Prospectus re Admission to the Official List - Heritage Oil

usually when legal title passes to the external party. Interest income is recognised on a timeproportion basis using the effective interest method.Drilling services revenue relates to the provision of drilling services in respect of the drilling rig.s) Income taxesCurrent income tax is based on taxable profit for the period. Taxable profit differs from profit asreported in the income statement because it excludes items that are never taxable or deductible.The Group’s current tax assets and liabilities are calculated using tax rates that have been enactedor substantively enacted by the balance sheet date.Deferred income tax is provided in full, using the liability method, on temporary differencesarising between the tax bases of assets and liabilities and their carrying amounts in theconsolidated financial statements. Deferred income tax is determined using tax rates (and laws)that have been enacted or substantively enacted by the balance sheet date and are expected toapply when the related deferred income tax asset is realised or the deferred income tax liabilityis settled.Deferred tax assets are recognised for deductible temporary differences and unused tax lossesonly if it is probable that future taxable amounts will be available to utilise those temporarydifferences and losses.Deferred tax assets and liabilities are offset when there is a legally enforceable right to offsetcurrent tax assets and liabilities and when the deferred tax balances relate to the same taxationauthority.t) Foreign currency translationItems included in the financial statements of each of the Corporation’s consolidated subsidiariesare measured using the currency of the primary economic environment in which the subsidiaryoperates (‘the functional currency’). The Corporation’s consolidated financial statements arepresented in U.S. dollars, which is the Corporation’s functional and presentation currency.Foreign currency transactions are translated into the respective functional currencies of groupentities using the exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from the translation atperiod end exchange rates of monetary assets and liabilities denominated in foreign currenciesare recognised in the income statement, except when they are deferred in equity as part of or as ahedge of the net investment in a foreign operation.The results and financial position of all the Corporation’s consolidated subsidiaries (none ofwhich has a functional currency that is the currency of a hyperinflationary economy) that have afunctional currency different from the presentation currency are translated into the presentationcurrency as follows:i) assets and liabilities for each balance sheet presented are translated at the closing rate at thedate of that balance sheet;ii) income and expenses for each period are translated at average exchange rates (unless this isnot a reasonable approximation of the cumulative effect of the rates prevailing on thetransaction dates, in which case income and expenses are translated at the dates of thetransactions); andiii) all resulting exchange differences are recognised as income and expense in a separatecomponent of equity.Foreign currency loans and overdrafts are designated as and are considered to be hedges of theexchange rate exposure inherent in foreign currency net investments and, to the extent that thehedge is effective, exchange differences giving rise to changes in the carrying value of foreigncurrency loans are also recognised as income or expense directly in equity. All other exchangedifferences giving rise to changes in the carrying value of foreign currency loans and overdraftsare recognised in the income statement.When a foreign operation is sold or any borrowings hedging forming part of the net investmentare repaid, a proportionate share of the cumulative exchange differences previously recognised in187