Borealis Exploration Limited Consolidated Financial Statements for the Six Months Ended 30 September
NOTES TO THE FINANCIAL STATEMENTS
six months ended 30 September 2013
1. PRINCIPAL ACCOUNTING POLICIES
a. Basis of accounting
b. Basis of consolidation
The results of subsidiaries acquired or disposed of during the year are included in the consolidated
statement of comprehensive income from the effective date of acquisition, or up to the effective date of
disposal, as appropriate. Entities which are acquired and are controlled, but which will be held for a
period less than twelve months, are recorded as assets held for sale.
These financial statements have been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the
International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs"),
the Gibraltar Companies Act, the Gibraltar (Companies Accounts) Act 1999 and the Gibraltar
(Consolidated Accounts) Act 1999.
The principal accounting policies adopted in the preparation of the financial statements are set out
below. The policies have been consistently applied, unless otherwise stated.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain
critical accounting estimates. It also requires Family management to exercise judgment in applying the
Family's accounting policies. The areas where significant judgments and estimates have been made in
preparing the financial statements and their effect are disclosed in note 5.
From 1 January 2010, the total comprehensive income of non-wholly owned subsidiaries is attributed to
owners of the parent and to the non-controlling interests in proportion to their relative ownership
interests. Before this date, unfunded losses in such subsidiaries were attributed entirely to the family. In
accordance with the transitional requirements of IAS 27 (2008), the carrying value of non-controlling
interests at the effective date of the amendment has not been restated.
The acquisition method of accounting is used by the Family when it undertakes a business combination.
The fair value of consideration transferred at the acquisition date includes the fair value of assets
transferred, liabilities incurred by the owners and equity instruments issued by the Family. Consideration
can include cash, contingent consideration and options. Acquisition related costs are expensed as
incurred unless they relate to the issue of financial instruments in which case they are accounted for in
accordance with accounting policies relating to that specific type of financial instrument. The fair value
of assets acquired and liabilities assumed are recognised at the acquisition date. At the acquisition date
any equity interest held prior to the acquisition date is recognised at fair value with a resulting gain or
loss recognised in profit or loss. The family has an option on a combination by combination basis on
how to recognise non-controlling interest at the acquisition date either at fair value or proportionate
share of net assets.
Goodwill is measured as the excess of the consideration transferred, plus any non-controlling interest
and the fair value of any previously held interest in the acquiree over the fair value of assets acquired
and liabilities assumed. If the goodwill is negative (bargain purchase) this is recognised immediately in
the income statement. Any changes in contingent consideration after the measurement period are
recognised in profit or loss.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated
statement of comprehensive income from the effective date of acquisition, or up to the effective date of
disposal, as appropriate. Entities which are acquired and are controlled, but which will be held for a
period less than twelve months, are recorded as assets held for sale.
The consolidated financial statements are based on the financial statements of the individual
companies drawn up using the standard Family accounting policies. Accounting policies applied by
individual subsidiaries have been revised where necessary to ensure consistency with Family
policies for consolidation purposes. All companies in the Family have the same annual reporting
date of 31 March.
All significant transactions and balances between Family entities are eliminated on consolidation.
The Family applies a policy of treating transactions with a non-controlling interest as transactions
with equity holder when control is not lost of the subsidiary, and therefore recognised in equity.
c. Segment Information
The Borealis Family of Companies has two reportable operating segments. The Family's mining
exploration operations are conducted on properties in Canada. The only assets utilised in this
business segment are the mining and other equipment. All other assets relate to the Family's other
reportable operating segment, which is the business of conducting basic industrial research with
the intent to commercialise these technologies. While the technical rights and/or patents are owned
by a company registered in Gibraltar, the research activities are currently mainly carried out outside
Gibraltar.
d. Foreign Currency Translation
The Family has determined the USD $ as its functional currency, as this is the currency of the
economic environment in which the Family predominantly operates.
Transactions in currencies other than USD $ are recorded at the rates of exchange prevailing on
the dates of the transactions. At each reporting date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on the reporting date.
Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies
are translated at the rates prevailing at the date when the fair value was determined. Gains and
losses arising on exchange are included in profit or loss. No Family entity has an operational
currency of a hyper-inflationary economy.
Foreign currency differences arising on retranslation are recognised in profit or loss, except for
differences arising on the retranslation of available-for-sale equity instruments, financial liabilities
that are designated as hedges of the net investment in a foreign operation and qualifying cash flow
hedges, each of which are recognised directly in equity within the translation reserve.
