REG - SolGold PLC - Final Results <Origin Href="QuoteRef">SOLG.L</Origin> - Part 3
14/09/2017 07:58
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the extent of sample sizes tested during the
audit.
There were no misstatements identified during the course of our audit that were individually, or in aggregate, considered
to be material in terms of their absolute monetary value or on qualitative grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit scope focused on the Group's principal mining entity, Exploraciones Novomining S.A ("ENSA"). ENSA holds the
Cascabel exploration project. ENSA was subject to a full scope audit. The two other significant components were determined
to be the Parent Company and the Group consolidation which were also both subject to a full scope audit.
The remaining components of the Group were considered non-significant and such components were subject to analytical review
procedures together with substantive testing on Group audit risk areas applicable to that component ('review work'). We set
out below the extent to which the Group's total assets were subject to audit versus analytical review procedures.
The audit of ENSA was performed in Ecuador. All audit work (full scope audit or review work) was conducted by BDO LLP and
BDO member firms.
As part of our audit strategy the Group audit team were embedded into the Ecuadorian audit team and were present onsite in
Ecuador during the local audit. BDO LLP had full access to all audit working papers of the significant component audit BDO
member firm.
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors' report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors' report have been prepared in accordance with applicable legal
requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required
to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) or ISA
IAASB will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's
report.
Anne Sayers
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
consolidated statement of comprehensive income
For the year ended 30 June 2017
Group2017 Group2016
Notes A$ A$
Expenses
Exploration costs written-off 12 (17,310) (1,555,004)
Administrative expenses (8,232,307) (2,553,010)
Movement in fair value of derivative liability 22a (v) - (1,378,260)
Operating loss 3 (8,249,617) (5,486,274)
Finance income 6 69 585
Finance costs 6 (73,502) (237,433)
Loss before tax (8,323,050) (5,723,122)
Tax expense (benefit) 7 (3,823,078) -
Loss for the year (4,499,972) (5,723,122)
Other comprehensive profit / (loss)
Items that may be reclassified into profit or loss
Change in fair value of available-for-sale financial assets net of tax 10a / 14 8,920,515 190,610
Exchange differences on translation of foreign operations (2,089,272) 1,048,814
Total comprehensive profit / (loss) for the year 2,331,271 (4,483,698)
Loss for the year attributable to:
Owners of the parent company (4,418,025) (5,465,830)
Non-controlling interest (81,947) (257,292)
(4,499,972) (5,723,122)
Total comprehensive profit / (loss) for the year attributable to:
Owners of the parent company 2,697,343 (4,383,728)
Non-controlling interest (366,072) (99,970)
2,331,271 (4,483,698)
Loss per share Cents per share Cents per share
Basic loss per share 8 (0.3) (0.7)
Diluted loss per share 8 (0.3) (0.7)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
consolidated and company statements of financial position
As at 30 June 2017
Registered Number 5449516
Notes Group2017 Group2016 Company2017 Company2016
A$ A$ A$ A$
Assets
Property, plant and equipment 11 1,777,937 375,400 189,342 9,449
Intangible assets 12 59,723,105 41,079,914 - -
Investment in subsidiaries 9 - - 64,289,892 40,132,827
Investment in available-for-sale securities 10(a) 14,366,304 1,622,712 14,360,725 1,617,132
Loans receivable and other non-current assets 13 226,175 123,974 90,137 -
Total non-current assets 76,093,521 43,202,000 78,930,096 41,759,408
Other receivables and prepayments 15 1,307,344 203,169 780,168 168,353
Cash and cash equivalents 16 89,312,743 94,933 88,669,626 17,199
Total current assets 90,620,087 298,102 89,449,794 185,552
Total assets 166,713,608 43,500,102 168,379,890 41,944,960
Equity
Share capital 17 26,376,265 17,015,019 26,376,265 17,015,019
Share premium 17 199,322,436 87,488,507 199,322,436 87,488,507
Other reserves 15,385,705 2,844,038 15,309,852 963,038
Accumulated loss (76,869,038) (72,489,364) (73,389,037) (69,514,852)
Equity attributable to owners of the parent company 164,215,368 34,858,200 167,619,516 35,951,712
Non-controlling interest (242,935) 123,137 - -
Total equity 163,972,433 34,981,337 167,619,516 35,951,712
Liabilities
Trade and other payables 18 2,741,175 3,742,361 760,374 1,216,844
Borrowings 22a (iv) - 4,776,404 - 4,776,404
Total current liabilities 2,741,175 8,518,765 760,374 5,993,248
Total liabilities 2,741,175 8,518,765 760,374 6,001,910
Total equity and liabilities 166,713,608 43,500,102 168,379,890 41,944,960
The above consolidated and company statements of financial position should be read in conjunction with the accompanying
notes.
