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Sunrise Diamonds plc

Notes to the Financial Statements

continued

1.

Accounting policies — continued The Company also issues shares in order to settle certain liabilities, including payment of fees to directors. The fair value of shares issued is based on the closing mid-market price of the shares on the AIM Market on the day prior to the date of settlement and it is expensed on the date of settlement with a corresponding increase in equity.

(i) Judgements and estimations in applying accounting policies

In the process of applying the Company’s accounting policies above, management has identified the

judgemental areas that have the most significant effect on the amounts recognised in the financial statements:

Intangible fixed assets — exploration and evaluation Capitalisation of exploration and evaluation costs requires that costs be assessed against the likelihood that such costs will be recoverable against future exploitation or sale or alternatively, where activities have not reached a stage which permits a reasonable estimate of the existence of mineral reserves, a judgement that future

exploration or evaluation should continue. This requires management to make estimates and judgements and to make certain assumptions, often of a geological nature, and most particularly in relation to whether or not an economically viable mining operation can be established in future. Such estimates, judgements and assumptions

are likely to change as new information becomes available. When it becomes apparent that recovery of expenditure is unlikely the relevant capitalised amount is written off to the income statement.

Impairment Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. Assessment of the impairment of assets is a judgement based on analysis of the future likely cash flows from the relevant project. The Company will look to evidence produced by its exploration activities to indicate whether the carrying value is impaired.

Going concern The preparation of financial statements requires an assessment of the validity of the going concern assumption. The validity of the going concern assumption is dependant on finance being available for the continuing working capital requirements of the Company. Based on the assumption that such finance will become available, the directors believe that the going concern basis is appropriate for these accounts.

Share based payments The estimates of share based payments costs requires that management selects an appropriate valuation model and make decisions on various inputs into the model including the volatility of its own share price, the probable life of the options before exercise, and behavioural consideration of employees.

2.

Segmental analysis The Company’s primary segment is the exploration, evaluation and development of mineral resources. The primary segment during the year consisted of one geographical reporting area, which is Finland.

Capital expenditure 2009 £

Total segment assets 2009 £

Capital expenditure 2008 £

Total segment assets 2008 £

51,547 51,547

783,050 783,050

199,007 199,007

740,606 740,606

Finland

Administrative expenses are not allocated to geographical segments.

20

www.sunrisediamonds.com

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