NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(All amounts in US$’000’s unless otherwise stated)
80
FORTUNA SILVER MINES INC. | 2014 ANNUAL REPORT
p) Fair Value Measurement
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. Refer to
Note 16. a).
q) Segment Reporting
The Company’s operating segments are based on the reports reviewed by the senior management group that are used
to make strategic decisions. The Chief Executive Officer considers the business from a geographic perspective considering
the performance of the Company’s business units.
A geographical segment is a distinguishable component of the entity that is engaged in providing products or services
within a particular economic environment and is subject to risks and returns that are different than those of segments
operating in other economic environments.
The business operations comprise the mining and processing of silver-lead, zinc, and silver-gold and the sale of these
products.
r) Leases
A lease is a finance lease when substantially all of the risks and rewards incidental to ownership of the leased asset are
transferred from the lessor to the lessee by the agreement. The leased assets are initially recorded at the lower of the
fair value and the present value of the minimum lease payments and are depreciated over the shorter of the asset’s
useful lives and the term of the lease. Interest on the lease instalments is recognized as interest expense over the lease
term using the effective interest method. Leases for land and buildings are recorded separately if the lease payments
can be allocated accordingly.
Leases that do not transfer all the risks and rewards of ownership are classified as operating leases. Payments are
recorded in the income statement using the straight line method over their estimated useful lives.
s) Share Capital
Common shares are classified as equity. Incremental costs directly attributable to the issue of shares are shown in
equity as a deduction from the proceeds. Share-based payments including stock option plan, deferred share unit plan,
and restricted share unit plan are discussed in Note 2. l).
t) Related Party Transactions
Parties are considered to be related if one party has the ability directly, or indirectly, to control the other party or exercise
significant influence over the other party in making financial and operating decisions. Parties are also considered to be
related if they are subject to common control, related parties may be individuals or corporate entities. A transaction is
considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
u) Significant Accounting Judgments and Estimates
The preparation of these Financial Statements requires management to make judgments and estimates that affect the
reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses
during the reporting period. Actual outcomes could differ from these judgments and estimates. The Financial Statements
include judgments and estimates which, by their nature, are uncertain. The impacts of such judgments and estimates
are pervasive throughout the Financial Statements, and may require accounting adjustments based on future occurrences.
Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects
both current and future periods.
Significant assumptions about the future and other sources of judgments and estimates that management has made
at the statement of financial position date, that could result in a material adjustment to the carrying amounts of
assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to,
the following:
2. Basis of Consolidation and Summary of Significant Accounting Policies (Continued)
