BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
Dec. 31, 2011
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Change in Year End On May 19, 2010, the Company determined to change its fiscal year from November 30 to December 31. As the transition period covered a period of one month, the Company was not required to file a transition report. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Universal Gold Holdings (Cayman) Ltd. (“UGH”), which was incorporated in the Cayman Islands on April 22, 2010, and UGMC Mining, Inc. (“UGMC”), which was incorporated in British Columbia on September 14, 2010. UGMC ceased operations in February 2011 and was dissolved in October 2011. All material intercompany accounts and transactions have been eliminated. Use of Estimates Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses for the periods presented. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). Beginning December 31, 2010 through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to the depositor’s other accounts held by a FDIC-insured institution, which are insured for balances up to $250,000 per depositor until December 31, 2013. At December 31, 2011, the amounts held in banks exceeded the insured limit by $47,590. The Company has not incurred losses related to these deposits. Marketable Securities Marketable securities consist of equity securities, available for sale, which are publicly traded on national exchanges. At December 31, 2011, marketable securities consisted entirely of shares in Rio Novo Gold Inc., (“Rio Novo”) a company whose ordinary shares trade on the Toronto Stock Exchange. Available for sale securities are reported at their estimated fair value, with any unrealized gains and losses reported, net of any related tax effects, as a component of accumulated other comprehensive income. We evaluate our investment securities on a quarterly basis for declines in market value below cost for the purpose of determining whether these declines represent other than temporary impairments (“OTTI”). A decline in the fair value of a security below cost judged to be other than temporary is recognized as a loss in the current period and its fair value becomes the new cost basis of the security. Rio Novo is a Toronto, Ontario based company focused on the acquisition, exploration and development of gold mineral resources in South America. The fair value of common shares of Rio Novo is subject to risk associated with operations in South America and the gold mining industry. Accounts Receivable and Allowance for Doubtful Accounts At December 31, 2010, the Company’s accounts receivable were composed primarily of receivables from employees, related parties and third parties. The Company performs credit evaluations prior to advancing funds or granting credit to third parties and generally does not require collateral. The Company maintains an allowance for doubtful accounts for amounts in which collection is not assured. There were no accounts receivable as of December 31, 2011. Goods and Services Tax Refund Receivable The Canadian Government requires Canadian resident companies to collect sales taxes from customers when goods and services are sold in Canada. These taxes collected can be offset by taxes paid (tax credits) for goods and services purchased in Canada. Any sale outside of Canada is not taxed for this purpose. At the end of each quarter, all taxes paid on goods and services purchased are netted against the taxes due on sales of goods and services sold. Because the Company had more tax credits than taxes collected, as of December 31, 2010, the Company was due a refund of $16,328, which was refunded to the Company during the quarter ended September 30, 2011. The Company’s Canadian subsidiary was dissolved in October 2011. There were no outstanding balances for goods and services tax receivable or payable as of December 31, 2011. Property and Equipment Property and equipment are carried at cost, with depreciation provided on a straight-line basis over their estimated useful lives of five years. During the year ended December 31, 2011 and the period from May 3, 2006 (Inception) through December 31, 2011, we recognized a loss of $3,518 on disposal of property and equipment held by UGMC. Mineral Exploration and Development Costs All exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop new ore deposits, to expand the capacity of mines or to develop mine areas substantially in advance of production are also capitalized once proven and probable reserves exist, and the property is determined to be a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If the Company does not continue with exploration after the completion of the feasibility study, the cost of mineral rights will be expensed at that time. Costs of abandoned projects, including related property and equipment costs, are charged to mining costs. To determine if these costs are in excess of their recoverable amount, periodic evaluations of the carrying value of capitalized costs and any related property and equipment costs are performed. These evaluations are based upon expected future cash flows and/or estimated salvage value. Income Taxes The Company accounts for its income taxes using the liability method, whereby deferred tax assets and liabilities are determined based on temporary differences between basis used for financial reporting and income tax reporting purposes. Income taxes are provided based on tax rates in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize the tax assets through future operations. Fair Value Measurements The Company measures fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company’s financial instruments consist primarily of cash, marketable securities traded on national exchanges, and accounts payable. The Company believes the carrying value of its cash and accounts payable approximate fair value because of the short-term nature or maturity of the instruments. Stock-Based Compensation The Company’s Board of Directors approved the 2008 Equity Incentive Plan (the “2008 Plan”), under which the Company may issue stock options. All share-based payments to employees, including grants of employee stock options, are recognized in the consolidated statement of operations and other comprehensive income (loss) based upon their estimated fair value as of the date of grant. Foreign Currency The financial statements of foreign subsidiaries are translated into U.S. dollars at period end exchange rates except for revenues and expenses, which are translated at average monthly rates. Translation adjustments are reflected as a separate component of stockholders’ equity and have no current effect on earnings or cash flows. Foreign currency exchange transactions are recorded using the exchange rate at the earlier of either the date of settlement or the most recent intervening balance sheet date. The Company recognized a foreign currency exchange gain of $2,646 and $31,666 for the years ended December 31, 2011 and 2010, respectively. From May 3, 2006 (Inception) through December 31, 2011, the Company recognized a foreign currency exchange gain of $34,312. Other Comprehensive Income (Loss) The Company’s other comprehensive income (loss) is attributable to unrealized gains/losses on foreign currency translation adjustments and gain/loss on change in fair value of marketable securities available for sale. During the year ended December 31, 2011 and since May 3, 2006 (Inception) through December 31, 2011, the Company recorded an unrealized loss on its marketable securities in the amount of $468,340. The Company did not hold any marketable securities during the year ended December 31, 2010. During the year ended December 31, 2011, the Company recognized a foreign currency translation loss of $2,136 and recognized a foreign currency translation gain of $2,136 during the year ended December 31, 2010. Earnings (Loss) Per Share Information Basic net earnings (loss) per common share are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for all periods presented in these consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Potentially dilutive securities consist of outstanding option grants to employees and directors and contained an exercise price that was greater than the value of the Company’s common stock at December 31, 2011. Subsequent Events The Company evaluates subsequent events through the date when financial statements are issued. The Company, which files reports with the U.S. Securities and Exchange Commission (the “SEC”), considers its consolidated financial statements issued when they are widely distributed to users, such as upon filing of the financial statements on EDGAR, the SEC’s Electronic Data Gathering, Analysis and Retrieval system. New Accounting Pronouncements Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASU’s”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all recent ASU’s. ASU’s not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations. In May 2011, the FASB issued amendments to disclosure requirements for common fair value measurement. These amendments, effective for the interim and annual periods beginning on or after December 15, 2011 (early adoption is prohibited), result in common definition of fair value and common requirements for measurement of and disclosure requirements between U.S. GAAP and IFRS. Consequently, the amendments change some fair value measurement principles and disclosure requirements. The implementation of this amended accounting guidance does not have a material impact on our consolidated financial position or results of operations. In June 2011, the FASB issued amendments to disclosure requirements for presentation of comprehensive income. This guidance, effective retrospectively for the interim and annual periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company has implemented this amended accounting guidance in our consolidated financial statements as of and for the years ended December 31, 2011 and 2010. In December 2011, the FASB deferred an effective date for amendments issued in June 2011 that relate to the presentation of reclassifications of items out of accumulated other comprehensive income. All other requirements in ASU issued in June 2011 are not affected, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The implementation of this amended accounting guidance is not expected to have a material impact on our consolidated financial position or results of operations.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2011

