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:IFRS7.40(a)Foreign Currency Risk:Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and US dollaror other foreign currencies will affect the Company’s operations and financial results. The company does nothave significant exposure to foreign exchange rate fluctuation.Interest Rate Risk:Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interestrates. The Company does not have any borrowings. Interest rate risk is limited to potential decreases onthe interest rate offered on cash and cash equivalents held with chartered Canadian financial institutions.The Company consider this risk to be immaterial.Equity Price Risk:Equity risk is the uncertainty associated with the valuation of assets arising from changes in equity markets.The Company is exposed to this risk through its equity holdings. The available-for-sale investment in thecommon shares of XYZ Mine Company is monitored by Management with decisions on sale taken at Boardlevel. A 10% decrease in the fair value of XYZ Mine Company would result in a $x decrease in equity.b) Credit RiskIFRS 7.36Credit risk is the risk of financial loss to the Company if a customer or a counterparty to a financialinstrument fails to meet its contractual obligations. Financial instruments which are potentially subject tocredit risk for the Company consist primarily of cash and cash equivalents. Cash and cash equivalents aremaintained with financial institutions of reputable credit and may be redeemed upon demand.The carrying amount of financial assets represent the maximum credit exposure. The Company has grosscredit exposure at December 31, 2011 and December 31, 2010 relating to cash and cash equivalents of $xxand $xx respectively. All cash and cash equivalents are held at BCD Bank which has a rating of XXX. TheCompany has performed a sensitivity analysis on changes in the credit risk associated with BCD Bank andconsiders this risk to be minimal for all cash and cash equivalent assets based on changes that are reasonablypossible at the reporting date.c) Liquidity RiskLiquidity risk is the risk that the Company will not be able to meet its financial obligations as they becomedue. The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet itsliabilities when they become due, under both normal and stressed conditions, without incurringunacceptable losses or risking damage to the Company’s reputation. The key to success in managing liquidityis the degree of certainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidityrisk increases.Typically, the Company ensures that it has sufficient cash on demand to meet expected operationalexpenses for a period of xx days. To achieve this objective, the Company prepares annual capitalexpenditure budgets, which are regularly monitored and updated as considered necessary. Further, theCompany utilizes authorizations for expenditures on exploration projects to further manage expenditure.The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing trade andother accounts payable.IFRS 7.39(a)The following table sets out the contractual maturities (representing undiscounted contractual cash flows) offinancial liabilities:Up to 3 Between 3 Between 1 Between 2 Over 5 Totalmonths and 12 months and 2 years and 5 years yearsTrade payables and other liabilitiesAs at January 1, 2010 $xxx $xxx $xxx $xxx $xxx $xxxDecember 31, 2010 $xxx $xxx $xxx $xxx $xxx $xxxDecember 31, 2011 $xxx $xxx $xxx $xxx $xxx $xxxPAGE 26 OF 35BDO CANADA LLP
Precious & Other Metals ExplorationNOTES TO THE FINANCIAL STATEMENTSExpressed in Canadian DollarsFor the year-ended December 31, 2011Reference:IFRS 7.25IFRS 7.26Determination of Fair Value:Fair values have been determined for measurement and/or disclosure purposes based on the followingmethods. When applicable, further information about the assumptions made in determining fair values isdisclosed in the notes specific to that asset or liability.The Statement of Financial Position carrying amounts for cash and cash equivalents and trade and otherpayables approximate fair value due to their short-term nature. Due to the use of subjective judgments anduncertainties in the determination of fair values these values should not be interpreted as being realizable inan immediate settlement of the financial instruments.Fair Value Hierarchy:IFRS 7.27BFinancial instruments that are measured subsequent to initial recognition at fair value are grouped in Levels1 to 3 based on the degree to which the fair value is observable:• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in activemarkets for identical assets or liabilities; and• Level 2 fair value measurements are those derived from inputs other than quoted prices includedwithin level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and• Level 3 fair value measurements are those derived from valuation techniques that include inputs forthe asset or liability that are not based on observable marker data (unobservable inputs).The available-for-sale investment is based on quoted prices and is therefore considered to be Level 1.17. CAPITAL MANAGEMENTIAS 1.124AIAS 1.124B(a)The company monitors its cash, common shares, warrants and stock options as capital. The Company’sobjectives when maintaining capital are to maintain sufficient capital base in order to meet its short-termobligations and at the same time preserve investor’s confidence required to sustain future development andproduction of the business.The company is not exposed to any externally imposed capital requirements.18. RELATED PARTY T RANSACTIONSIAS 24.18The following is a summary of the Company’s related party transactions during the year:a) Legal FeesLegal fees of $xxx (year-ended December 31, 2010: $xxx), incurred in connection with the Company’sfinancings as well as general corporate matters, were paid to a law firm of which one partner is a Director ofthe Company. At December 31, 2011, $xxx (January 1, 2010: $xxx, December 31, 2010: $xxx) owing to thislegal firm was included in accounts payable.b) Rental PaymentsRental payments of $xxx (year-ended December 31, 2010: $xxx) were paid to Office Company, which iscontrolled by a Director of the Company. At December 31, 2011, $xxx (January 1, 2010: $xxx, December 31,2010: $xxx) owing was included in accounts payable.PAGE 27 OF 35BDO CANADA LLP
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2011 Annual Illustrative IFRS Financial Statements - BDO Canada

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