At each financial reporting period, the Company’s management estimates the Fair Value of investments based on the criteria below:
(i) Publicly-traded investments:
· Securities which are traded on a recognized securities exchange and for which no sales restrictions apply are recorded at fair values based on quoted market prices at the reporting date or the closing price on the last day the security traded before the reporting date if there were no trades on the reporting date.
· Securities which are traded on a recognized securities exchange but which are escrowed or otherwise restricted as to sale or transfer are recorded at amounts discounted from market value. In determining the discount for such investments, the Company considers the nature and length of the restriction, business risk of the investee company, its stage of development, market potential, relative trading volume and price volatility and any other factors that may be relevant to the ongoing and realizable value of the investments.
· For warrants which are not traded on a recognized securities exchange, no market value is readily available. When there are sufficient and reliable observable market inputs, a valuation technique is used; if no such market inputs are available, the warrants are valued at intrinsic value, which is equal to the higher of the closing bid price at the consolidated balance sheet date of the underlying security less the exercise price of the warrant, or zero.
(ii) Privately-held investments:
· All privately-held investments (other than options and warrants) are initially recorded at the transaction price, being the fair value at the time of acquisition. Thereafter, at each reporting period, the fair value of an investment may (depending upon the circumstances) be adjusted using one or more of the valuation indicators described below. Options and warrants of private companies are carried at their intrinsic value.
· The determinations of fair value of the Company’s privately-held investments at other than initial cost are subject to certain limitations. Financial information for private companies in which the Company has investments may not be available and, even if available, that information may be limited and/or unreliable. Use of the valuation approach described below may involve uncertainties and determinations based on the Company’s judgment and any value estimated from these techniques may not be realized or realizable.
· Company-specific information is considered when determining whether the fair value of a privately-held investment should be adjusted upward or downward at the end of each reporting period. In addition to company-specific information, the Company will take into account trends in general market conditions and the share performance of comparable publicly-traded companies when valuing privately-held investments. The absence of the occurrence of any of these events, any significant change in trends in general market conditions, or any significant change in share performance of comparable publicly-traded companies indicates generally that the fair value of the investment has not materially changed.
The fair value of a privately-held investment may be adjusted if:
a) there has been a significant subsequent equity financing provided by outside investors at a valuation different than the current value of the investee company, in which case the fair value of the investment is set to the value at which that financing took place;
b) there have been significant corporate, political or operating events affecting the investee company that, in management’s opinion, have a material impact on the investee company’s prospects and therefore its fair value. In these circumstances, the adjustment to the fair value of the investment will be based on management’s judgment and any value estimated may not be realized or realizable;
c) the investee company is placed into receivership or bankruptcy;
d) based on financial information received from the investee company, it is apparent to the Company that the investee company is unlikely to be able to continue as a going concern;
e) receipt/denial by the investee company of environmental, mining, aboriginal or similar approvals, which allow the investee company to proceed/prohibit with its project(s);
f) filing by the investee company of a National Instrument 43-101 technical report in respect of a previously non-compliant resource;
g) release by the investee company of positive/negative exploration results; and
h) important positive/negative management changes by the investee company that the Company’s management believes will have a very positive/negative impact on the investee company’s ability to achieve its objectives and build value for shareholders.
i) Adjustments to the fair value of a privately-held investment will be based upon management’s judgment and any value estimated may not be realized or realizable. The resulting values for non-publicly traded investments may differ from values that would be realized if a ready market existed.
(iii) Investments in associates:
Investments in associates are those entities over which the Company has or is deemed to have significant influence but not control over, the financial and operating policies. Investments in associates are held as part of the Company’s investments portfolio and carried in the consolidated statement of financial position at fair value even though the Company may have significant influence over the companies. This treatment is permitted by International Accounting Standards (“IAS”) 28 Investment in Associates, which allows investments held by venture capital or similar organizations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and subsequently they are accounted for in accordance with IFRS 9, with changes in fair value recognized in the consolidated statement of comprehensive income (loss) within unrealized gains or losses on investments.
(iv) Other investment instruments:
Included in Pinetree’s investments may be certain instruments that are accounted for as follows:
· Convertible debentures and convertible notes are valued as though converted to common shares.
· Debt instruments are fair valued at the lesser of their discounted cash flow or the fair value of the underlying security.
· Cumulative dividends expected to be received are included in the fair value of each investment.
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