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Change in Year End

On May 19, 2010, the Company determined to change its fiscal year from November 30 to December 31. As the transition period covered a period of one month, the Company was not required to file a transition report.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Universal Gold Holdings (Cayman) Ltd. (“UGH”), which was incorporated in the Cayman Islands on April 22, 2010, and UGMC Mining, Inc. (“UGMC”), which was incorporated in British Columbia on September 14, 2010. UGMC ceased operations in February 2011 and was dissolved in October 2011. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses for the periods presented. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). Beginning December 31, 2010 through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to the depositor’s other accounts held by a FDIC-insured institution, which are insured for balances up to $250,000 per depositor until December 31, 2013. At December 31, 2011, the amounts held in banks exceeded the insured limit by $47,590. The Company has not incurred losses related to these deposits.

Marketable Securities

Marketable securities consist of equity securities, available for sale, which are publicly traded on national exchanges. At December 31, 2011, marketable securities consisted entirely of shares in Rio Novo Gold Inc., (“Rio Novo”) a company whose ordinary shares trade on the Toronto Stock Exchange. Available for sale securities are reported at their estimated fair value, with any unrealized gains and losses reported, net of any related tax effects, as a component of accumulated other comprehensive income.

We evaluate our investment securities on a quarterly basis for declines in market value below cost for the purpose of determining whether these declines represent other than temporary impairments (“OTTI”). A decline in the fair value of a security below cost judged to be other than temporary is recognized as a loss in the current period and its fair value becomes the new cost basis of the security.

Rio Novo is a Toronto, Ontario based company focused on the acquisition, exploration and development of gold mineral resources in South America. The fair value of common shares of Rio Novo is subject to risk associated with operations in South America and the gold mining industry.

Accounts Receivable and Allowance for Doubtful Accounts

At December 31, 2010, the Company’s accounts receivable were composed primarily of receivables from employees, related parties and third parties. The Company performs credit evaluations prior to advancing funds or granting credit to third parties and generally does not require collateral. The Company maintains an allowance for doubtful accounts for amounts in which collection is not assured. There were no accounts receivable as of December 31, 2011.

Goods and Services Tax Refund Receivable

The Canadian Government requires Canadian resident companies to collect sales taxes from customers when goods and services are sold in Canada. These taxes collected can be offset by taxes paid (tax credits) for goods and services purchased in Canada. Any sale outside of Canada is not taxed for this purpose. At the end of each quarter, all taxes paid on goods and services purchased are netted against the taxes due on sales of goods and services sold. Because the Company had more tax credits than taxes collected, as of December 31, 2010, the Company was due a refund of $16,328, which was refunded to the Company during the quarter ended September 30, 2011. The Company’s Canadian subsidiary was dissolved in October 2011. There were no outstanding balances for goods and services tax receivable or payable as of December 31, 2011.

