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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Sep. 30, 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Development stage entity

 

The Company is considered a development stage entity, as defined in FASB ASC 915, because since its inception it has not commenced operations that have resulted in significant revenue and the Company's efforts have been devoted primarily to activities related to raising capital.

 

The financial statements show the position of the Company from August 9, 2010, which was the incorporation date of Farm Lands of Guinea Limited (BVI). This correctly shows the position of the Company following the reverse merger of February 28, 2011.

 

Going concern

 

As shown in the accompanying financial statements, the Company had limited cash but had an accumulated deficit and a net loss through September 30, 2011, and has not yet begun its principal operations, which raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

Basis of presentation – principles of consolidation

 

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  This basis differs from that used in the statutory accounts of the operating subsidiaries of the Company, which were prepared in accordance with International Financial Reporting Standards and IFRIC interpretations. All necessary adjustments have been made to present the financial statements in accordance with US GAAP.

 

The consolidated financial statements include (i) the accounts of the Company and (ii) the accounts of its consolidated subsidiaries.  All inter-company balances and transactions have been eliminated.

 

These consolidated financial statements have been prepared on a going concern basis. The Company has incurred losses since inception resulting in an accumulated deficit of $1,009,040. The Company’s ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to address the going concern issue by funding future operations through the sale of equity capital.

 

Business combination

 

In accordance with FASB ASC 805 “Business Combinations”, assets and liabilities are recorded at their acquisition date fair values.  Any differences between those fair values and the purchase price is recorded as goodwill or gain.

 

Management makes estimates of fair values based upon assumptions believed to be reasonable.  These estimates are based on historical experience and information obtained from the management of the acquired companies. Critical estimates in valuing certain of the intangible assets include but are not limited to: future expected cash flows from revenues, customer relationships, key management and market positions, assumptions about the period of time the acquired trade names will continue to be used in the Company’s combined product portfolio, and discount rates used to establish fair value.  These estimates are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

 

Use of estimates

 

The 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

Cash and cash equivalents

 

For the purpose of the statement of cash flows, cash and cash equivalents include cash on hand and demand deposits held by banks and other financial institutions with original maturities of three months or less.

 

As of September 30, 2011, the cash balance in financial institutions in the British Isles was $273,999.  Accounts at these financial institutions are insured up to £85,000, which is the equivalent to $132,436 US dollars at a 0.64182 ending exchange rate. Therefore, at September 30, 2011 the Company had deposits exceeding the limits covered by insurance. The accounts are denominated in US dollars so there is no foreign currency translation adjustment.

 

Accounts receivable

 

Trade accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write off experience, customer specific facts and economic conditions. Bad debt expense, if any, is included in general and administrative expenses.

 

Outstanding balances are reviewed individually and collectively. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. There were no write-offs at September 30, 2011.

 

Investments

 

Investments in an entity where the company owns less than twenty percent of the voting stock of the entity and does not exercise significant influence over operating and financial policies of the entity are accounted for using the cost method. Investments in the entity where the Company owns twenty percent or more but not in excess of fifty percent of the voting stock of the entity or less than twenty percent and exercises significant influence over operating and financial policies of the entity are accounted for using the equity method. The Company has a policy in place to review its investments at least annually, to evaluate the carrying value of the investments in these companies. The cost method investment is subject to impairment assessment if there are identified events or changes in circumstance that may have a significant adverse affect on the fair value of investments. If the Company believes that the carrying value of an investment is in excess of estimated fair value, it is the Company’s policy to record an impairment charge to adjust the carrying value to the estimated fair value, if the impairment is considered other-than-temporary.

 

Property, plant and equipment

 

Property, plant and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation has been charged in the period as the property, plant and equipment has now been brought into use. The depreciation has been computed by the straight line method (after taking into account estimated residual values) over the assets’ estimated useful lives as follows:

 

 

 

Useful Life (Years)

 

 

 

Plant and machinery

 

5

Computer equipment

 

5

 

Upon sale or retirement of property, plant and equipment, the related costs and accumulated depreciation will be removed from the accounts and any gain or loss will be reflected in operations.

 

Impairment of long-lived assets

 

The Company follows FASB ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets” for its long-lived assets. The Company’s long-lived assets are reviewed for impairments whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company determined that there were no impairments of long-lived assets as of September 30, 2011.

 

Project development costs

 

Project development costs are recorded at cost. Expenditures for major costs are capitalized. The costs have not yet been depreciated as the project has not yet commenced. When the project enters the next phase and development occurs, the costs will be written off on a straight line basis over the life of the project.

 

Fair value of financial instruments

 

The Company follows FASB ASC 825-10-50-10 “Financial Instruments-Overall-Disclosure” for its financial instruments.  The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties.  The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, prepayments and other current assets, accounts payable, customer deposits, taxes payable, accrued expenses and other current liabilities, approximate their fair values because of the short maturity of these instruments.

 

Revenue recognition

 

The Company recognizes revenues in accordance with guidance provided in FASB ASC 605, “Revenue Recognition”, which states that revenue is recognized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exits; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectability is reasonably assured.

 

Non-controlling interests

 

Non-controlling interests represent the government of the Republic of Guinea’s 10% equity ownership in Land & Resources of Guinea SA.

 

Segment reporting

 

FASB ASC 280, “Segment Reporting” requires use of the management approach model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

 

In accordance with FASB ASC 280, the Company has reviewed its business activities and determined that multiple segments do not exist that need to be reported.

 

Earnings per share

 

Earnings (loss) per common share is computed pursuant to FASB ASC 260 “Earnings per Share”.  Basic earnings (loss) per common share is computed by dividing net profit (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period.  Diluted earnings (loss) per common share is computed by dividing net profit (loss) attributable to common stockholders by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period to reflect the potential dilution that could occur from common shares issuable through common stock equivalents.

 

 

 

 

 

 

Inception

 

 

 

 

 

 

(August 9, 2010)

 

 

 

Year ended

 

 

through

 

 

 

September 30, 2011

 

 

September 30, 2010

 

 

 

 

 

 

 

 

Numerator for basic and diluted earnings (loss) per share attributable to common stockholders

 

$

(990,771

)

 

$

(18,329

)

 

 

 

 

 

 

 

 

 

Denominator for basic and diluted (loss) per share – Weighted average shares of common stock outstanding

 

 

7,074,973

 

 

 

1,950,250

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per share

 

$

(0.00

)

 

$

(0.01

)

 

Income taxes

 

The Company accounts for income taxes under FASB ASC 740 “Income Taxes”.  Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. There are no deferred tax assets or liabilities at the balance sheet date.

 

Recently issued accounting pronouncements

 

In September 2009, the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). Rules and interpretive releases of Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification. The ASC does change the way the guidance is organized and presented.

 

Accounting Standards Updates (“ASU”) through ASU No. 2011-12 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

 

Foreign currencies

 

Transactions and balances originally denominated in US dollars are presented at their original amounts. Transactions and balances in other currencies are converted into US dollars in accordance with FASB ASC 830 “Foreign Currency Matters” and are included in determining net income or loss.

 

The financial records of the subsidiary, Land & Resources of Guinea SA, are maintained in US dollars which is the functional currency of the subsidiary and the parent company.