Annual Report 2010 - Ophir Energy

48
Ophir energy plc | 2010 ANNUAL REPORT
grOUp AccOUnTs | NOTEs TO THE fiNANCiAL sTATEmENTs
Notes to the
financial statements
2.12 Trade and other payables
Trade and other payables are carried at amortised cost. They
represent liabilities for goods and services provided to the
Group prior to the end of the financial year that are unpaid
and arise when the Group becomes obligated to make
future payments in respect of the purchase of those goods
and services. The amounts are unsecured and are usually
paid within 30 days of recognition.
2.13 provisions
A provision is recognised when the Group has a legal or
constructive obligation as a result of a past event and it
is probable that an outflow of economic benefits will be
required to settle the obligation and a reliable estimate
can be made of the obligation. If the effect of the time
value of money is material, expected future cash flows
are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to
unwinding the discount is recognised as a finance cost.
2.14 pensions and other post-retirement
benefits
The Group does not operate its own pension plan but
makes pension or superannuation contributions to private
funds of its employees which are defined contribution plans.
The cost of providing such benefits are expensed in the
income statement as incurred.
2.16 equity instruments
Equity instruments issued by the Company are recorded at
the proceeds received, net of direct issue costs.
2.17 interest bearing borrowing
All loans and borrowings are initially recognised at fair value
less directly attributable transaction costs.
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost
using the effective interest rate method.
Gains and losses are recognised in the income statement
when liabilities are derecognised as well as through the
amortisation process.
2.18 leases
The determination of whether an arrangement is, or
contains, a lease is based on the substance of the
arrangement and requires an assessment of whether the
fulfilment of the arrangement is dependent on the use of a
specific asset or assets and the arrangement conveys a right
to use the asset.
The Group has leases where the Lessor retains substantially
all the risks and benefits of ownership of the asset. Such
leases are classified as operating leases and rentals payable
are charged to the Income Statement on a straight line basis
over the lease term.
2.15 employee benefits
wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulating sick leave expected
to be settled within 12 months of the reporting date are
recognised in respect of employees’ services up to the
reporting date. They are measured at the amounts expected
to be paid when the liabilities are settled. Liabilities for
non-accumulating sick leave are recognised when the leave
is taken and are measured at the rates paid or payable.
long service leave
The liability for long service leave is recognised and
measured at the present value of expected future payments
to be made in respect of services provided by employees
up to the reporting date using the projected unit
credit method.
Consideration is given to expected future wage and salary
levels, experience of employee departures, and periods of
service. Expected future payments are discounted using
market yields at the reporting date on national government
bonds with terms to maturity and currencies that match, as
closely as possible, the estimated future cash outflows.
2.19 interests in Joint ventures
The Group has a number of contractual arrangements with
other parties which represent joint ventures. A joint venture
is a contractual arrangement whereby the Group and other
parties undertake economic activity.
Where a Group company undertakes its activities under
joint venture arrangements the Group’s share of jointly
controlled assets, liabilities and related income and expenses
are included in the Financial Statements in their respective
classification categories.
The Group’s interests in joint ventures, which are in the form
of jointly controlled assets, are identified in note 22.
2.20 Derivative financial instruments
Financial instruments are classified as held for trading if they
are acquired for the purpose of selling in the near-term.
Derivatives, including separated embedded derivatives
are also classified as held for trading. Gains or losses on
investments classified as held for trading are recognised in
profit or loss.