| Significant Accounting Policies | 2. Significant Accounting Policies
(a) Statement of compliance These Financial Statements
have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”)
effective for the Company’s fiscal year ended July 31, 2018. The Company’s Board
of Directors authorized issuance of these Financial Statements on October 10, 2018.
(b) Basis of presentation These Financial Statements
have been prepared on a historical cost basis, except for financial instruments measured at fair value. In addition, these Financial
Statements have been prepared using the accrual basis of accounting, except for cash flow information.
(c) Significant accounting estimates and judgments The preparation of financial
statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application
of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
The impact of such estimates is pervasive throughout the financial statements, and may require accounting adjustments based on
future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future
periods if the revision affects both current and future periods. These estimates are based on historical experience, current and
future economic conditions and other factors, including expectations of future events that management believes are reasonable under
the circumstances. Changes in the subjective inputs and assumptions can materially affect fair value estimates. Specific areas where significant
estimates or judgements exist are: Sources of estimation uncertainty:
● Provisions for income taxes are an estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of each reporting period. However, it is possible that at some future date a change in tax liabilities or taxes recoverable could result from audits by taxation authorities. Where the outcome of these tax-related matters is different from the amounts that were originally recorded, such differences will affect the tax provisions in the period in which such determination is made. Critical accounting judgments:
● Assessment of the Company’s ability to continue as a going concern;
(d) Basis of consolidation These consolidated financial
statements include the accounts of the Company and the subsidiaries that it controls. Control is achieved when the Company is exposed
to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through
its power over the investee. Intercompany balances and
transactions, including any unrealized income and expenses arising from intercompany transactions, are eliminated upon consolidation. At July 31, 2018, and July
31, 2017, the Company held a 100% interest in QZMG Resources Ltd., a company that holds a 100% interest in Wavecrest Resources
Inc.
(e) Foreign currency The functional and presentation
currency of the Company and its subsidiaries as at July 31, 2018, is the Canadian dollar. Transactions in currencies
other than the functional currency are recorded at the rates of exchange prevailing on the dates of transactions. At the end of
each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing
at the period end date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.
Gains and losses arising on translation are included in profit or loss for the period.
(f) Financial instruments Financial assets The Company classifies its
financial assets into one of the following categories as follows: Fair value through profit
or loss - This category comprises derivatives and financial assets acquired principally for the purpose of selling or repurchasing
in the near term. They are carried at fair value with changes in fair value recognized in profit or loss. Loans and receivables - These
assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are
carried at amortized cost using the effective interest method less any provision for impairment. Held-to-maturity investments
- These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s
management has the positive intention and ability to hold to maturity. These assets are measured at amortized cost using the effective
interest method less any provision for impairment. If there is objective evidence that the asset is impaired, determined by reference
to external credit ratings and other relevant indicators, the financial asset is measured at the present value of estimated future
cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized in profit or loss. Available-for-sale - Non-derivative
financial assets not included in the above categories are classified as available-for-sale. They are carried at fair value with
changes in fair value recognized in other comprehensive income (loss). Where a decline in the fair value of an available-for-sale
financial asset constitutes objective evidence of impairment, the amount of the loss is removed from accumulated other comprehensive
income (loss) and recognized in profit or loss. All financial assets except
those measured at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial
assets are impaired when there is objective evidence of impairment as a result of one or more events that have occurred after initial
recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or the group of
financial assets. The Company has classified
its cash as fair value through profit or loss and amounts receivable as loans and receivables. Financial liabilities The Company classifies its
financial liabilities into one of two categories as follows: Fair value through profit
or loss - This category comprises derivatives and financial liabilities incurred principally for the purpose of selling or repurchasing
in the near term. They are carried at fair value with changes in fair value recognized in profit or loss. Other financial liabilities:
This category consists of liabilities carried at amortized cost using the effective interest method. The Company classified its
amounts payable and other liabilities and due to related party balances as other financial liabilities. Impairment of financial
assets: Financial assets are assessed
for indicators of impairment at the end of each reporting period. Financial assets are impaired when 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:
● significant financial difficulty of the issuer or counterparty; or
● default or delinquency in interest or principal payments; or
● it becoming probable that the borrower will enter bankruptcy or financial re-organization. For certain categories of
financial assets, such as amounts receivable, assets that are assessed not to be impaired individually are subsequently assessed
for impairment on a collective basis. The carrying amount of the financial asset is reduced by the impairment loss directly for
all financial assets with the exception of amounts receivable, where the carrying amount is reduced through the use of an allowance
account. When an amount receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries
of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account
are recognized in profit or loss. 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 profit or loss 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.
