The consolidated financial statements are prepared by management
in accordance with accounting principles generally accepted in Canada
and, except as described in note 27, conform in all material respects
with accounting principles generally accepted in the United States.
Management makes various estimates and assumptions in determining
the reported amounts of assets and liabilities, revenues and expenses
for each year presented, and in the disclosure of commitments and
contingencies. Changes in estimates and assumptions will occur based
on the passage of time and the occurrence of certain future events.
This summary of significant accounting policies is a description
of the accounting methods and practices that have been used in the
preparation of these consolidated financial statements and is presented
to assist the reader in interpreting the statements contained herein.
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Consolidation Principles |
The consolidated financial statements include the accounts
of Cameco and its subsidiaries. Interests in joint ventures
are accounted for by the proportionate consolidation method.
Under this method, Cameco includes in its accounts its proportionate
share of assets, liabilities, revenues and expenses. Investments
in associated companies over which Cameco has the ability to
exercise significant influence are accounted for by the equity
method. Under this method, Cameco includes in earnings its share
of earnings or losses of the associated company. |
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Inventories |
Inventories of broken ore, uranium concentrates and refined
and converted products are valued at the lower of average cost
and net realizable value. Cost for customer-owned conversion
inventories is the cost of the refining and conversion processes.
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Supplies |
Consumable supplies and spares are valued at the lower of
weighted average cost or replacement value. |
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Property, Plant and Equipment |
Assets are carried at cost. Costs of additions and improvements
are capitalized. When assets are retired or sold, the resulting
gains or losses are reflected in current earnings. Maintenance
and repair expenditures are charged to cost of production.
The carrying values of property, plant and equipment are
periodically assessed by management and if management determines
that the carrying values cannot be recovered, the unrecoverable
amounts are written off against current earnings.
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Non-Producing Properties |
The decision to develop a mine property within a project
area is based on an assessment of the commercial viability of
the property, the availability of financing and the existence
of markets for the product. Once the decision to proceed to
development is made, development and other expenditures relating
to the project area are deferred and carried at cost with the
intention that these will be depleted by charges against earnings
from future mining operations. No depreciation or depletion
is charged against the property until commercial production
commences. After a mine property has been brought into commercial
production, costs of any additional work on that property are
expensed as incurred, except for large development programs,
which will be deferred and depleted over the remaining reserves.
The carrying values of non-producing properties are periodically
assessed by management and if management determines that the
carrying values cannot be recovered, the unrecoverable amounts
are written off against current earnings.
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Capitalization of Interest |
Interest is capitalized on expenditures related to construction
or development projects actively being prepared for their intended
use. Capitalization is discontinued when the asset enters commercial
operation or development ceases. |
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Depreciation and Depletion |
Conversion services assets, mine buildings, equipment and
mineral properties are depreciated or depleted according to
the unit-of-production method. This method allocates the costs
of these assets to each accounting period. For conversion services,
the amount of depreciation is measured by the portion of the
facilities' total estimated lifetime production that is produced
in that period. For mining, the amount of depreciation or depletion
is measured by the portion of the mines' economically recoverable
proven and probable ore reserves which are recovered during
the period.
Other assets are depreciated according to the straight-line
method based on estimated useful lives which range from three
to ten years.
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Research and Development and Exploration Costs |
Expenditures for applied research and technology related
to the products and processes of Cameco and expenditures for
geological exploration programs are charged against earnings
as incurred. |
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Environmental Protection and Reclamation Costs |
Expenditures relating to ongoing environmental and reclamation
programs are charged against earnings as incurred or capitalized
and depreciated depending on their relationship to future earnings.
The estimated costs for decommissioning and reclaiming producing
resource properties are accrued and charged to operations according
to the unit-of-production method. Actual costs of decommissioning
and reclamation are deducted against this accrual. Cameco's
estimates of reclamation costs could change as a result of changes
in regulatory requirements and cost estimates. |
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Post-Employment Benefits |
Cameco accrues for all post-employment benefits over the
estimated service life of the employees. |
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Sales of Products and Services |
In accordance with normal industry practices, Cameco contracts
for future delivery of mine concentrates and conversion services.
Sales revenue is recorded in the period that title passes or,
with customer-owned material, when delivery is effected. |
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Amortization of Financing Costs |
Debt discounts and issue expenses associated with long-term
financing are deferred and amortized over the term of the issues
to which they relate. |
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Foreign Currency Translation |
Monetary assets and liabilities denominated in foreign currencies
are translated into Canadian dollars at year- end rates of exchange.
Revenue and expense transactions denominated in foreign currencies
are translated into Canadian dollars at rates in effect at the
time of the transactions. The applicable exchange gains and
losses arising on these transactions are reflected in earnings.
Foreign currency gains or losses arising on translation of
long-term monetary items with a fixed or ascertainable life
beyond the end of the following fiscal year are deferred and
amortized to earnings over the remaining life of the item.
The United States dollar is considered the functional currency
of Cameco's uranium operations in the United States and gold
operations in Kyrgyzstan. The financial statements of these
operations are translated into Canadian dollars using the
current rate method whereby all assets and liabilities are
translated at the year-end rate of exchange and all revenue
and expense items are translated at the average rate of exchange
prevailing during the year. Exchange gains and losses arising
from this translation, representing the net unrealized foreign
currency translation gain (loss) on Cameco's net investment
in these foreign operations, are recorded in the cumulative
translation adjustment component of shareholders' equity.
Exchange gains or losses arising from the translation of foreign
debt designated as a hedge of a net investment in foreign
operations are also recorded in the cumulative translation
adjustment component of shareholders' equity. These adjustments
are not included in earnings until realized through a reduction
in Cameco's net investment in such operations.
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Derivative Financial Instruments and Hedging Transactions |
Cameco utilizes derivative financial and commodity instruments
to reduce exposure to fluctuations in foreign currency exchange
rates and commodity prices. Gains and losses related to derivatives
that are hedges are deferred and recognized in the same period
as the corresponding hedged positions. If derivative financial
instruments are closed before planned delivery, gains or losses
are recorded as deferred revenue and recognized on the planned
delivery date.
A derivative must be designated and effective to be accounted
for as a hedge. Effectiveness is achieved if the cash flows
or fair values of the derivative substantially offset the
cash flows of the hedged position and the timing is similar.
Premiums paid or received with respect to derivatives are
deferred and amortized to earnings over the term of the hedge.
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Per Share Amounts |
Earnings per common share and cash from operations per common
share are calculated using the weighted average number of paid
common shares outstanding. |
