Page 67 - ar2012

31 December 2012
NOTESTO FINANCIAL STATEMENTS
GEO ENERGY RESOURCES LIMITED | Annual Report 2012 63
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Depreciation is charged so as to write off the cost of assets, over the estimated useful lives of the assets using the
straight-line method, on the following bases:
Number of years
Leasehold property 60 (over terms of lease)
Temporary housing facility 2
Heavy equipment 8
Machineries 4
Motor vehicles 4
Equipment and furniture 4
Computer and software 4
Fully depreciated assets still in use are retained in the fnancial statements.
Mining property is classifed as an asset under property, plant and equipment. Mining property include mining
rights and costs transferred from mining evaluation assets once technical feasibility and commercial viability of
an area of interest are demonstrable and subsequent costs to develop the mine to the production phase. The
economic benefts from the assets are consumed in a pattern which is linked to the production level. These assets
are depreciated on a unit-of-production basis. Depreciation starts from the date when commercial production
commences.
The estimated useful lives, mining reserves, residual values and depreciation method are reviewed at the end of
each reporting period, with the effect of any changes in estimates accounted for on a prospective basis.
Assets held under fnance leases are depreciated over their expected useful lives on the same basis as owned
assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the asset shall
be fully depreciated over the shorter of the lease term and its useful life.
The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amounts of the asset and is recognised in proft or loss.
DEFERRED MINING EVALUATION ASSETS – Evaluation activity involves the determination of technical
feasibility and the assessment of the commercial viability of an identifed resource. Evaluation expenditure are
capitalised in respect of each area of interest for which the rights to tenure are current and where:
 The evaluation expenditures are expected to be recouped through successful development and exploitation
of the area of interest; or
 Evaluation activities in the area of interest have not reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves, and active and signifcant
operations in, or in relation to, the areas of interest are continuing.
Mining evaluation assets are reviewed at each reporting date as to whether an indication of impairment exists. If
any such indication exists, the recoverable amount of the mining evaluation assets is estimated to determine the
extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of
the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognised for the asset in previous years.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest
are demonstrable and where a decision is made to proceed with development, the mining evaluation assets
attributable to that area of interest are frst tested for impairment and then reclassifed to mining property within
property, plant and equipment.