Page 63 - ar2012

31 December 2012
NOTESTO FINANCIAL STATEMENTS
GEO ENERGY RESOURCES LIMITED | Annual Report 2012 59
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Changes in the group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions. The carrying amounts of the group’s interests and the non-controlling interests are adjusted to refect
the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-
controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in
equity and attributed to owners of the company.
When the group loses control of a subsidiary, the proft or loss on disposal is calculated as the difference between
(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest; and
(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-
controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary
are accounted for (i.e. reclassifed to proft or loss or transferred directly to retained earnings) in the same manner
as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained
in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for
subsequent accounting under FRS 39 Financial Instruments: Recognition and Measurement or, when applicable,
the cost on initial recognition of an investment in an associate or jointly controlled entity.
In the company’s fnancial statements, investments in subsidiaries are carried at cost less any impairment in net
recoverable value that has been recognised in proft or loss.
FINANCIAL INSTRUMENTS – Financial assets and fnancial liabilities are recognised on the Group’s statement of
fnancial position when the Group becomes a party to the contractual provisions of the instrument.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a fnancial instrument and of
allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts or payments (including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected
life of the fnancial instrument, or where appropriate, a shorter period. Income or expense is recognised on an
effective interest basis for debt instruments.
Financial assets
All fnancial assets are recognised and de-recognised on a trade date where the purchase or sale of an investment
is under a contract whose terms require delivery of the investment within the timeframe established by the
market concerned, and are initially measured at fair value plus transaction costs, except for those fnancial assets
classifed as at fair value through proft or loss which are initially measured at fair value.
Loans and receivables
Trade and other receivables that have fxed or determinable payments that are not quoted in an active market are
classifed as “loans and receivables”. These are initially measured at fair value and subsequently measured at
amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective
interest rate method, except for short-term receivables when the recognition of interest would be immaterial.
Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of cash fows comprise cash on hand, cash at bank and
other short-term highly liquid assets that are readily convertible to a known amount of cash and are subject to an
insignifcant risk of changes in value. Pledged deposits are excluded for the purpose of the consolidated statement
of cash fows.