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Bounty Oil & Gas N.L. Annual Report – 2011<br />
l) Fair Value Estimation<br />
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for<br />
disclosure purposes.<br />
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, trading and<br />
available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price<br />
used for financial asset held by the Group is the current bid price; the appropriate quoted market price for financial<br />
liabilities is the current ask price.<br />
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate<br />
their fair value. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future<br />
contractual cash flows at the current market interest rate that is available to the Group for similar financial<br />
instruments.<br />
m) Impairment of Assets<br />
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation. They are tested<br />
annually for impairment or more frequently if events or changes in circumstances indicate that they might be<br />
impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that<br />
the carrying amount may not be recoverable.<br />
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable<br />
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the<br />
purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately<br />
identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets<br />
(cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible<br />
reversal of the impairment at each reporting date.<br />
n) Interests in Joint Ventures<br />
The Group’s share of the assets, liabilities, revenue and expenses of its joint venture operations are included in the<br />
appropriate items of the consolidated financial statements. Details of the Group’s material joint venture petroleum<br />
production interests are shown at Note 26.<br />
The Group’s interests in joint venture entities are brought to account using the cost method of accounting in the<br />
financial statements.<br />
o) Foreign Currency Transactions and Balances<br />
Functional and presentation currency<br />
The functional currency is measured using the currency of the primary economic environment in which the Group<br />
operates. The financial statements are presented in Australian dollars which is the Group’s functional and<br />
presentation currency.<br />
Transactions and Balances<br />
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date<br />
of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary<br />
items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Nonmonetary<br />
items measured at fair value are reported at the exchange rate at the date when fair values were<br />
determined.<br />
Exchange differences arising on the translation of monetary items are recognised in the income statement, except<br />
where deferred in equity as a qualifying cash flow or net investment hedge.<br />
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent<br />
that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income<br />
statement.<br />
p) Employee Benefits<br />
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to<br />
balance date. Employee benefits that are expected to be settled within one year have been measured at the<br />
amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been<br />
measured at the present value of the estimated future cash outflows to be made for those benefits. Those cash flows<br />
are discounted using market yields on national government bonds with terms to maturity that match the expected<br />
timing of cash flows.<br />
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