A separate statement of comprehensive income for the parent company has not been presented as permitted by section 408 of
the Companies Act 2006. The Company's loss for the year was A$3,912,536 (2016: A$3,639,906).
The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 14 September
2017.
Nicholas Mather
Director
consolidated and company statements of changes in equity
For the year ended 30 June 2017
Consolidated statement of changes in equity
Notes Share capital A$ Share premium A$ Available-for-sale financial assets reserve A$ Share option reserve A$ Foreign Currency Translation Reserve A$ Change in proportionate interest reserve A$ Accumulated loss A$ Total A$ Non-controlling interests A$ Total Equity
A$
Balance at 1 July 2015 17 13,184,721 82,212,310 (331,909) 1,104,337 1,057,372 (67,864) (67,023,534) 30,135,433 223,107 30,358,540
Loss for the year - - - - - - (5,465,830) (5,465,830) (257,292) (5,723,122)
Other comprehensive income - - 190,610 - 891,492 - - 1,082,102 157,322 1,239,424
Total comprehensive income for the year - - 190,610 - 891,492 - (5,465,830) (4,383,728) (99,970) (4,483,698)
New share capital subscribed 3,830,298 5,292,358 - - - - - 9,122,656 - 9,122,656
Share issue costs - (16,161) - - - - - (16,161) - (16,161)
Balance at 30 June 2016 17,015,019 87,488,507 (141,299) 1,104,337 1,948,864 (67,864) (72,489,364) 34,858,200 123,137 34,981,337
Loss for the year - - - - - - (4,418,025) (4,418,025) (81,947) (4,499,972)
Other comprehensive income - - 8,920,515 - (1,805,147) - - 7,115,368 (284,125) 6,831,244
Total comprehensive income for the year - - 8,920,515 - (1,805,147) - (4,418,025) 2,697,343 (366,072) 2,331,271
New share capital subscribed 9,282,812 117,092,097 - - - - - 126,374,909 - 126,374,909
Options exercised 78,434 1,216,906 - - - - - 1,295,340 - 1,295,340
Share issue costs - (6,475,074) - - - - - (6,475,074) - (6,475,074)
Options expired - - - (38,351) - - 38,351 - - -
Value of share and options issued to Directors , employees and consultants - - - 5,464,650 - - - 5,464,650 - 5,464,650
Balance at 30 June 2017 17 26,376,265 199,322,436 8,779,216 6,530,636 143,717 (67,864) (76,869,038) 164,215,368 (242,935) 163,972,433
The above statement of changes in equity should be read in conjunction with the accompanying notes.
consolidated and company statements of changes in equity (coNTINUED)
For the year ended 30 June 2017
Company statement of changes in equity
Notes Share capital A$ Share premium A$ Available-for-sale financial assets A$ Share option reserve A$ Accumulated loss A$ Total
A$
Balance at 1 July 2015 17 13,184,721 82,212,310 (331,909) 1,104,337 (65,874,946) 30,294,513
Loss for the year - - - - (3,639,906) (3,639,906)
Other comprehensive income - - 190,610 - - 190,610
Total comprehensive income for the year - - 190,610 - (3,639,906) (3,449,296)
New share capital subscribed 3,830,298 5,292,358 - - - 9,122,656
Share issue costs - (16,161) - - - (16,161)
Balance at 30 June 2016 17,015,019 87,488,507 (141,299) 1,104,337 (69,514,852) 35,951,712
Loss for the year - - - - (3,912,536) (3,912,538)
Other comprehensive income - - 8,920,515 - - 8,920,515
Total comprehensive income for the year - - 8,920,515 - (3,912,536) 5,007,979
New share capital subscribed 9,282,812 117,092,097 - - - 126,374,909
Options exercised 78,434 1,216,906 - - - 1,295,340
Share issue costs - (6,475,074) - - - (6,475,074)
Options expired - - - (38,351) 38,351 -
Value of share and options issued to Directors, employees and consultants - - - 5,464,650 - 5,464,650
Balance at 30 June 2017 17 26,376,265 199,322,436 8,779,216 6,530,636 (73,389,037) 167,619,516
The above statement of changes in equity should be read in conjunction with the accompanying notes.
