LOM 2023 Annual Report - Report - Page 47
LOM
2021 ANNUAL REPORT
The Company has obtained an independent valuation to estimate the fair value of one (2020: one) investment in a publicly held
security. For purposes of valuing privately held securities, fair value is defined as the amount at which a minority common stock
interest in a privately held enterprise could be bought or sold in a current transaction between unrelated willing parties, that is,
other than in a forced or liquidation sale. The methodology used in determining fair value uses a variety of factors giving each
factor a weighting. When evidence supports a change to the carrying value from the transaction price, adjustments will be made to
reflect expected exit values in the investment’s principal market under current market conditions.
The media company’s valuation is determined by a combination of a single period capitalization method for the property rental
segment of the business and a net asset value method for the remainder of the business.
The fair value of the remaining Level 3 investments are based on unobservable inputs that are not developed by management,
such as investments for which fair value is determined by recent, pending or expected transactions or third-party pricing
information without adjustment.
Ongoing reviews are conducted by the Company’s management on all privately held securities based on an assessment of the
underlying investments from the inception date through the most recent valuation date.
Derivatives
As of December 31, 2021, the Company was short 15 derivative futures contracts (2020 – 21 contracts) consisting of short gold
mini futures which would have been used as hedges against quantities of physical gold held in inventory by the Company. These
derivatives are traded on recognized commodity exchanges and the Company executes the trades through a broker on a net
margin basis, each contract representing 10 fine troy ounces of gold. As of December 31, 2021, the underlying notional value
of the short contracts was $274,290 (2020 - $397,971) compared to a cost of $270,786 (2020 - $393,694) resulting in an
unrealized gain of $3,504 (2020 - $4,277). Because the contracts are executed on a net margin basis, the Company recorded
only the unrealized gain/loss in the financial statements.
At December 31, 2021, the volume of the Company’s derivative activities based on their notional amounts and number of
contracts, categorized by primary underlying risk, are as follows:
Primary Underlying Risk
Underlying Contract Size
Number of Contracts
Short Gold Mini Futures
10 ounces of Fine Troy Gold
312
During the year ended December 31, 2021, the Company recorded gains/(losses) of $43,494 (2020 – $(52,289)) from derivative
trades, hedging its physical gold held for resale to customers.
4. EQUITY INVESTMENT IN AFFILIATE
Affiliate
2021
2020
$1,507,795
$1,606,396
The Company owns 127,750 (35.29%) (2020 - 127,750 (35.29%)) ordinary shares of an affiliate, which is accounted for under the
equity method. The Company also engages in certain transactions with this affiliate (See Note 8).
The affiliate provides management services through its wholly owned subsidiaries. The Company’s share of the net income of this
company for the year ended December 31, 2021 was $156,900 (2020 – $211,740). The Company received a dividend in 2021
of $255,501 (2020 - $Nil) which was recorded as a reduction in the carrying value of the investment on the consolidated balance
sheet.
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