Prospectus re Admission to the Official List - Heritage Oil

iii) IFRIC 12, ‘‘Service concession arrangements’’ (effective from 1 January 2008), applies tocontractual arrangements whereby a private sector operator participates in the development,financing, operation and maintenance of infrastructure for public sector services.iv) IFRIC 13, ‘‘Customer loyalty programmes’’ (effective from 1 July 2008), clarifies that wheregoods or services are sold together with a customer loyalty incentive (for example, loyaltypoints or free products), the arrangement is a multiple-element arrangement and theconsideration receivable from the customer is allocated between the components of thearrangement using fair values.v) IFRIC 14, ‘‘IAS 19—The limit on a defined benefit asset, minimum funding requirementsand their interaction’’ (effective from 1 January 2008), provides guidance on assessing thelimit in IAS 19 on the amount of the surplus that can be recognised as an asset. It alsoexplains how the pension asset or liability may be affected by a statutory or contractualminimum funding requirement.The following amendments have been published, but have not been applied in these financialstatements:i) IFRS 2 (Amendment), Share based payment—Vesting Conditions and Cancellations:effective for accounting periods commencing on or after 1 January 2009;i) IFRS 3 (Amendment) Business Combinations: effective for accounting periods commencingon or after 1 July 2009;iii) IAS 1 (Amendment), Presentation of Financial Statements: effective for accounting periodscommencing on or after 1 January 2009;iv) IAS 23 (Amendment), Borrowing Costs: effective for accounting periods commencing on orafter 1 January 2009;v) IAS 27 (Amendment), Consolidated and Separate Financial Statements: effective foraccounting periods commencing on or after 1 July 2009.The Directors do not anticipate that the adoption of these amendments will have a materialimpact on the Group’s financial statements in the period of initial application.2 Risk managementThe Group’s activities expose it to a variety of financial risks that arise as a result of its exploration,development, production, and financing activities. The Group’s overall risk management programmefocuses on the unpredictability of financial markets and seeks to minimise potential adverse effects onthe Group’s financial performance.a) Financial risk managementi) Foreign exchange riskForeign exchange risk arises when transactions and recognised assets and liabilities of theGroup entity concerned are denominated in a currency that is not the Corporation’sfunctional currency. The Group operates internationally and is exposed to foreign exchangerisk arising from currency exposures to the U.S. dollar.There are no forward exchange rate contracts in place at, or subsequent to,30 September 2007.At 30 September 2007, if the Canadian dollar had strengthened/weakened by 10% againstthe U.S. dollar with all other variables held constant, the loss for the period would have been$2,033,068 (30 September 2006—$99,367; 31 December 2006—$125,982; 31 December2005—$(20,937)) higher/(lower), mainly as a result of foreign exchange gains/losses ontranslation of Canadian dollar-denominated general and administrative expenses and cash inbank. Profit is more/less sensitive to movement of Canadian/U.S. dollar exchange rates in2007 than 2006 because of significantly higher general and administrative expenses in 2007 incomparison with 2006.At 30 September 2007, if the Russian rouble had strengthened/weakened by 10% against theUS dollar with all other variables held constant, the loss for the period would have been189