(b) New standards and interpretations not yet adopted:
The IASB periodically issues new standards and amendments or interpretations to existing standards. The following new pronouncements are those that the Company considers most significant and are not intended to be a complete list of new pronouncements that may affect the financial statements.
IFRS 9, Financial Instruments, replaces the multiple classification and measurement models in IAS 39, Financial Instruments: Recognition and Measurement, with a single model that has only two classification categories: amortized cost and fair value. This standard is in effect for accounting periods beginning on or after January 1, 2015, with earlier adoption permitted. The Company does not expect this standard to have a significant effect on its financial statements.
IAS 19, Employee Benefits, was revised to eliminate the option to defer recognition of gains and losses, known as the "corridor method", and to enhance disclosure requirements for defined benefit plans. As the Company did not choose the corridor method in accounting for its defined benefit plans, there is no impact on its financial statements as a result of the elimination of this option.
Application of this standard will also impact the calculation of finance costs, resulting in an increase to Production expense in the Statement of Earnings, which will be fully offset by an increase in Defined benefit plan actuarial gains (losses) in the Statement of Comprehensive Income. Prior to this standard, the impact of defined benefit plans on Net earnings included an interest cost on the obligation using the discount rate (based on current bond yields), and a credit on the plan assets using the expected rate of return (based on long term expected bond and equity returns). Under the new standard, the credit on plan assets will no longer recognize the equity risk premium and will be based on the discount rate only.
This standard is in effect for accounting periods beginning on or after January 1, 2013.
As at the reporting date, no assessment has been made of the impact of these standards on the Company's financial statements other than the effect of the elimination of the corridor method.
4. Seasonality of operating results:
Quarterly trends normally reflect the seasonality of the Company's operations. Logging operations are seasonal due to a number of factors including weather, ground conditions and fire season woods closures. Generally, the Company's B.C. Coastal logging divisions experience higher production levels in the latter half of the first quarter, throughout the second and third quarters and in the first half of the fourth quarter. Logging activity in the B.C. Interior is generally higher in the first half of the first quarter, slows during spring thaw and increases in the third and fourth quarters. Sawmill operations are less seasonal than logging operations but are dependent on the availability of logs from logging operations, including those from suppliers. In addition, the market demand for lumber and related products is generally lower in the winter due to reduced construction activity, which increases during the spring, summer and fall.
5. Inventories:-------------------------------------------------------------------------------------------------------------------------------------------------------- Dec. 31, Dec. 31, 2012 2011----------------------------------------------------------------------------Logs $ 59,772 $ 59,412Lumber 31,833 31,729Other 6,419 6,504---------------------------------------------------------------------------- $ 98,024 $ 97,645--------------------------------------------------------------------------------------------------------------------------------------------------------Inventory expensed in the period includes production costs, amortization ofplant and equipment, and depletion and amortization of timber and roads. Theinventory writedown in order to record inventory at the lower of cost andnet realizable value at December 31, 2012 was $7,050,000 (December 31, 2011- $10,006,000).6. Cash and borrowings:-------------------------------------------------------------------------------------------------------------------------------------------------------- Revolving Operating TermDecember 31, 2012 Line Line Total----------------------------------------------------------------------------Available line of credit $ 65,000 $ 200,000 $ 265,000Maximum borrowing available 65,000 200,000 265,000Drawings - 135,046 135,046Outstanding letters of credit included in line utilization 5,190 - 5,190Unused portion of line 59,810 64,954 124,764--------------------------------------------------------------------------------------------------------------------------------------------------------December 31, 2011----------------------------------------------------------------------------Available line of credit $ 65,000 $ 200,000 $ 265,000Maximum borrowing available 65,000 200,000 265,000Drawings - 110,713 110,713Outstanding letters of credit included in line utilization 5,062 - 5,062Unused portion of line 59,938 89,287 149,225--------------------------------------------------------------------------------------------------------------------------------------------------------
