58
FORTUNA SILVER MINES INC. | 2014 ANNUAL REPORT
• the provision for income taxes which is included in the consolidated statements of income and composition of
deferred income tax asset and liabilities included in the consolidated statement of financial position;
• the recognition of deferred income tax assets, amounts recorded for uncertain tax positions, the measurement of
income tax expense and indirect taxes included in the consolidated statement of financial position;
• the inputs used in determining the net present value of the liability for provisions related to decommissioning and
restoration included in the consolidated statements of financial position; and,
• the inputs used in determining the various commitments and contingencies accrued in the consolidated statements
of financial position.
Financial Instruments and Related Risks
(expressed in (‘000’s)
The Company is exposed to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk, and price
risk. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk
management framework and reviews the Company’s policies on an ongoing basis.
a) Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the
principal (or most advantageous) market at the measurement date under current market conditions (an exit price)
regardless of whether that price is directly observable or estimated using another valuation technique. The fair value
hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1
inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices
in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted
prices that are observable for the asset or liability (interest rate, yield curves), or inputs that are derived principally from
or corroborated observable market data or other means. Level 3 inputs are unobservable (supported by little or no market
activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
During the year ended December 31, 2014, there have been no transfers of amounts between Level 1, Level 2, and
Level 3 of the fair value hierarchy.
i. Assets and Liabilities Measured At Fair Value on a Recurring Basis
Fair Value Measurements
Expressed in $’000’s
Quoted Prices in Significant and
Significant
Active Markets for Other Observable
Unobservable
Identical Assets
Inputs
inputs
Aggregate
At December 31, 2014
Level 1
Level 2
Level 3
Fair Value
Cash and cash equivalents
$ 42,867
$ –
$ –
$ 42,867
Short term investments
34,391
–
–
34,391
Trade receivable from concentrate sales
1
–
16,573
–
16,573
$ 77,258
$ 16,573
$ –
$ 93,831
1
Trade receivable from concentrate sales includes provisional pricing, and final price and assay adjustments. The fair value of trade
receivable from concentrate sales resulting from provisional pricing reflect observable market commodity prices and thereby classified
within Level 2 of the fair value hierarchy.