Property and Equipment

Property and equipment are carried at cost, with depreciation provided on a straight-line basis over their estimated useful lives of five years. During the year ended December 31, 2011 and the period from May 3, 2006 (Inception) through December 31, 2011, we recognized a loss of $3,518 on disposal of property and equipment held by UGMC.

Mineral Exploration and Development Costs

All exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop new ore deposits, to expand the capacity of mines or to develop mine areas substantially in advance of production are also capitalized once proven and probable reserves exist, and the property is determined to be a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If the Company does not continue with exploration after the completion of the feasibility study, the cost of mineral rights will be expensed at that time. Costs of abandoned projects, including related property and equipment costs, are charged to mining costs. To determine if these costs are in excess of their recoverable amount, periodic evaluations of the carrying value of capitalized costs and any related property and equipment costs are performed. These evaluations are based upon expected future cash flows and/or estimated salvage value.

Income Taxes

The Company accounts for its income taxes using the liability method, whereby deferred tax assets and liabilities are determined based on temporary differences between basis used for financial reporting and income tax reporting purposes. Income taxes are provided based on tax rates in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize the tax assets through future operations.

Fair Value Measurements

The Company measures fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company’s financial instruments consist primarily of cash, marketable securities traded on national exchanges, and accounts payable. The Company believes the carrying value of its cash and accounts payable approximate fair value because of the short-term nature or maturity of the instruments.

Stock-Based Compensation

The Company’s Board of Directors approved the 2008 Equity Incentive Plan (the “2008 Plan”), under which the Company may issue stock options. All share-based payments to employees, including grants of employee stock options, are recognized in the consolidated statement of operations and other comprehensive income (loss) based upon their estimated fair value as of the date of grant.

Foreign Currency

The financial statements of foreign subsidiaries are translated into U.S. dollars at period end exchange rates except for revenues and expenses, which are translated at average monthly rates. Translation adjustments are reflected as a separate component of stockholders’ equity and have no current effect on earnings or cash flows.

Foreign currency exchange transactions are recorded using the exchange rate at the earlier of either the date of settlement or the most recent intervening balance sheet date. The Company recognized a foreign currency exchange gain of $2,646 and $31,666 for the years ended December 31, 2011 and 2010, respectively. From May 3, 2006 (Inception) through December 31, 2011, the Company recognized a foreign currency exchange gain of $34,312.

Other Comprehensive Income (Loss)

The Company’s other comprehensive income (loss) is attributable to unrealized gains/losses on foreign currency translation adjustments and gain/loss on change in fair value of marketable securities available for sale. During the year ended December 31, 2011 and since May 3, 2006 (Inception) through December 31, 2011, the Company recorded an unrealized loss on its marketable securities in the amount of $468,340. The Company did not hold any marketable securities during the year ended December 31, 2010. During the year ended December 31, 2011, the Company recognized a foreign currency translation loss of $2,136 and recognized a foreign currency translation gain of $2,136 during the year ended December 31, 2010.

Earnings (Loss) Per Share Information

Basic net earnings (loss) per common share are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for all periods presented in these consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Potentially dilutive securities consist of outstanding option grants to employees and directors and contained an exercise price that was greater than the value of the Company’s common stock at December 31, 2011.

Subsequent Events

The Company evaluates subsequent events through the date when financial statements are issued. The Company, which files reports with the U.S. Securities and Exchange Commission (the “SEC”), considers its consolidated financial statements issued when they are widely distributed to users, such as upon filing of the financial statements on EDGAR, the SEC’s Electronic Data Gathering, Analysis and Retrieval system.

New Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASU’s”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all recent ASU’s. ASU’s not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

In May 2011, the FASB issued amendments to disclosure requirements for common fair value measurement. These amendments, effective for the interim and annual periods beginning on or after December 15, 2011 (early adoption is prohibited), result in common definition of fair value and common requirements for measurement of and disclosure requirements between U.S. GAAP and IFRS. Consequently, the amendments change some fair value measurement principles and disclosure requirements. The implementation of this amended accounting guidance does not have a material impact on our consolidated financial position or results of operations.

In June 2011, the FASB issued amendments to disclosure requirements for presentation of comprehensive income. This guidance, effective retrospectively for the interim and annual periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company has implemented this amended accounting guidance in our consolidated financial statements as of and for the years ended December 31, 2011 and 2010.

In December 2011, the FASB deferred an effective date for amendments issued in June 2011 that relate to the presentation of reclassifications of items out of accumulated other comprehensive income. All other requirements in ASU issued in June 2011 are not affected, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The implementation of this amended accounting guidance is not expected to have a material impact on our consolidated financial position or results of operations.

UNIVERSAL GOLD MINING CORP. 10-K