| SIGNIFICANT ACCOUNTING POLICIES | 4. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies of the Company include the following: (a) Principles of consolidation Subsidiaries are entities controlled
by the Company. Control exists when the Company has the power to govern the financial and operating policies of a Company so as
to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable are taken
into account. The financial statements of the Company’s former wholly-owned subsidiaries, 27 Red and 4 Touchdowns are included
in the consolidated financial statements from the date that control commenced to the date that control ceased. Intercompany balances and transactions
and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the consolidated financial
statements. (b) Financial instruments The Company adopted all of the requirements
of IFRS 9 Financial Instruments on January 1, 2018. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement.
IFRS 9 utilizes a revised model for recognition and measurement of financial instruments in a single, forward-looking “expected
loss” impairment model. The following is the Company’s
new accounting policy for financial instruments under IFRS 9: (i) Classification The Company classifies its financial
instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other
comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial
assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing
the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified
as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument
basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured
at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL. The Company completed a detailed assessment
of its financial assets and liabilities as at January 1, 2018. The following table shows the original classification under IAS
39 and the new classification under IFRS 9:
Financial assets/liabilities Original Classification IAS 39 New Classification IFRS 9
Cash and cash equivalents FVTPL FVTPL
Accounts payable Amortized cost Amortized cost
Due to related party Amortized cost Amortized cost
Refundable subscriptions Amortized cost Amortized cost
Loan payable Amortized cost Amortized cost
Convertible debentures Amortized cost Amortized cost The adoption of IFRS 9 resulted in
no impact to the opening accumulated deficit nor to the opening balance of accumulated comprehensive income on January 1, 2018. (ii) Measurement Financial assets and liabilities
at amortized cost Financial assets and liabilities at
amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at
amortized cost less any impairment. Financial assets and liabilities
at FVTPL Financial assets and liabilities carried
at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of comprehensive loss. Realized
and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are
included in the statements of comprehensive loss in the period in which they arise. Debt investments at FVTOCI These assets are subsequently measured
at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment
are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive loss (“OCI”). On
derecognition, gains and losses accumulated in OCI are reclassified to profit or loss Equity investments at FVTOCI These assets are subsequently measured
at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of
the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss. (iii) Impairment of financial assets
at amortized cost The Company recognizes a loss allowance
for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures
the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the
financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased
significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to
the twelve month expected credit losses. The Company shall recognize in the statements of comprehensive loss, as an impairment
gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting
date to the amount that is required to be recognized. (iv) Derecognition Financial assets The Company derecognizes financial
assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets
and substantially all of the associated risks and rewards of ownership to another entity. Financial liabilities The Company derecognizes a financial
liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability
when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially
different, in which case a new financial liability based on the modified terms is recognized at fair value. Gains and losses on derecognition
are generally recognized in profit or loss. (c) Mineral property interests Costs directly related to the acquisition,
exploration and evaluation of resource properties are capitalized once the legal rights to explore the resource properties are
acquired. If it is determined that capitalized
acquisition, exploration and evaluation costs are not recoverable, or the property is abandoned or management has determined impairment
in value, the property is written down to its recoverable amount. From time to time, the Company acquires
or disposes of properties pursuant to the terms of option agreements. Options are exercisable entirely at the discretion of the
optionee, and accordingly, are recorded as mineral property costs or recoveries when the payments are made or received. After costs
are recovered, the balance of the payments received is recorded as a gain on option or disposition of mineral property. Once the technical feasibility and
commercial viability of the extraction of mineral resources are demonstrable, mineral property interests attributable to that area
of interest are first tested for impairment and then reclassified to mining property and development assets within property and
equipment. To date, none of the Company’s mineral property interests has demonstrated technical feasibility and commercial
viability. The recoverability of the carrying amount of any mineral property interests is dependent on successful development and
commercial exploitation or, alternatively, sale of the respective areas of interest. (d) Impairment At the end of each reporting period,
the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment. The recoverable
amount is the higher of fair value less costs to sell and value in use. Fair value is determined 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 pre-tax discount rate that reflects current
market assessments of the time value of money 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 the impairment loss
is recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable
amount is determined for the cash-generating unit to which the asset belongs. When 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. (e) Decommissioning liabilities An obligation to incur decommissioning
and site rehabilitation costs occurs when environmental disturbance is caused by exploration, evaluation, development or ongoing
production. Decommissioning and site rehabilitation
costs arising from the installation of plant and other site preparation work, discounted to their net present value, are provided
when the obligation to incur such costs arises and are capitalized into the cost of the related asset. These costs are charged
against operations through depreciation of the asset and unwinding of the discount on the provision. Depreciation is included in operating
costs while the unwinding of the discount is included as a financing cost. Changes in the measurement of a liability relating to
the decommissioning or site rehabilitation of plant and other site preparation work are added to, or deducted from, the cost of
the related asset. The costs for the restoration of site
damage, which arises during production, are provided at their net present values and charged against operations as extraction progresses. Changes in the measurement of a liability,
which arise during production, are charged against operating profit. The discount rate used to measure the net present value of
the obligations is the pre-tax rate that reflects the current market assessment of the time value of money and the risks specific
to the obligation. To date the Company does not have any decommissioning liabilities. (f) Income taxes Income tax expense consisting of current
and deferred tax expense is recognized to profit or loss. Current tax expense is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at period-end, adjusted for amendments to tax payable with regard
to previous years. Deferred tax assets and liabilities
and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences
between the carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
substantive enactment occurs. A deferred tax asset is recognized
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. (g) Share-based payments The Company grants stock options to
directors, officers, employees and consultants of the Company. The fair value of share-based payments to employees is measured
at grant date, using the Black-Scholes Option Pricing Model, and is recognized over the vesting period using the graded method.
