EDC PR 2016

Financial Statement
Exploration and Evaluation Assets
The Company follows the full cost method of accounting for its exploration costs determined on
the basis of each service contract area. Under this method, all exploration costs relating to each
service contract are accumulated and deferred under the “Exploration and evaluation assets”
account in the consolidated statement of financial position pending the determination of whether
the wells has proved reserves. Capitalized expenditures include costs of license acquisition,
technical services and studies, exploration drilling and testing, and appropriate technical and
administrative expenses. General overhead or costs incurred prior to having obtained the legal
rights to explore an area are recognized as expense in the profit or loss when incurred.
If tests conducted on the drilled exploratory wells reveal that these wells cannot produce proved
reserves, the capitalized costs are charged to expense except when management decides to use the
unproductive wells, for recycling or waste disposal.
Once the technical feasibility and commercial viability of the project to produce proved reserves
are established, the exploration and evaluation assets are reclassified to property, plant and
equipment.
Exploration and evaluation assets also include the estimated rehabilitation and restoration costs of
the Company that are incurrred as a consequence of having undertaken the exploration for and
evaluation of geothermal resources.
Input VAT
Input VAT represents tax imposed on purchases of services related to the Company’s VATable
services. It is carried at cost less any impairment allowance.
Impairment of Non-financial Assets
For non-financial assets such as property, plant and equipment, intangible assets, exploration and
evaluation assets, and input VAT claims for refund/tax credits, the Company assesses at each
financial reporting date whether there is an indication that a non-financial asset may be impaired.
If any such indication exists, the Company estimates the asset’s recoverable amount.
The recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its
VIU and is determined for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or group of assets. When the carrying amount
of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to
its recoverable amount. In determining VIU, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. In determining fair value less costs to sell,
an appropriate valuation model is used. These calculations are corroborated by valuation
multiples or other available fair value indicators.
Impairment losses are recognized in the profit or loss in the expense categories consistent with the
function of the impaired asset.
For non-financial assets excluding goodwill, an assessment is made at each financial reporting
date as to whether there is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the Company makes an estimate of
the recoverable amount. A previously recognized impairment loss is reversed only if there has
been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognized. In such instance, the carrying amount of the asset is increased to
its recoverable amount. However, that increased amount cannot exceed the carrying amount that
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