Changes in Accounting Policies Including Initial Adoption

Changes in Accounting Policies Including Initial Adoption

The following Canadian accounting policies were adopted in the Current Year:

Effective May 1, 2007, the Company adopted CICA Handbook Section 1530, “Comprehensive Income”, CICA Handbook Section 3855, “Financial Instruments – Recognition and Measurement”, CICA Handbook Section 3861, “Financial Instruments – Disclosure and Presentation” and CICA Handbook Section 3865, “Hedges” on a prospective basis.

Section 1530 establishes standards for reporting and presenting comprehensive income, which is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income that are excluded from net income calculated in accordance with Canadian generally accepted accounting principles. The adoption of Section 1530 had no impact on the Company’s consolidated financial statements.

Under Section 3855, financial instruments must be classified into one of the following categories: held to maturity, held for trading, loans and receivables, available for sale financial assets or other financial liabilities. All financial instruments, including derivatives, are measured on the balance sheet at fair value, except for loans and receivables, held to maturity investments and other financial liabilities, which are measured at amortized cost. Subsequent measurement and recognition of changes in fair value will depend on their initial classification; held for trading financial instruments are measured at fair value and changes in fair value are recognized in net income, while available for sale financial instruments are measured at fair value, with unrealized changes in fair value recorded in other comprehensive income.

Upon adoption of these new standards, the Company designated its cash, cash equivalents and short-term deposits as held for trading, which are measured at fair value. Accounts receivable have been classified as loans and receivables, which are measured at amortized cost. Accounts payable, accrued liabilities and convertible debentures have been classified as other financial liabilities, which are measured at amortized cost. All financial instruments are measured at fair value at inception.

The Company’s investment in equity securities, acquired in July 2007, was recorded at fair value at the time of acquisition. These equity securities have been designated as available-for-sale. During the year ended April 30, 2008, the Company recognized a loss of $513,000, which has been included in the consolidated statements of loss and deficit.

Changes in fair value of the Company’s cash equivalents and short-term deposits, which are comprised of interest-bearing bank deposits, are included in interest income each period. Upon adoption of Section 3855, the Company was no longer permitted to account for debt issue costs as a deferred charge, which had been presented as a separate asset on the balance sheet. As a result, the Company has elected to net its deferred financing costs against the carrying value of its long-term debt and to amortize the discount over the term of the debt using a method that closely approximates the effective yield method.

The adoption of Section 3865, which specifies circumstances under which hedge accounting is permissible, and how hedge accounting may be performed, had no impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

Capital Disclosures

The CICA Section 1535 – Capital Disclosures establishes standards for disclosing information about an entity’s objectives, policies and processes for managing capital. This section is effective May 1, 2008. Management is currently reviewing the potential impact of this section on the Company’s disclosure.

Inventories

In June 2007, the CICA issued Section 3031 – Inventories. This Section provides more guidance on the measurement and disclosure requirements for inventories. Specifically, the new pronouncement prescribes the accounting treatment for inventories and provides guidance on the determination of costs and its subsequent recognition as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories. This section is effective May 1, 2008 but the adoption of the standard is not expected to have an impact on the Company’s disclosure.

Financial Instrument Disclosures and Presentation

In March 2007, the CICA issued Section 3862 – Financial Instruments – Disclosures, and Section 3863 - Financial Instruments – Presentations. The section relating to disclosures require that entities provide disclosure of quantitative and qualitative information in their financial statements that enable users to evaluate (a) the significance of financial instruments for the entity’s financial position and performance; and (b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and management’s objectives, policies and procedures for managing such risks. The section relating to presentation supersedes the provisions of CICA 3861 in respect of enhancing users’ understanding of the significance of financial instruments to the Company’s financial position, performance and cash flows.

These sections are effective May 1, 2008. Management is currently reviewing the potential impact of these sections on the Company’s disclosure.

Goodwill and Intangible Assets

Effective May 1, 2009, Section 3064 replaces handbook Section 3062 – Goodwill and Intangible Assets and establishes revised standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The new standard also provides guidance for the treatment of pre-production and start-up costs and requires these costs be expensed as incurred. Management is currently reviewing the potential impact of this section on the Company’s disclosure.

Going Concern

Effective May 1, 2008, CICA 1400 – General Standards of Financial Statement Presentation has been amended to include requirements for management to assess and disclose the Company’s ability to continue as a Going Concern. Management is currently reviewing the potential impact of this section on the Company’s disclosure.

International financial reporting standards

In addition to the above accounting pronouncements, the Canadian Accounting Standards Board (“AcSB”) in 2006 published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with International Financial Reporting Standards (“IFRS”) over an expected five-year transition period. In February 2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canada’s own GAAP. The date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company’s transition date of May 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended April 30, 2010. While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be reasonably estimated at this time.