Annual Report 2007 - Global Energy Development

28 Notes to the financial information Global Energy Development PLCAnnual report 2007Notes to the financial information continuedFor the twelve months ended 31 December 20071. Accounting policies continuedConvertible debtIn accordance with IAS 32 and IAS 39, the Company has classified the convertible debt in issue as a compound financial instrument.Accordingly, the Company presents the liability and equity components separately on the balance sheet. The classification of theliability and equity components is not reversed as a result of a change in the likelihood that the conversion option will be exercised.No gain or loss arises from initially recognising the components of the instrument separately. Interest on the debt element of the loanis accreted over the term of the loan. Costs associated with the raising of debt are set off against the gross value of monies received.Interest on borrowings is capitalised where the related proceeds are clearly allocated to the development of a tangible asset.Capitalisation of interest is suspended once the asset is bought into production.Share-based paymentsIn accordance with IFRS 2 “Share-based payments”, the Group reflects the economic cost of awarding shares and share options toemployees and directors by recording an expense in the income statement equal to the fair value of the benefit awarded. Theexpense is recognised in the income statement over the vesting period of the award.Fair value is measured by use of a binomial model which takes into account conditions attached to the vesting and exercise of theequity instruments. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of nontransferability,exercise restrictions and behavioral considerations.Post retirement benefitsThe Group contributes to a defined contribution scheme. Contributions are charged to the income statement as they becomepayable.Foreign currenciesTransactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date. Exchange gainsor losses on translation are included in the income statement.The functional currency of the Company has been determined to be the US Dollar and accordingly the financial statements have beenprepared in US dollars.LeasesOperating leases and the corresponding rental charges are charged to the income statement on a straight-line basis over the life of thelease.Maintenance expenditureExpenditure on major maintenance, refits or repairs is capitalised where it fulfils one of the following:•••enhances the life or performance of an asset above its originally assessed standard of performance;replaces an asset, or part thereof, which was separately depreciated and which is then written off;restores the economic benefits of an asset which has been fully depreciated.All other maintenance expenditures are charged to the income statement as incurred.