consolidated and company statements of cash flows
For the year ended 30 June 2017
Notes Group2017 Group2016 Company2017 Company2016
A$ A$ A$ A$
Cash flows from operating activities
Loss before tax (4,499,972) (5,723,122) (3,912,536) (3,639,906)
Depreciation 10 36,713 14,303 35,855 8,012
Share based payment expense 5 / 19 2,239,533 - 2,239,533 -
Write-off of exploration expenditure 11 17,310 1,555,004 - -
Deferred taxes 14 (3,823,078) - (3,823,078)
Movement in fair value of derivative liability - 1,378,260 - 1,378,260
(Increase) decrease in other receivables and prepayments (353,550) (51,874) 8,718 (31,481)
Increase / (decrease) in trade and other payables 1,488,722 (148,391) 820,592 516,318
Net cash outflow from operating activities (4,894,321) (2,975,820) (4,630,916) (1,768,797)
Cash flows from investing activities
Interest received 69 585 - -
Interest paid (2,642) (15,449) (2,642) (15,449)
Security deposit (payments) / refunds (102,201) 22,715 (90,137) -
Acquisition of property, plant and equipment (1,439,250) (79,221) (215,748) (6,343)
Acquisition of exploration and evaluation assets (21,739,184) (6,408,358) - -
Investment in available-for-sale securities - (530,330) - (530,330)
Investment in subsidiaries - - (4,207)
Loans advanced to subsidiaries - - (23,799,262) (7,636,565)
Net cash outflow from investing activities (23,283,208) (7,010,058) (24,111,996) (8,188,687)
Cash flows from financing activities
Proceeds from the issue of ordinary share capital 17 117,862,952 908,329 117,862,952 908,329
Payment of issue costs (288,339) (16,163) (288,339) (16,163)
Proceeds from Convertible note issues - 2,332,000 - 2,332,000
Proceeds from borrowing 852,736 6,535,205 852,736 6,535,205
Net cash inflow from financing activities 118,427,349 9,759,371 118,427,349 9,759,371
Net increase / (decrease) in cash and cash equivalents 90,249,820 (226,507) 89,684,437 (198,113)
Cash and cash equivalents at the beginning of year 94,933 321,440 17,199 215,312
Effect of foreign exchange on cash (1,032,010) - (1,032,010) -
Cash and cash equivalents at end of year 16 89,312,743 94,933 88,669,626 17,199
The above statements of cash flows should be read in conjunction with the accompanying notes.
notes to the financial statements
For the year ended 30 June 2017
NOTE 1 ACCOUNTING POLICIES
The Company is a public limited company incorporated in England and Wales and is dual listed on the AIM market of the
London Stock Exchange and the Toronto Stock Exchange.
(a) Statement of compliance
The consolidated financial statements and company financial statements have been prepared in accordance with International
Financial Reporting Standards ('IFRS') and their interpretations issued by the International Accounting Standards Board
(IASB), as adopted by the European Union. They have also been prepared in accordance with those parts of the Companies Act
2006 applicable to companies reporting under IFRS. The consolidated financial statements also comply with IFRS as issued by
the IASB, as is required as a result of our listing on TSX in Canada.
The accounting policies set out below have been applied consistently throughout these consolidated financial statements.
(b) Basis of preparation of financial statements and going concern
The consolidated financial statements are presented in Australian dollars ("A$"), rounded to the nearest dollar.
The Company was incorporated on 11 May 2005. The Group from incorporation has prepared the annual consolidated financial
statements in accordance with IFRS.
