## 3. SIGNIFICANT ACCOUNTING POLICIES: 

## (a) Basis of consolidation: 

 The consolidated financial statements include the Company and Lantic Inc. (“Lantic”), the subsidiary it controls. Control exists where the Company has the power to govern the financial and operating policies of a subsidiary and obtain the receipt of benefits from having the power to govern.The Company owns 100% of the common shares of Lantic. Lantic Capital Inc., a wholly-owned subsidiary of Belkorp Industries Inc., owns the two outstanding Class C shares of Lantic. These Class C shares are non-voting, have no rights to return or risk of loss and are redeemable for $1 each.The Class C shares entitle the holder to elect five of the seven directors of Lantic but have no other voting rights at any meetings of Lantic shareholders except as may be required by law. 

 Notwithstanding Lantic Capital Inc.’s ability to elect five of the seven directors of Lantic, Lantic Capital Inc. receives no benefits or exposure to losses from its ownership of the Class C shares. As the Class C shares are non-dividend paying and redeemable for $1, there is no participation in future dividends or changes in value of Lantic resulting from the ownership of the Class C shares.There is also no management fee or other form of consideration attributable to the Class C shares.The determination of who has the power to govern and receive the benefits from having the power to govern necessarily involves a high degree of judgement. Based on all the facts and available information, management has concluded that the Company has the power to govern Lantic and receive the benefits derived from having the power to govern. 

 Inter-company balances and transactions, and any unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the consolidated financial statements. 

## (b) Foreign currency translation: 

 Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate in effect at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated at the rate prevailing at the date that the fair value was determined. Foreign denominated non-monetary assets and liabilities that are measured at the historical costs are translated at the rate prevailing at the transaction date. Revenues and expenses denominated in foreign currencies are translated into the functional currency at the rate in effect on the dates they occur. Gains or losses resulting from these translations are recorded in net earnings of the period. 

## (c) Cash and cash equivalents: 

Cash and cash equivalents include cash on hand, bank balances and short-term liquid investments with maturities of three months or less, and bank overdraft when the latter forms an integral part of the Company’s cash management. 

## (d) Inventories: 

Inventories are valued at the lower of cost and net realizable value. The cost of inventories is determined substantially on a first-in first-out basis, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. 

 Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. 