In the case of foreign entities the financial statements of the Family's overseas operations are
translated as follows on consolidation: assets and liabilities, at exchange rates ruling on the
reporting date, income and expense items at the average rate of exchange for the period and equity
at exchange rates ruling on the dates of the transactions. Exchange differences arising are
classified as equity and transferred to a separate translation reserve. Such translation differences
are recognised in the statement of comprehensive income in the period in which the operation is
disposed of. Foreign exchange gains and losses arising from monetary item receivable from or
payable to a foreign operation, the settlement of which is neither planned nor likely within the
foreseeable future, are considered to form part of a net investment in a foreign operation and are
recognised directly in equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate. Foreign currency gains
and losses are reported on a net basis.
e. Revenue
At present all Family companies are engaged in development of various products and projects
which have not yet reached the point of revenue generation. Once revenue commences, it will be
accounted for on the basis of the accounting period in which the work was carried out or invoiced.
f. Non-controlling interests
For business combinations completed on or after 1 January 2010 the Family has the choice, on a
business combination by business combination basis, to initially recognise any non-controlling
interest in the acquiree at either acquisition date fair value or, as was required prior to 1 January
2010, at the non-controlling interest's proportionate share of the acquiree's net assets. The family
has not elected to take the option to use fair value in acquisitions completed to date.
From 1 January 2010, the total comprehensive income of non-wholly owned subsidiaries is
attributed to owners of the parent and to the non-controlling interests in proportion to their relative
ownership interests. Before this date, unfunded losses in such subsidiaries were attributed entirely
to the family. In accordance with the transitional requirements of IAS 27 (2008), the carrying value
of non-controlling interests at the effective date of the amendment has not been restated.
g. Non-current assets
Non-current assets are stated in the statement of financial position at their revalued amounts, being
the fair value on the basis of their existing use at the date of revaluation, less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. Revaluations are
performed with sufficient regularity such that the carrying amount does not differ materially from that
which would be determined using fair values at the reporting date.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item will
flow to the Family and the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Any revaluation increase arising on the revaluation of such non-current assets are credited to the
revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset
previously recognised as an expense, in which case the increase is credited to the income
statement to the extent of the decrease previously charged. A decrease in carrying amount arising
on the revaluation of such non-current assets are charged as an expense to the extent that it
exceeds the balance, if any, held in the properties revaluation reserve relating to a previous
revaluation of that asset.
When revalued assets are sold, the amounts included in the revaluation reserve are transferred to
retained earnings.
Tangible non-current assets and intangible non-current assets are stated at their purchase cost,
together with any incidental expenses of acquisition.
Depreciation is provided on all fixed assets to write off their cost less residual value over their
estimated useful lives. The rates in use on a reducing balance method are as follows:
Mining and geological equipment 30%
Other equipment 20%
Patents are accounted for on the basis of the costs of registering the worldwide rights. All costs of
development and legal works of the products have been written off in the year incurred. These
patents are depreciated on the straight-line method at a rate of 4% per year. The carrying value of
patents is reviewed annually by the Geoup of Companies. If, as a result of such a review, it is
determined that the value has been permanently impaired, any diminution in value is taken to
statement of comprehensive income account in accordance with IAS 36. To the extent that such
diminution in value is subsequently reversed, this reversal is credited to the statement of
comprehensive income.
h. Intangible Assets – research and development expenditure
Research costs are expensed in the year in which they are incurred. Development costs are
reviewed annually and are expensed if they do not qualify for capitalisation. Development costs
that are directly attributable to the design and testing of identifiable and unique products controlled
by the Family are capitalised as intangible assets only when the following criteria are met:
(i) it is technically feasible to complete the product so that it will be available for use;
(ii) management intends to complete the product and use or sell it;
(iii) there is an ability to use or sell the product;
(iv) it can be demonstrated how the product will generate probable future economic benefits;
(vi) the expenditure attributable to the product during its development can be measured reliably.
When revalued assets are sold, the amounts included in the revaluation reserve are transferred to
retained earnings.
The depreciable amount of an intangible asset with a finite useful life, will be distributed on a
systematic basis over its useful life. Capitalised development costs are amortised on a straight line
basis over their twenty five year useful estimated life once the asset is available for use.
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