liabilities are classified as other financial liabilities, based on the purpose for which the liability wasincurred, and comprise of trade payables and accrued liabilities. These liabilities are initially recognized atfair value net of any transaction costs directly attributable to the issuance of the instrument andsubsequently carried at amortized cost using the effective interest rate method. This ensures that anyinterest expense over the period to repayment is at a constant rate on the balance of the liability carried inthe statement of financial position. Interest expense in this context includes initial transaction costs andpremiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding.Trade and other payables represent liabilities for goods and services provided to the Company prior to theend of the year which are unpaid.IAS 37.10 i) ProvisionsRehabilitation ProvisionThe Company is subject to various government laws and regulations relating to environmental disturbancescaused by exploration and evaluation activities. The Company records the present value of the estimatedcosts of legal and constructive obligations required to restore the exploration sites in the year in which theobligation is incurred. The nature of the rehabilitation activities include restoration, reclamation and revegetationof the affected exploration sites.The rehabilitation provision generally arises when the environmental disturbance is subject to governmentlaws and regulations. When the liability is recognized, the present value of the estimated costs is capitalizedby increasing the carrying amount of the related exploration properties. Over time, the discounted liability isincreased for the changes in present value based on current market discount rates and liability specific risks.Additional environment disturbances or changes in rehabilitation costs will be recognized as additions to thecorresponding assets and rehabilitation liability in the year in which they occur.IAS 37.10Other ProvisionsProvisions are recognized for liabilities of uncertain timing or amount that have arisen as a result of pasttransactions, including legal or constructive obligations. The provision is measured at the best estimate ofthe expenditure required to settle the obligation at the reporting date.j) Income TaxesIAS 1.32IAS 12.34IAS 12.58IAS 12.12IAS 12.46IAS 12.15IAS 12.24IAS 12.24IAS 12.34IAS 12.37Income tax expense comprises of current and deferred tax. Current tax and deferred tax are recognized innet income except to the extent that it relates to a business combination or items recognized directly inequity or in other comprehensive loss/income.Current income taxes are recognized for the estimated income taxes payable or receivable on taxable incomeor loss for the current year and any adjustment to income taxes payable in respect of previous years. Currentincome taxes are determined using tax rates and tax laws that have been enacted or substantively enacted bythe year-end date.Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differsfrom its tax base, except for taxable temporary differences arising on the initial recognition of goodwill andtemporary differences arising on the initial recognition of an asset or liability in a transaction which is not abusiness combination and at the time of the transaction affects neither accounting nor taxable profit or loss.Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences isrestricted to those instances where it is probable that future taxable profit will be available against whichthe deferred tax asset can be utilized. At the end of each reporting year the Company reassessesunrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset tothe extent that it has become probable that future taxable profit will allow the deferred tax asset to berecovered.PAGE 11 OF 35BDO CANADA LLP
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2011 Annual Illustrative IFRS Financial Statements - BDO Canada

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