g) Financial Instruments
ASC 820, Fair Value Measurements and Disclosures
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to
measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level
of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to
measure fair value:
Level 1 - Quoted prices in active markets
for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included within
Level 1 that are either directly or indirectly observable; and
Level 3 - Unobservable inputs that are supported by little
or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants
would use in pricing.
The Companys financial instruments consist principally
of cash, bank indebtedness, accounts payable and accrued liabilities and loan payable. Pursuant to ASC 820, the fair value of our
cash and bank indebtedness are determined based on Level 1 inputs, which consist of quoted prices in active markets
for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their
current fair values because of their nature and respective maturity dates or durations.
The Companys operations are in Canada, which results
in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Companys operations
that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does
not use derivative instruments to reduce its exposure to foreign currency risk.