The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business
activities and the realisation of assets and discharge of liabilities in the ordinary course of business. The Company has
not generated revenues from operations. In common with many exploration companies, the Company raises finance for its
exploration and appraisal activities in discrete tranches.
The Company currently has sufficient working capital levels to carry out its planned exploration activities for the
following 12 months however it should be noted that the current working capital levels will not be sufficient to bring the
Group's projects into full development and production and, in due course, further funding will be required. In the event
that the Company is unable to secure further finance either through other finance arrangements or capital raisings, it may
not be able to fully develop its projects and this may have a consequential impact on the carrying value of the related
exploration assets and the investment of the parent company in its subsidiaries.
(c) Basis of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) made up to 30 June each year.
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all
three of the following elements are present: power over the investee, exposure to variable returns from the investee, and
the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these elements of control.
notes to the financial statements
For the year ended 30 June 2017
NOTE 1 ACCOUNTING POLICIES (continued)
(c) Basis of consolidation (continued)
The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they
formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The results of acquired operations are included in the
consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the
date on which control ceases.
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. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with
those used by the Group.
Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and
presented within equity in the consolidated statement of financial position, separately from the equity of the owners of
the parent.
(ii) Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
(d) Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the year-end are translated into Australian dollars at
the foreign exchange rate ruling at that date. Any resultant foreign exchange currency translation amount is taken to the
profit and loss.
The functional currency of the subsidiaries in Australia is considered to be Australian Dollars (A$). The functional
currency of the subsidiaries in the Solomon Islands is considered to be Solomon Islands Dollars (SBD$). The functional
currency of the subsidiaries in Ecuador is considered to be United States Dollars (US$). The assets and liabilities of the
entities are translated to the group presentation currency at rates of exchange ruling at the reporting date. Income and
expense items are translated at average rates for the period.
Intercompany loans between the parent and subsidiaries are translated at the rate the loan was made to the subsidiary. Any
exchange differences are taken to other comprehensive income. On disposal of an entity, cumulative exchange differences
are recognised in the income statement as part of the profit or loss on sale.
The Company's functional and presentation currency is Australian dollars (A$). The exchange rates applied in preparation
of these financial statements at 30 June 2017 were £0.5951/A$1.0, US$0.7692/A$1.0 and SBD$5.9401/A$1.0 (30 June 2016:
£0.55359/A$1.0, US$0.7451/A$1.0 and SBD$5.8635/A$1.0). The average exchange rate applied for the year ended 30 June 2017
was US$0.7545/A$1.0 (2016: US$0.7286/A$1.0).
(e) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses
(see accounting policy i below).
(ii) Subsequent costs
The Group recognises in the carrying amount of property, plant and equipment the cost of replacing part of such an item
when that cost is incurred if it is probable that the future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All other costs are recognised in the statement of comprehensive
income as an expense as incurred.
notes to the financial statements
For the year ended 30 June 2017
NOTE 1 ACCOUNTING POLICIES (continued)
(e) Property, plant and equipment (continued)
(iii) Depreciation
Depreciation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives
of each item of property, plant and equipment used in corporate and administrative operations. Depreciation is capitalised
to exploration on a straight-line basis over the estimated useful lives of each item of property, plant and equipment used
in exploration operations. The estimated useful lives of all categories of assets are:
Office Equipment
3 years
Furniture and Fittings 5 years
Motor Vehicles 5 years
Plant and Equipment 5 years
Land and Buildings
12 years
The residual values and useful lives are assessed annually. Gains and losses on disposal are determined by comparing
proceeds with carrying amounts and are included in the statement of comprehensive income.
(f) Intangible assets
Deferred exploration costs
Costs incurred in relation to the acquisition of, or application for, a tenement area are capitalised where there is a
reasonable expectation that the tenement will be acquired or granted. Where the Group is unsuccessful in acquiring or
being granted a tenement area, any such costs are immediately expensed.
All other costs incurred prior to obtaining the legal right to undertake exploration and evaluation activities on a project
are written-off as incurred.
Exploration and evaluation costs arising following the acquisition of an exploration licence are capitalised on a
project-by-project basis, pending determination of the technical feasibility and commercial viability of the project.
Costs incurred include appropriate technical and administrative overheads. Deferred exploration costs are carried at
historical cost less any impairment losses recognised.