(g) Exploration and evaluation expenditures Exploration and evaluation
expenditures are expenditures incurred by the Company in connection with the exploration for and evaluation of mineral resources
before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Exploration and evaluation
expenditures are expensed as incurred, except for initial expenditures associated with the acquisition of exploration and evaluation
assets through a business combination or an asset acquisition. Exploration and evaluation
expenditures include the cash consideration and the estimated fair market value of common shares on the date of issue or as otherwise
provided under the relevant agreements for exploration costs. Administrative expenditures
related to exploration activities are expensed in the period incurred. Mineral property interests Expenditures incurred by the
Company in connection with a mineral property after the technical feasibility and commercial viability of extracting a mineral
resource are demonstrable are capitalized. Such amounts are then amortized over the estimated life of the property following the
commencement of commercial production, or are written off if the property is sold, allowed to lapse or abandoned, or when impairment
has been determined to have occurred. Mineral property interests,
if any, are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability,
and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount. Mineral property interests
attributable to an area of interest are tested for impairment and then reclassified to mineral property and development assets
within property, plant and equipment once the technical feasibility and commercial viability of the extraction of mineral resources
in an area of interest are demonstrable. Recoverability of the carrying
amount of mineral property interests is dependent on successful development and commercial exploitation, or alternatively, a sale
of the respective areas of interest.
(h) Impairment of non-financial assets At the end of each reporting
period the carrying amounts of the Company’s assets are reviewed to determine whether there is any indication that those
assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment, if any. The recoverable amount is the greater of (i) fair value less costs to sell, and (ii) value in
use. Fair value is estimated as the amount that would be obtained from the sale of the asset in an arm’s length transaction
between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present
value using a discount rate that reflects current assessments of the Company’s cost of capital and the risks specific to
the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset
is reduced to its recoverable amount and an impairment loss is recognized in profit or loss for the period. For an asset that does
not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset
belongs. Where an impairment loss subsequently
reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount,
but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized
for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or
loss.
(i) Share capital Common shares are classified
as equity. Transaction costs directly attributable to the issuance of common shares and share purchase options are recognized as
a deduction from equity, net of any tax effects.
(j) Loss per share Basic earnings (loss) per
share is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of shares outstanding
during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that
the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and
warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were
exercised and that proceeds from such exercises were used to acquire common stock at the average market price during the reporting
periods. For the years 2018 and 2017, there was no impact on loss per share from the potentially dilutive securities.
(k) Share-based payments Share-based payments to employees
and others providing similar services are measured at the fair value of the instruments at the grant date. The fair value determined
at the grant date is charged to operations over the vesting period, based on the Company’s estimate of equity instruments
that will eventually vest. The Company revises the estimate on each reporting date and the effect of the change is recognized in
profit or loss. Share-based payment transactions
with other parties are measured at the fair value of the goods or services received, except where the fair value cannot be estimated
reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity
obtains the goods or the counterparty renders the service.
(l) Rehabilitation provision An obligation to incur rehabilitation
and site restoration costs arises when environmental disturbance is caused by the exploration, development or ongoing production
of a mineral property interest. Such costs arising from the decommissioning of plant and other site preparation work, discounted
to their net present value, are provided for and capitalized at the start of each project, as soon as the obligation to incur such
costs arises. These costs are charged against earnings over the life of the operation. The Company has no material
rehabilitation and site restoration costs.
(m) Income taxes Income tax on profit or loss
for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that
it relates to items recognized directly in shareholders’ deficiency, in which case it is recognized in shareholders’
deficiency. Current tax expense is the
expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end, adjusted
for amendments to tax payable with regards to previous years. Deferred tax is calculated
by providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences
are not provided for:
● goodwill not deductible for tax purposes;
● the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
● differences relating to investments in subsidiaries, associates, and joint ventures to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantively enacted at the end of the reporting period applicable to the period of expected realization or settlement. A deferred tax asset is recognized
only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. 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.
(n) Compound financial instruments Compound financial instruments
issued by the Company include convertible debentures that can be converted into a fixed number of the Company’s common shares
at the option of the holder. The liability component of
a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion
option. The equity component, if any, is recognized initially as the difference between the estimated fair value of the compound
financial instrument as a whole and the estimated fair value of the liability component. Directly attributable transaction costs,
if material, are allocated to the liability and equity components in proportion to their initial carrying amounts.
(o) Changes in accounting policies and new accounting pronouncements Accounting standards issued
but not yet effective: Effective for annual periods
beginning on or after January 1, 2018:
● IFRS 9, Financial Instruments
● IFRS 15, Revenue from Contracts with Customers Effective for annual periods
beginning on or after January 1, 2019:
● IFRS 16, Leases and revised IAS 17, Leases
● IFRIC 23, Uncertainty over Income Tax Treatments The Company has not early
adopted these new standards or amendments to existing standards and does not expect the impact of these standards on the Company’s
financial statements to be material. |
