NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(All amounts in US$’000’s unless otherwise stated)
78
FORTUNA SILVER MINES INC. | 2014 ANNUAL REPORT
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange at
each financial position date. Foreign exchange gains or losses on translation to the functional currency of an entity are
recorded in income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial transaction.
For entities with a functional currency different from the presentation currency of the Company, translation to the
presentation currency is required. Assets and liabilities are translated at the rate of exchange at the financial position
date. Revenue and expenses are translated at the average rate for the period. All resulting exchange differences are
recognized in other comprehensive income.
o) Financial Instruments
i.
Financial Assets
The Company classifies all financial assets as either fair value through profit or loss (“FVTPL”), held-to-maturity (“HTM”),
loans and receivables, or available-for-sale “(AFS”). The classification is determined at initial recognition and depends
on the nature and purpose of the financial asset.
a) Financial Assets at Fair Value Through Profit or Loss
Financial assets are classified as FVTPL when the financial asset is held-for-trading or it is a designated FVTPL on initial
recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-
term.
Financial assets classified as FVTPL are stated at fair value with any resulting gain or loss recognized in income or loss
in the period in which they arise. Transaction costs related to financial assets classified as FVTPL are recognized
immediately in net income (loss).
Derivatives are not being accounted for as hedges and are categorized as held-for-trading. Derivatives are initially
recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair
value. Fair value of the Company’s recognized commodity-based derivatives are based on the forward prices of the
associated market index. Gains or losses are recorded in the consolidated statement of income.
b) Held-to-Maturity (“HTM”)
HTM investments are recognized on a trade-date basis and are initially measured at fair value, including transactioncosts.
The Company does not have any assets classified as HTM investments.
c) Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are initially measured at fair value, net of transaction costs and are classified as current or non-
current assets based on their maturity date. They are carried at amortized cost less any impairment. The impairment
loss of receivables is based on a review of all outstanding amounts at each reporting period. Interest income is recognized
by applying the effective interest rate, except for short term receivables when the recognition of interest would not be
significant.
d) Available-For-Sale (“AFS”) Assets
AFS financial assets are non-derivatives that are either designated in this category or not classified in any of the other
categories.
AFS financial assets are measured at fair value, determined by published market prices in an active market, except for
investments in equity instruments that do not have quoted market prices in an active market which are measured at
cost. Changes in fair value are recorded in other comprehensive income (loss) until realized through disposal or
impairment. Investments classified as available-for-sale are written down to fair value through income whenever it is
necessary to reflect prolonged or significant decline in the value of the assets. Realized gains and losses on the disposal
of available-for-sale securities are recognized in the consolidated statement of income.
The Company does not have any assets classified as AFS.
e) Impairment of Financial Assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting period. Financial
assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
2. Basis of Consolidation and Summary of Significant Accounting Policies (Continued)
n) Foreign Currency Translation (Continued)