If an exploration project is successful, the related expenditures will be transferred to mining assets and amortised over
the estimated life of the ore reserves on a unit of production basis.
The recoverability of deferred exploration and evaluation costs is dependent upon the discovery of economically recoverable
ore reserves, the ability of the Group to obtain the necessary financing to complete the development of ore reserves and
future profitable production or proceeds from the disposal thereof.
(g) Loans receivables, other receivables and prepayments
Other receivables and prepayments are not interest bearing and are stated at their nominal amount less provision for
impairment.
(h) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the statement of financial position.
(i) Impairment
Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable the asset
is reviewed for impairment. An asset's carrying value is written down to its estimated recoverable amount (being the
higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying amount.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 1 ACCOUNTING POLICIES (Continued)
(i) Impairment (continued)
Impairment reviews for deferred exploration costs are carried out on a project-by-project basis, with each project
representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment
arise, typically when one of the following circumstances apply:
§ The period for which the entity has the right to explore in the specific area has expired during the period or will
expire in the near future, and is not expected to be renewed;
§ Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither
budgeted nor planned;
§ Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially
viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and
§ Sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying
amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
(j) Share capital
(i) Ordinary share capital
The Company's ordinary shares are classified as equity.
(ii) Shares issued to settle liabilities
The Group from time to time settles financial liabilities by issuing shares. The Group considers these equity instruments
as 'consideration paid' and accordingly derecognises the financial liability.
The equity instruments issued are measured at fair value, with the difference being taken to the income statement, unless
the creditor is also a direct or indirect shareholder and is acting in its capacity as direct or indirect shareholder. When
the creditor is acting in capacity as a direct or indirect shareholder the value of shares issued is deemed to be the
carrying value of the liability.
(k) Employee benefits
(i) Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted and amortised over the vesting periods. Share based payments to
non-employees are measured at the fair value of goods or services rendered or the fair value of the equity instrument
issued, if it is determined the fair value of the goods or services cannot be reliably measured. Estimating fair value for
share based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms
and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model
including the expected life of the share option, volatility and dividend yield and making assumptions about them. The
assumptions and model used for estimating fair value for share based payment transactions are disclosed in Note 19.
(ii) Retirement benefits
The Group operates a defined contribution pension scheme. Contributions payable for the year are charged to the statement
of comprehensive income.
(l) Provisions
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events, it is more
likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably
estimated.
A contingent asset or liability is disclosed in the notes to the financial statements when an uncertainty exists and the
amount of the asset or liability cannot be reliably measured.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 1 ACCOUNTING POLICIES (Continued)
(m) Trade and other payables
Trade and other payables are not interest bearing and are stated at their nominal value, unless settled with shares as per
(J) (i) above. The effect of discounting is immaterial.
(n) Revenue
During the exploration phase, any revenue generated from incidental sales is treated as a contribution towards previously
incurred costs and offset accordingly.
(o) Other income
Other income is recognised in the statement of comprehensive income as it accrues.
(p) Financing costs and income
(i) Financing costs
Financing costs comprise interest payable on borrowings calculated using the effective interest rate method.
(ii) Finance income
Interest income is recognised in the statement of comprehensive income as it accrues, using the effective interest method.
(q) Taxation
Deferred tax is provided using the balance sheet liability method, 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 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 realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognised only to the
extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred
tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(r) Segment reporting
The Group determines and presents operating segments based on information that is internally provided to the Board of
Directors, who are the Group's chief operating decision makers.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and
incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. An
operating segment's operating results and asset position are reviewed regularly by the Board to make decisions about
resources to be allocated to the segment and assess its performance, for which discrete financial information is
available.
Segment results that are reported to the Board include items directly attributable to a segment, as well as those that can
be allocated on a reasonable basis. Unallocated items comprise mainly corporate office assets, head office expenses, and
income tax assets and liabilities.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 1 ACCOUNTING POLICIES (Continued)
(s) Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation
of its assets and liabilities.
Business combinations are accounted for by applying the acquisition method, unless it is a combination involving entities
or businesses under common control. The acquisition method requires that for each business combination one of the combining
entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the
acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the
parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions, the fair value of the
identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be
recognised where a present obligation has been incurred and its fair value can be reliably measured.
