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: k) Government GrantsIAS 20.39From time to time the Company receives government incentive programs such as investment tax credits.Government incentives are accrued when there is reasonable assurance of realization and reflected as areduction of the related asset or expense. In the event the investment tax credits received are less than theamount claimed, the difference will be reflected in profit or loss in the year in which it is determined.IFRS 7.76 l) Share CapitalEquity instruments are contracts that give a residual interest in the net assets of the Company. Financialinstruments issued by the Company are classified as equity only to the extent that they do not meet thedefinition of a financial liability or financial asset. The Company’s common shares, preferred shares, sharewarrants and flow-through shares are classified as equity instruments.Incremental costs directly attributable to the issue of new shares or options are shown in equity as adeduction, net of tax, from the proceeds.Flow-through SharesThe Company will from time to time, issue flow-through common shares to finance a significant portion of itsexploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer thetax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates theflow-through share into i) a flow-through share premium, equal to the estimated premium, if any, investorspay for the flow-through feature, which is recognized as a liability, and ii) share capital. Upon expendituresbeing incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amountof tax reduction renounced to the shareholders. The premium is recognised as other income and the relateddeferred tax is recognized as a tax provision.Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadianresource property exploration expenditures within a two-year period. The portion of the proceeds receivedbut not yet expended at the end of the Company’s reporting year is disclosed separately as flow-throughshare proceeds in Note 10.The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the LookbackRule, in accordance with Government of Canada flow-through regulations. When applicable, this tax isaccrued as a financial expense until paid.IAS 33.70m) Earnings / Loss Per ShareBasic earnings/loss per share is computed by dividing the net income or loss applicable to common shares ofthe Company by the weighted average number of common shares outstanding for the relevant year.Diluted earnings/loss per common share is computed by dividing the net income or loss applicable to commonshares by the sum of the weighted average number of common shares issued and outstanding and alladditional common shares that would have been outstanding, if potentially dilutive instruments wereconverted.PAGE 12 OF 35BDO CANADA LLP
Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 2.12IFRS 2.46IFRS 2.13IAS 1.79(b)IAS 1.31,IAS 8.30,IAS 8.31n) Share-based PaymentsWhere equity-settled share options are awarded to employees, the fair value of the options at the date ofgrant is charged to the statement of comprehensive loss/income over the vesting period. Performance vestingconditions are taken into account by adjusting the number of equity instruments expected to vest at eachreporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on thenumber of options that eventually vest. Non-vesting conditions and market vesting conditions are factoredinto the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge ismade irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjustedfor failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.Where the terms and conditions of options are modified before they vest, the increase in the fair value of theoptions, measured immediately before and after the modification, is also charged to the statement ofcomprehensive loss/income over the remaining vesting period.Where equity instruments are granted to employees, they are recorded at the fair value of the equityinstrument granted at the grant date. The grant date fair value is recognized in comprehensive loss/incomeover the vesting period, described as the period during which all the vesting conditions are to be satisfied.Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods orservices received in the statement of comprehensive loss/income. Options or warrants granted related to theissuance of shares are recorded as a reduction of share capital.When the value of goods or services received in exchange for the share-based payment cannot be reliablyestimated, the fair value is measured by use of a valuation model.All equity-settled share-based payments are reflected in contributed surplus, until exercised. Upon exercise,shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital,adjusted for any consideration paid.Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vestingconditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration ofvesting and recognizes the amount that otherwise would have been recognized for services received over theremainder of the vesting period. Any payment made to the employee on the cancellation is accounted for asthe repurchase of an equity interest except to the extent the payment exceeds the fair value of the equityinstrument granted, measured at the repurchase date. Any such excess is recognized as an expense.o) Standards, Amendments and Interpretations Not Yet Effective 2Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatoryfor accounting years beginning after January 1, 2011 or later years. None of these is expected to have asignificant effect on the consolidated financial statements, except for the following:• The Company has early adopted amendments to IFRS 1 which replaces references to a fixed date of‘1 January 2004’ with ‘the date of transition to IFRSs’. This eliminates the need for the Company torestate derecognition transactions that occurred before the date of transition to IFRSs. Theamendment is effective for year-ends beginning on or after July 1, 2011; however, the Company hasearly adopted the amendment. The impact of the amendment and early adoption is that theCompany only applies IAS 39 derecognition requirements to transactions that occurred after the dateof transition i.e. January 1, 2010.2 “Standards, Amendments and Interpretations Not Yet Effective” section may need further updating prior tofinancial statement release.PAGE 13 OF 35BDO CANADA LLP
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2011 Annual Illustrative IFRS Financial Statements - BDO Canada

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