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Summary of Significant Accounting Policies
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2011
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note B - Summary of Significant Accounting Policies | Principles of Consolidation The financial statements include the accounts of Golden Eagle International, Inc. and its subsidiaries, Golden Eagle International, an unincorporated Bolivian entity, and Golden Eagle International, Inc. (Bolivia). All inter-company transactions and balances have been eliminated. Minority interests are not presented since they are not obligated to fund operating losses. As of the year ended December 31, 2011 we did not own or control any subsidiaries.
Use of Estimates Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the financial statements.
Foreign Currency The functional currency for our foreign subsidiaries is U.S. dollars. The financial transactions, records and statements of foreign subsidiaries are all measured in U.S. dollars using the effective daily exchange rate. As a result, we have no material currency translation gains or losses.
Concentration of Credit Risk From time to time our cash balances, held at a major financial institution, exceed the federally insured limits of $250,000. Our management believes that the financial institution is financially sound and the risk of loss is low.
Fair Value of Financial Instruments We use the established three-level valuation hierarchy for valuing and disclosing our financial instruments at fair value. The three levels are defined as follows:
The carrying amounts reported in the balance sheets for cash, receivables, and current liabilities are at cost which approximates their fair value due to their short-term nature.
As part of our August 2010 settlement with Queenstake Resources we obtained 2,000,000 shares of common stock of Queenstake’s parent company, Yukon Nevada Gold Corp. (“YNG”).
These securities, classified as available for sale, are our only financial instrument that is measured at fair value on a recurring basis. At December 31, 2011 we held 1,567,500 shares of YNG and the fair value of these shares, using level 1 inputs, was $458,825. At December 31, 2010 we held 2,000,000 shares of YNG and the fair value of these shares, using level 1 inputs, was $1,738,000.
Since the securities are classified as available for sale, we recognize realized gains / losses and declines in value of the securities deemed to be other than temporary in earnings. Unrealized gains / losses are recognized as a component of other comprehensive income. For the year ended December 31, 2011 we recognized an unrealized loss of $1,030,055 on our YNG common stock holdings. For the year ended December 31, 2010 we recognized an unrealized gain of $586,000 on our YNG common stock holdings.
Cash and Cash Equivalents For the statement of cash flows, any liquid investments with a maturity of three months or less at the time of acquisition are considered to be cash equivalents. Property, Equipment Property and equipment are recorded at cost. Maintenance and repair costs are charged to expense as incurred, and renewals and improvements that extend the useful life of assets are capitalized. Depreciation on property and equipment is computed using the straight-line method over the assets’ estimated useful lives as follows:
Depreciation expense totaled $205 for the years ended December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010 we held a Mill with a carrying value of $3,980,000. The Mill is located near Eureka, Nevada and has been idle since acquisition; therefore, no depreciation expense has been recognized.
At December 31, 2011 and 2010 we have an immaterial amount of office equipment that is depreciated on a straight line basis.
Long-Lived Assets We periodically review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized when the estimated future cash flows are less than the carrying amount of the asset calculated on discounted cash flow basis.
For the years ended December 31, 2011 and 2010 we recognized impairment charges of $0. Stock Based Compensation We measure stock-based compensation cost relative to the estimated fair value of the awards on the grant date using a Black Scholes options pricing model. We recognize the cost as the awards vest. See Note E for a more detailed description of our stock based compensation.
Beneficial Conversion Feature of Debentures and Convertible Notes Payable In accordance with FASB ASC 470-20, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, we recognize the advantageous value of conversion rights attached to convertible debt. Such rights give the debt holder the ability to convert the debt into common stock at a price per share that is less than the trading price to the public on the day the loan is made to us. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of debentures and related accruing interest is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the effective interest method.
Income (Loss) Per Share The computation of basic earnings (loss) per common share is based on the weighted average number of shares outstanding during each year.
Stock equivalents consist of the following:
Income Taxes Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled.
Deferred taxes are provided on a liability method whereby deferred tax assets tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax law and rates on the date of enactment.
Effect of New Accounting Pronouncements There are no recent accounting pronouncements that are expected to have a material impact on our financial position, results of operations or cash flows. |
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