VENZA GOLD CORP. - FORM 10-K - XML - IDEA: XBRL DOCUMENT - January 28, 2013
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Note 2 - Summary of Significant Accounting Policies
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12 Months Ended |
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Oct. 31, 2012
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| Significant Accounting Policies [Text Block] |
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
These
financial statements and related notes are presented in
accordance with US GAAP, and are presented in United States
dollars. The Company has not produced revenues from its
principal business and is an exploration stage company as
defined by “Accounting and Reporting by Development
Stage Enterprises.”
Use
of Estimates
The
preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions
that affect certain of the reported amounts of assets and
liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the year.
The Company regularly evaluates estimates and assumptions.
The Company bases its estimates and assumptions on current
facts, historical experience and various other factors it
believes to be reasonable under the circumstances, the
results of which form the basis for making judgments about
the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent
from other sources. Significant areas of estimate include
the carrying value of the mineral property and deferred
income tax obligations. The actual results experienced by
the Company may differ materially and adversely from the
Company’s estimates. To the extent there are material
differences between the estimates and the actual results,
future results of operations will be affected.
Asset
Retirement Obligations
The
Company records the fair value of an asset retirement
obligation as a liability in the period in which it incurs
an obligation associated with the retirement of tangible
long-lived assets that result from the acquisition,
construction, development and/or normal use of the assets.
The estimated fair value of the asset retirement obligation
is based on the current cost escalated at an inflation rate
and discounted at a credit adjusted risk-free rate. This
liability is capitalized as part of the cost of the related
asset and amortized over its useful life. The
liability accretes until the Company settles the
obligation. To date the Company has not incurred
any measurable asset retirement obligations.
Impairment
or Disposal of Long Lived Assets
The
carrying value of intangible assets and other long-lived
assets is reviewed on a regular basis for the existence of
facts or circumstances that may suggest impairment. The
Company recognizes impairment when the sum of the expected
undiscounted future cash flows is less than the carrying
amount of the asset. Impairment losses, if any, are
measured as the excess of the carrying amount of the asset
over its estimated fair value.
Fair
Value of Financial Instruments
Fair
value is defined as the price that would be received upon
sale of an asset or paid upon transfer of a liability in an
orderly transaction between market participants at the
measurement date and in the principal or most advantageous
market for that asset or liability. The fair value should
be calculated based on assumptions that market participants
would use in pricing the asset or liability, not on
assumptions specific to the entity. In addition, the fair
value of liabilities should include consideration of
non-performance risk including the entity’s own
credit risk.
A
fair value hierarchy for valuation inputs is established.
The hierarchy prioritizes the inputs into three levels
based on the extent to which inputs used in measuring fair
value are observable in the market. Each fair value
measurement is reported in one of the three levels and
which is determined by the lowest level input that is
significant to the fair value measurement in its
entirety.
These
levels are:
Level
1 – inputs are based upon unadjusted quoted prices
for identical instruments traded in active markets.
Level
2 – inputs are based upon quoted prices for similar
instruments in active markets, quoted prices for identical
or similar instruments in markets that are not active, and
model-based valuation techniques for which all significant
assumptions are observable in the market or can be
corroborated by observable market data for substantially
the full term of the assets or liabilities.
Level
3 – inputs are generally unobservable and typically
reflect management’s estimates of assumptions that
market participants would use in pricing the asset or
liability. The fair values are therefore determined using
model-based techniques that include option pricing models,
discounted cash flow models, and similar techniques.
The
Company’s financial instruments consist of cash,
notes receivable, accounts payable and amounts due from
related parties. The carrying value of these financial
instruments approximates their fair value based on their
liquidity, their short-term nature or application of
appropriate risk based discount rates to determine fair
value. These financial assets and liabilities are valued
using Level 3 inputs, except for cash which is at Level 1.
The Company is not exposed to significant interest,
exchange or credit risk arising from these financial
instruments.
Foreign
Currency Translation and Transaction
The
Company’s functional currency is the Canadian dollar
and reporting currency is the United States dollar. The
Company translates assets and liabilities to US dollars
using year-end exchange rates, translates unproved mineral
properties using historical exchange rates, and translates
revenues and expenses using average exchange rates during
the period. Gains and losses arising on settlement of
foreign currency denominated transactions or balances are
included in the other comprehensive income. The Company has
not to the date of these financial statements, entered into
derivative instruments to offset the impact of foreign
currency fluctuations.
Income
Taxes
Income
taxes are determined using the liability
method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying
amounts of assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences
are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that
includes that date of enactment. In addition, a
valuation allowance is established to reduce any deferred
tax asset for which it is determined that it is more likely
than not that some portion of the deferred tax asset will
not be realized.
The
Company accounts for uncertainty in income taxes by
applying a two-step method. First, it evaluates whether a
tax position has met a more likely than not recognition
threshold, and second, it measures that tax position to
determine the amount of benefit, if any, to be recognized
in the financial statements. The application of this method
did not have a material effect on the Company's financial
statements.
Loss
per Share
The
Company presents both basic and diluted loss per share
(“LPS”) on the face of the statements of
operations. Basic LPS is computed by dividing net loss
available to common shareholders by the weighted average
number of shares outstanding during the year. Diluted LPS
gives effect to all dilutive potential common shares
outstanding during the period including convertible debt,
stock options, and warrants, using the treasury stock
method. Diluted LPS excludes all dilutive potential shares
if their effect is anti-dilutive.
Mineral
Properties
The
Company classifies its mineral rights as tangible assets
and accordingly acquisition costs are capitalized as
mineral property costs. Mineral exploration costs are
expensed as incurred until commercially mineable deposits
are determined to exist within a particular
property.
When
it has been determined that a mineral property can be
economically developed as a result of establishing proven
and probable reserves, the costs then incurred to develop
such property, are capitalized. Such costs will be
amortized using the units-of-production method over the
estimated life of the probable reserves. If mineral
properties are subsequently abandoned or impaired, any
capitalized costs will be charged to operations.
Recently
Adopted Accounting Guidance
The
Company has reviewed recently issued accounting
pronouncements and plans to adopt those that are applicable
to it. It does not expect the adoption of these
pronouncements to have a material impact on its financial
position, results of operations or cash flows.
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