Fair value of share-based payments for non-employees is recognized and measured at the date the goods or services are received
based on the fair value of the goods or services received. If it is determined that the fair value of goods and services received
cannot be reliably measured, the share-based payment is measured at the fair value of the equity instruments issued using the Black-Scholes
Option Pricing Model. For both employees and non-employees,
the fair value of share-based payments is recognized as either an expense or as mineral property interests with a corresponding
increase in option reserves. The amount to be recognized as expense is adjusted to reflect the number of share options expected
to vest. Consideration received on the exercise of stock options is recorded in capital stock and the related share-based payment
is transferred from the stock option reserve to capital stock. For unexercised options that expire, the recorded value is transferred
to deficit. (h) Convertible debentures The liability component of convertible
debentures is recognized initially at the fair value of a similar liability that does not have a conversion option. The equity
component is recognized initially, as the difference between the fair value of the convertible debenture as a whole and the fair
value of the liability component. Transaction costs are allocated to the liability and equity components in proportion to their
initial carrying amounts. Subsequent to initial recognition, the liability component of the convertible debenture is measured at
amortized cost using the effective interest method. The equity component is not re-measured subsequent to initial recognition. (i) Loss per share Loss per share is calculated by dividing
net loss attributable to common shares of the Company by the weighted average number of common shares outstanding during the year.
The Company uses the treasury stock method for calculating diluted loss per share. Under this method, the dilutive effect on earnings
per share is calculated on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments.
It assumes that the proceeds of such exercise would be used to purchase common shares at the average market price during the period.
However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants
that would be anti-dilutive. (j) Capital stock Proceeds from the exercise of stock
options and warrants are recorded as capital stock. The proceeds from the issuance of units of the Company are allocated between
common shares and warrants based on the residual value method. Under this method, the proceeds are allocated first to capital stock
based on the fair value of the common shares at the time the units are issued and any residual value is allocated to the warrants.
When the warrants are exercised, the related value is transferred from the warrant reserve to capital stock. For unexercised warrants
that expire, the recorded value is transferred from the warrant reserves to deficit. (k) Foreign currency translation Amounts recorded in foreign currency
are translated into Canadian dollars as follows: (i) Monetary assets and liabilities,
at the rate of exchange in effect as at the balance sheet date; (ii) Non-monetary assets and liabilities,
at the exchange rates prevailing at the time of the acquisition of the assets or assumption of the liabilities; and (iii) Revenues and expenses (excluding
amortization, which is translated at the same rate as the related asset), at the rate of exchange on the transaction date. Exchange differences are recognized
in profit or loss in the period which they arise. (l) Accounting standards issued but not yet applied IFRS 16, Leases The new standard eliminates the classification
of leases as either operating or finance leases for a lessee. Instead all leases are capitalized by recognizing the present value
of lease payments and recognizing an asset and a financial liability representing an obligation to make future lease payments.
The principles in IFRS 16 provide a more consistent approach to acquiring the use of an asset whether by leasing or purchasing
an asset. The new leasing standard is applicable to all entities and will supersede current lease accounting standards under IFRS.
IFRS 16 is mandatory for annual periods beginning on or after January 1, 2019. Management has assessed that the adoption of this
accounting standard will not have significant impact on its financial statements. At the date of the approval of the
financial statements, a number of standards and interpretations were issued but not effective. The Company considers that these
new standards and interpretations are either not applicable or are not expected to have a significant impact on the Company’s
financial statements. |
