Annual Report 2012 - Syrah Resources Ltd

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Syrah Resources Limited Notes to the financial statements 30 June 2012 Note 2. Significant accounting policies (continued) (iv) AASB 11 Joint Arrangements In August 2011 the Australian Accounting Standards Board issued AASB 11 to replace AASB131: Interests in Joint Ventures (July 2004 as amended). AASB 11 requires joint arrangements to be classified as either "joint operations" (whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities) or "joint ventures" (where the parties that have joint control of the arrangement have rights to the net assets of the arrangement). Joint ventures are required to adopt the equity method of accounting (proportionate consolidation is no longer allowed). This standard will have no impact on the Group's financial statements as at 30 of June 2012 as at that time the Group is not a party to any joint arrangement. (v) AASB 12 Disclosure of Interests in Other Entities In August 2011 the Australian Accounting Standards Board issued AASB 12. AASB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint venture, joint operation or associate. AASB 12 also introduces the concept of a "structured entity", replacing the "special purpose entity" concept currently used in Interpretation 112, and requires specific disclosures in respect of any investments in unconsolidated structured entities. This standard will only affect disclosures and will have no other impact on the Group's financial statements. (vi) AASB 13 Fair Value Measurement and Amendments to AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013) In September 2011 the Australian Accounting Standards Board issued AASB 13, it defines fair value, sets out in a single Standard a framework for measuring fair value and requires disclosures about fair value measurements. On initial analysis this standard will have no impact on the Group's financial statements. Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Business combinations As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. In order to be considered a business combination the entity must be deemed to satisfy the requirements of carrying on a business at the time of acquisition. 46
Syrah Resources Limited Notes to the financial statements 30 June 2012 Note 3. Critical accounting judgements, estimates and assumptions (continued) Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Long service leave provision As discussed in note 1, the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Exploration and evaluation At each reporting period the directors review the carrying amount of each of the tenements by assessing whether any of the indicators of impairment outlined in AASB 6 Exploration for and Evaluation of Mineral Resources are in existence. Tax losses The Company has not recognised a deferred tax asset with regard to unused tax losses and other temporary differences, as it has not been determined whether the Company will generate sufficient taxable income against which the unused tax losses and other temporary differences can be utilised in the foreseeable future. Note 4. Operating segments The Company operated predominately as an explorer for minerals with exploration activities being performed primarily in south east Africa, but also in Australia and Saudi Arabia. AASB 8 requires operating segments to be identified on the basis of internal reports about the components of the Group that are regularly reviewed by the chief decision maker in order to allocate resources to the segment and to assess its performance. During the year, the Board started to review the performance of the African, Australian and Saudi Arabian operations separately and as such the consolidated entity now includes three operating segments: African exploration, Australian exploration and Saudi exploration. 47
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Annual Report 2012 - Syrah Resources Ltd

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