Page 70 - ar2012

31 December 2012
NOTESTO FINANCIAL STATEMENTS
66 GEO ENERGY RESOURCES LIMITED | Annual Report 2012
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
EMPLOYEE LEAVE ENTITLEMENT – Employee entitlements to annual leave are recognised when they accrue
to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by
employees up to the end of the reporting period.
INCOME TAX – Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable proft for the year. Taxable proft differs from proft as reported in the
statement of comprehensive income because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are not taxable or tax deductible. The Group’s liability for current
tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where
the Company and subsidiaries operate by the end of the reporting period.
Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities in the fnancial
statements and the corresponding tax bases used in the computation of taxable proft, and is accounted for
using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profts will
be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable proft nor the accounting proft.
Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries,
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only recognised to the extent that it is
probable that there will be sufficient taxable profts against which to utilise the benefts of the temporary differences
and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profts will be available to allow all or part of the asset to
be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end
of the reporting period. The measurement of deferred tax liabilities and assets refects the tax consequences that
would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in proft or loss, except when they relate to
items credited or debited outside proft or loss (either in other comprehensive income or directly in equity), in which
case the tax is also recognised outside proft or loss (either in other comprehensive income or directly in equity,
respectively).
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION – The individual fnancial statements of each
entity within the Group are measured and presented in the currency of the primary economic environment in which
the entity within the Group operates (its functional currency). The consolidated fnancial statements of the Group
and the statement of fnancial position of the Company are presented in United States dollars, which is not the
functional currency of the Company and each entity within the Group.
In preparing the fnancial statements of the individual entities, transactions in currencies other than the entity’s
functional currency are recorded at the rate of exchange prevailing on the date of the transaction. At the end of
each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing
at the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary
items that are measured in terms of historical cost in a foreign currency are not retranslated.