The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. The method adopted for the
measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree
where less than 100% ownership interest is held in the acquiree.
The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair
value of any previously held equity interest shall form the cost of the investment in the separate financial statements.
Consideration may comprise the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the
former owners of the acquiree and the equity interests issued by the acquirer.
Fair value uplifts in the value of pre-existing equity holdings on acquisition are taken to the statement of comprehensive
income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income,
such amounts are recycled to profit or loss on disposal of the interest.
Included in the measurement of consideration transferred is any asset or liability resulting from a contingent
consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial
liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously
paid are recognised as a receivable. Subsequent to initial recognition, contingent consideration classified as equity is
not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an
asset or a liability is remeasured at each reporting period to fair value through the statement of comprehensive income
unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive
income.
(t) Project Financing / Farm-outs
The Group, from time to time, enters into funding arrangements with third parties in order to progress specific projects.
The Group accounts for the related exploration costs in line with the terms of the specific agreement. Costs incurred by
SolGold plc are recognised as intangible assets within the financial statements. Costs incurred by third parties are not
recognised by SolGold plc.
(u) Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the
legal ownership are transferred to entities in the Group, are classified as finance leases.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of
the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease
payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as
expenses on a straight-line basis over the period of the lease.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 1 ACCOUNTING POLICIES (Continued)
(v) Financial Instruments
Recognition and Initial Measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a
party to the contractual provisions of the instrument.
Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified
as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through
profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out
below.
Classification and Subsequent Measurement
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market and are subsequently measured at amortised cost using the effective interest rate method.
(ii) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are
classified as held for trading unless they are designated as hedges. Assets in this category are classified as current
assets. These assets are measured at fair value with gains or losses recognised in the profit or loss.
(iii) Available-for-sale financial assets
Available-for-sale financial assets comprise investments in listed and unlisted entities and non-derivatives that are
either designated in this category or not classified in any other categories. After initial recognition, these investments
are measured at fair value with gains or losses recognised in other comprehensive income.
(iv) Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the
effective interest rate method.
(v) Derivatives
Derivative financial instruments, consisting of embedded conversion options in convertible loan notes, are initially
measured at fair value on the contract date and are re-measured to fair value at subsequent reporting dates.
Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.
Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to
determine the fair value of all other financial assets and liabilities, where appropriate, including recent arm's length
transactions, reference to similar instruments and option pricing models.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred
to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits
associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged,
cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to
another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed,
is recognised in profit or loss.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 1 ACCOUNTING POLICIES (Continued)
(v) Financial Instruments (continued)
Impairment of financial assets
An assessment is made at each reporting date to determine whether there is objective evidence that a specific financial
asset or a group of financial assets may be impaired. If such evidence exists, the estimated recoverable amount of that
asset is determined from available information such as quoted market prices or by calculating the net present value of
future anticipated cash flows. In estimating these cash flows, management makes judgements about a counter-party's
financial situation and the net realisable value of any underlying collateral. Impairment losses are recognised in the
profit or loss.
Impairment losses on assets measured at amortised cost using the effective interest rate method are calculated by comparing
the carrying value of the asset with the present value of estimated future cash flows at the original effective interest
rate.
Where there is objective evidence that an available for sale financial asset is impaired (such as a significant or
prolonged decline in the fair value of an available for sale financial asset) the cumulative loss that has been recognised
in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. When a
subsequent event reduces the impairment of an available for sale debt security the impairment loss is reversed through
profit or loss. When a subsequent event reduces the impairment of an available for sale equity instrument the fair value
increased is recognised in other comprehensive income.
(w) Accounting policies for the Company
The accounting policies applied to the Company are consistent with those adopted by the Group with the exception of the
following:
(i) Subsidiary investments
Investments in subsidiary undertakings are stated at cost less impairment losses. Expenditure incurred by plc on behalf of
a subsidiary, and where the subsidiary does not reimburse the Company for assets that could be capitalised in accordance
with IFRS 6, is recorded within investments in subsidiary undertakings.
(x) Nature and purpose of reserves
(i) Available-for-sale financial assets reserve
Changes in the fair value
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