Page 64 - ar2012

31 December 2012
NOTESTO FINANCIAL STATEMENTS
60 GEO ENERGY RESOURCES LIMITED | Annual Report 2012
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Impairment of fnancial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets
are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial
recognition of the fnancial asset, the estimated future cash fows of the fnancial assets have been impacted. For
fnancial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash fows, discounted at the original effective interest
rate.
The carrying amount of the fnancial asset is reduced by the impairment loss directly for all fnancial assets
with the exception of trade receivables where the carrying amount is reduced through the use of an allowance
account. When a trade receivable is uncollectible, it is written-off against the allowance account. Subsequent
recoveries of amounts previously written-off are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognised in proft or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment
loss is reversed through proft or loss to the extent the carrying amount of the fnancial asset at the date the
impairment is reversed does not exceed what the amortised cost would have been had the impairment not been
recognised.
Derecognition of fnancial assets
The Group derecognises a fnancial asset only when the contractual rights to the cash fows from the asset
expire, or it transfers the fnancial asset and substantially all the risks and rewards of ownership of the asset to
another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and
continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated
liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership
of a transferred fnancial asset, the Group continues to recognise the fnancial asset and also recognises a
collateralised borrowing for the proceeds received.
Financial liabilities and equity instruments
Classifcation as debt or equity
Financial liabilities and equity instruments issued by the Group are classifed according to the substance of the
contractual arrangements entered into and the defnitions of a fnancial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all
of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Other fnancial liabilities
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortised cost, using the effective interest method, with interest expense recognised on an effective
yield basis.
Interest-bearing bank loans are initially measured at fair value, and are subsequently measured at amortised
cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the
settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the
Group’s accounting policy for borrowing costs (see below).