FOR AGE ORBIT INC NOTES TO THE CONSOLID A TED FINANCIAL ST A TEMENTS Continued Y ears ended January 31 2007 and 2006 3 ACCOUNTING POLICIES Continued Capital assets Capital assets are recorded at cost less accumulated amortization and amortization is calculated using the following methods p eriods and rates Methods P eriods and rates Building Diminishing balance 5 Office equipment Diminishing balance 20 V ehicles Diminishing balance 30 Mining equipment Diminishing balance 20 Equipment Diminishing balance 20 Computer equipment Straightline 3 years L easehold improvements Straightline 5 years Goodwill Goodwill representing the excess of purchase price over fair value of the net identifiable assets of acquired businesses is tes ted for impairment annually or more frequently when an event or circumstance occurs that indicates that goodwill might be impaired Whe n the carrying amount exceeds the fair value an impairment loss is recognized in the statement of earnings in an amount equal to the excess Impairment of longlived assets L onglived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable An impairment loss is recognized when their carrying value exceeds the total undiscounted cash flows expected f rom their use and eventual disposition The amount of the impairment loss if any is determined as the excess of the carrying value of the asset over its fair value Income taxes The company uses the asset and liability method of accounting for income taxes Under this method future income tax assets and liabilities are recorded to account for future tax effects of differences between the value of the assets and liabilities on th e balance sheet and their tax values by using the tax rates in effect for the years during which the differences are expected to reverse Mana gement reduces the carrying value of the future income tax assets by a valuation allowance when it is more likely than not that some p ortion of the asset will not be realized F oreign currency translation Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date Nonmonetary assets a nd liabilities are translated at historical rates R evenues and expenses are translated at average rates for the period except for amortization which is translated at historical rates T ranslaction gains or losses are included in earnings R evenue recognition R evenue from drilling contracts is recognized on the basis of actual meterage drilled for each contract R evenue from ancillary services is recorded when the service is rendered The company recognizes revenue when persuasive evidence of an arrangement exists ser vice has been rendered the price to the buyer is fixed or determinable and collection is reasonably assured Use of estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires managemen t to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting perio d A ctual results could differ from these estimates Significant areas requiring the use of management estimates relate to the useful lives of capital assets for amortization purpo ses inventory valuation determination of bad debt allowance purchase price allocation related to business acquisitions income an d other taxes and amounts recorded as accrued liabilities F34