Page 68 - ar2012

31 December 2012
NOTESTO FINANCIAL STATEMENTS
64 GEO ENERGY RESOURCES LIMITED | Annual Report 2012
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
DEFERRED EXPENDITURE – Expenses incurred during pre-mining services activities such as labour costs and
those overhead costs incurred in mobilising the heavy equipment to the mine site are deferred in the statement
of fnancial position and released to proft or loss as expenses when services have been rendered and revenue
is recognised from the respective mining service contracts. Expenses are deferred to the extent that there is
reasonable probability of recovery from the mining services rendered. When it is probable that the costs incurred or
to be incurred on that mining services contract will exceed the estimated value of the mining services contract, the
expected loss is recognised as an expense in proft or loss immediately.
Deferred expenditure is reviewed at each reporting date as to whether an indication of impairment exists. If any
such indication exists, the recoverable amount of the deferred expenditure 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.
IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS – At the end of each reporting period, the Group
reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate
the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identifed, corporate
assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group
of cash-generating units for which a reasonable and consistent allocation basis can be identifed.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash fows are discounted to their present value using a pre-tax discount rate that refects current
market assessments of the time value of money and the risks specifc to the asset for which the estimates of
future cash fows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in proft or loss, unless the relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so 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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in proft or
loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
PROVISIONS – Provisions are recognised when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash fows estimated to settle the present obligation, its
carrying amount is the present value of those cash fows.
When some or all of the economic benefts required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.