Page 51 - Sun Resources 2014 Annual Report

1 Summary of Significant Accounting Policies (continued)
Group Companies
The financial results and position of foreign operations whose functional currency is different from the Group’s
presentation currency are translated as follows:
•• assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;
•• income and expenses are translated at average exchange rates for the period; and
•• Contributed equity and accumulated loses are translated at the exchange rates prevailing at the date of the
transaction.
All resultant exchange differences have been recognised in the Statement of Profit or Loss and other Comprehensive
Income.
f Oil and Gas Properties
i Exploration Costs Carried Forward
Exploration, evaluation and relevant acquisition expenditure incurred is accumulated in respect of each
identifiable area of interest. Areas of interest are recognised at the field level. These costs are only carried
forward to the extent that they are expected to be recouped through the successful development of the area or
where activities in the area have not yet reached a stage which permits reasonable assessment of the existence
of economically recoverable reserves. Economically recoverable reserves are defined as the estimated quantity
of product in an area of interest, which can be expected to be profitably extracted, processed and sold under
current and foreseeable economic conditions.
Exploration and evaluation expenditure, which does not satisfy these criteria, is written-off in full against profit in
the year in which a decision to abandon the area is made.
Bi-annual reviews are undertaken of each area of interest to determine the appropriateness of continuing to
carry forward costs in relation to that area of interest.
Revenue received from the sale of products, material or services during the exploration and evaluation phase of
operations is offset against expenditure in respect of the area of interest or hydrocarbon resource concerned.
ii Development Costs
Once an area of interest is identified as having commercial potential, exploration costs are transferred to
development and further well development costs are capitalised.
iii Producing Projects
When production commences on an area of interest an exploration and evaluating cost relating to the area of
interest is transferred to producing projects within the oil and gas properties.
Sun Resources uses the “Units of Production” (UOP) approach when depreciating and amortising field-specific
assets. Amortisation of producing projects for the year to 30 June 2014 was calculated based on proved and
developed reserves.
Transferred development, exploration and evaluation costs are amortised on the relevant UOP basis for each
area of interest. The reserves used in these calculations are updated at least annually. Economic and technical
developments are reviewed periodically in determining any rates.
iv Restoration Costs
Costs of site restoration are provided over the life of the facility from when exploration commences and are
included in costs of that area. Currently, the Group does not recognise any restoration liabilities.
g Trade and other Payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year
that are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. They are recognised
initially at fair value and subsequently at amortised cost.
h Trade and other Receivables
Trade and other receivables, including receivables from related parties, are initially recognised at fair value and
subsequently measured at amortised cost less an allowance for uncollectable amounts. Collectability and
impairment are assessed on a regular basis.
An allowance account (provision for impairment of trade receivables) is used when there is objective evidence
that the Group will not be able to collect all amounts due according to the original terms of the receivables. Any
allowance is recognised in a separate account.
SUN RESOURCES ANNUAL REPORT 2014  49
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS