Page 49 - 2012_Annual Report

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Saskatchewan Indian Gaming Authority Inc.
Notes to the Financial Statements
year ended March 31, 2012
47
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS (CONTINUED)
Classification and measurement (continued)
Financial instruments classified as loans and receivables and other liabilities are subsequently measured at amortized cost using the
effective interest method, less any impairment. The effective interest rate amortization is included in finance costs in the statement
of comprehensive income.
Transaction costs are included in the initial carrying amount of financial instruments except for financial instruments classified
as FVTPL, in which case they are expensed as incurred. Purchases and sales of financial assets are recognized on the trade date.
SIGA derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights
to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by SIGA is
recognized as a separate asset or liability. SIGA derecognizes a financial liability when its contractual obligations are discharged or
cancelled or expire.
Financial assets and liabilities are offset and the net amount reported on the statement of financial position when there is a legally
enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle
the liability simultaneously.
Embedded derivatives
Derivatives may be embedded in other host instruments and are treated as separate derivatives when their economic characteristics
and risks are not clearly and closely related to those of the host instrument, when the embedded derivative has the same terms as
those of a stand-alone derivative, and the combined contract is not held-for-trading or designated at fair value. These embedded
derivatives are measured at fair value with subsequent changes recognized in the statement of comprehensive income.
As at March 31, 2012, SIGA had no contracts (March 31, 2011 – none) with embedded derivatives that are required to be
valued separately.
Fair value of financial instruments
Fair values approximate amounts at which financial instruments could be exchanged between willing parties based on current
markets for instruments with similar characteristics such as risk and remaining maturities. 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’s own credit risk and the credit risk of the counterparty have been
taken into account in determining the fair value of financial assets and liabilities, including derivative instruments. Fair value
measurements are subjective in nature, and represent point-in-time estimates which may not reflect fair value in the future.
SIGA classifies fair value measurements recognized in the statement of financial position 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.