exactEarthTM Ltd.
Notes to the Consolidated Financial Statements
October 31, 2021
(in thousands of
Canadian dollars, except where otherwise noted and share data)
When an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying
amounts is recognized in the Consolidated Statements of Loss and Comprehensive Loss.
Impairment of financial assets
At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired. Objective evidence that financial assets
are impaired can include default or delinquency by a debtor, restructuring or an amount due to the Company on terms that the Company would not otherwise consider, or indications that a debtor or issuer will enter bankruptcy. Trade receivables are
reviewed qualitatively on a case-by-case basis to determine whether they need to be written off.
The Company applies the IFRS 9, Financial Instruments (IFRS 9) simplified approach to measuring ECL, which uses a lifetime expected
loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables, unbilled receivables, and other assets, have been grouped based on shared credit risk characteristics and the days past due.
The expected loss rates are based on payment profiles of sales over prior periods and the corresponding historical credit losses experienced during this
period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle receivables.
Impairment losses on financial assets are measured at amortized cost and are calculated as the difference between the carrying amount and the present value of
the estimated future cash flows discounted at the assets original effective interest rate. Losses are recognized in profit or loss and recorded as ECL against the related asset. When a subsequent event causes the impairment loss to decrease,
the decrease is reversed through profit or loss.
o) Convertible debentures
IAS 32, Financial Instruments: Presentation, requires the issuer of a non-derivative financial instrument to
evaluate the terms of the financial instrument to determine whether it contains both a liability and an equity component. This evaluation is based on the contractual terms of the financial instrument, the substance of the arrangement and the
definition of a financial liability, financial asset, and an equity instrument. If such components are identified, they must be accounted for separately as financial liabilities, financial assets, or equity.
The liability component of the Companys convertible debentures is measured at the fair value of a similar liability that does not have an associated
equity conversion feature. The equity component is allocated the residual difference between the difference between the fair value of the compound instrument (total issue proceeds) and the liability component. The equity component is credited
directly to equity and is not subsequently remeasured nor reclassified to profit or loss.
Transaction costs that relate to the issue of a compound
financial instrument are allocated to the liability and equity components of the instrument in proportion to the allocation of proceeds. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of
a financial asset or liability and includes fees and commissions paid to agents (including employees acting as selling agents), advisers, brokers, and dealers.
The initial carrying amount of the Companys convertible debentures is adjusted for transaction costs. Transaction costs related to the liability
component are included in the calculation of the amortized cost using the effective interest rate method and are included in interest expense recognized over the life of the instrument. Transaction costs allocated to the equity component are offset
against the amount recognized in equity.
p) Government assistance
Government assistance is periodically received in the form of grants, loans, or ITCs (see Research and development expenditures) that may be repayable
at a rate based on future company performance. Government assistance with predetermined repayment requirements or conditional criteria is recorded as a liability when received or until the conditions are satisfied. If no predetermined repayment
requirements exist, the assistance is treated as a reduction in the cost of the related item.
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