VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 3, 2009) - Terry Krepiakevich, Chief Financial Officer of SouthGobi Energy Resources Ltd. (TSX VENTURE:SGQ), announced today that on March 6, 2009, the British Columbia and Ontario Securities Commissions granted the Company exemptive relief to adopt International Financial Reporting Standards (IFRS) for financial reporting periods beginning on or after January 1, 2009.
As background, in February, 2008, the Canadian Accounting Standards Board confirmed that IFRS will replace Canadian Generally Accepted Accounting Principles (GAAP) for all publicly accountable enterprises for financial periods beginning on and after January 1, 2011, with the option available for enterprises to early adopt upon receipt of approval from the Canadian Securities regulatory authorities. Based on the granted exemption the Company will early adopt IFRS for Canadian reporting purposes and will prepare its financial statements in accordance with IFRS for financial reporting periods beginning on January 1, 2009, with an adoption date of January 1, 2009 and a transition date of January 1, 2005.
IFRS Conversion
The IFRS conversion plan is comprehensive and addresses matters including changes in accounting policies, restatement of comparative periods, organizational and internal controls and any required changes to business processes. To facilitate this process and ensure the full impact of the conversion is understood and managed reasonably, the Company retained an external third party accounting firm and hired an IFRS conversion project manager. The accounting staff also has attended several training courses on the adoption and implementation of IFRS. Through in-depth training and the preparation of reconciliations of historical Canadian GAAP financial statements to IFRS, the Company believes that its accounting personnel have obtained a thorough understanding of IFRS. Further, the accounting personnel at the Mongolian and Indonesian subsidiaries are already familiar with IFRS and have been working with IFRS due to either local adoption of IFRS or convergence of local standards to IFRS in those jurisdictions.
In conjunction with the adoption of IFRS a new accounting system was implemented, which will satisfy all the information needs under IFRS. The Company has also reviewed its current internal and disclosure control processes and believes they will not need significant modification as a result of our conversion to IFRS.
Initial Adoption of International Accounting Standards
IFRS 1 "First Time Adoption of International Accounting Standards" sets forth guidance for the initial adoption of IFRS. Under IFRS 1 the standards are applied retrospectively at the transitional balance sheet date with all adjustments to assets and liabilities as stated under GAAP taken to retained earnings unless certain exemptions are applied. The Company is not applying any exemptions on first-time adoption.
Impact of IFRS
IFRS employs a conceptual framework that is similar to Canadian GAAP; however significant differences exist in certain matters of recognition, measurement and disclosure. While the adoption of IFRS will not change actual cash flows, the adoption will result in changes to the reported financial position and results of operation.
In order to allow the users of the financial statements to better understand these changes, the Company has provided reconciliations between Canadian GAAP and IFRS for the total assets, total liabilities, shareholders equity and net earnings in the Company's Management Discussion and Analysis (MD&A) for the period ended December 31, 2008. While these unaudited reconciliations do not represent official adoption of IFRS, they provide an indication of the major differences identified to date, relative to the historical financial statements. In preparing the reconciliations, the Company applied the principles and elections of IFRS 1, with a transition date of January 1, 2005, consistent with those assumed in the application documentation for a secondary listing on an Asian stock exchange.
Disclosure of the transition process
- Additional details on the convergence plan and transition process have been included in the MD&A for the year ended December 31, 2008, which has been filed on SEDAR;
- The MD&A for the year ended December 31, 2008, will include, to the extent known, qualitative and quantitative information regarding the impact of adopting IFRS on key line items in the annual financial statements;
- The Company's first financial statements completed under IFRS will be the interim financial statements for the three months ending March 31, 2009, which will include notes disclosing extensive transitional information and full disclosure of all new IFRS policies.
About SouthGobi Energy Resources
SouthGobi Energy Resources is focused on exploration and development of its Permian-age metallurgical and thermal coal deposits in Mongolia's South Gobi Region and its Eocene-age metallurgical and thermal coal deposits in East Kalimantan, Indonesia. The Company's flagship coal mine, Ovoot Tolgoi in southern Mongolia, is selling coal to customers in China. The Company plans to supply a wide range of coal products and electricity to markets in Asia. The Company also is investigating the implementation of clean-coal technologies in the development of coal power-generating capacity to benefit all of its stakeholders.
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