Page 48 - SIGA_2010-11 Annual Report

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Saskatchewan Indian Gaming Authority Inc.
Notes to the Financial Statements
Year Ended March 31, 2011
46
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
SIGA was incorporated under The Non-Profit Corporations Act of Saskatchewan and is not subject to income tax under the provision
of paragraph 149(1)(1) of the Income Tax Act.
SIGA also pays Goods and Services Tax and Provincial Sales Tax to government agencies and claims input tax credits on its
ancillary operations.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are initially recognized at fair value and their subsequent measurement is dependent on
their classification as described below. Cash is classified as held-for-trading and is recorded at fair value. Short-term investments
are classified as held-for-trading and are recorded at fair value. Cost approximates fair value for these short-term investments.
Accounts receivable are classified as loans and receivables and are recorded at amortized cost. Amortized cost approximates fair
value due to the short-term nature of these instruments. Accounts payable and accrued liabilities are classified as other liabilities
and are recorded at amortized cost. Due to SLGA is classified as other liabilities and is recorded at amortized cost. Amortized cost
approximates fair value due to the short-term nature of these instruments. Long- term debt is classified as other liabilities and is
recorded at amortized cost. Fair value information is disclosed in Note 11. In order to manage its interest rate risk exposure, SIGA
entered into separate interest rate swap arrangements for the Dakota Dunes, Living Sky and Painted Hand construction projects on
December 12, 2007. These arrangements fixed the interest rates for the loan for each construction project at 4.94%, 5.09% and
5.09% respectively over the term of the loans.
These interest rate swaps are classified as held-for-trading and are recorded at fair value. SIGA does not have any outstanding
contracts or financial instruments with embedded derivatives that are required to be separately valued. Regular way purchases
and sales of financial assets are accounted for at their trade date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount of consideration that would be agreed upon in an arm’s length transaction
between knowledgeable, willing parties who are under no compulsion to act. Fair values are determined by reference to quoted bid
or asking prices in an active market. In the absence of an active market, SIGA determines fair value based on internal or external
valuation models, such as discounted cash flow analysis or using observable market based inputs (bid and ask price) for instruments
with similar characteristics and risk profiles.
SIGA classifies fair value measurements recognized in the balance sheet using a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value as follows:
Level 1 – valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 – valuation techniques using inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
Fair value measurements are classified in the fair value hierarchy based on the lowest level input that is significant to that fair
value measurement. This assessment requires judgment, considering factors specific to an asset or a liability and may affect
placement within the fair value hierarchy.