Annual Report 2004 53
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2004
1. Statement of Accounting Policies
The significant accounting policies that have
been adopted in the preparation of this
financial report are:
(a) Basis of preparation
The financial report is a general purpose
financial report prepared in accordance
with applicable Accounting Standards,
Urgent Issues Group Consensus Views,
other authoritative pronouncements of the
Australian Accounting Standards Board and
the Corporations Act 2001 collectively
referred to as Australian Generally
Accepted Accounting Principles
(“Australian GAAP”). The financial report
has been prepared on the basis of
historical costs and, except where stated,
does not take into account changing
money values or fair values of assets.
The accounting policies have been
consistently applied by each entity in the
Santos Group and are consistent with those
adopted in the previous financial year.
(b) Principles of consolidation
The consolidated financial statements
of the Santos Group include the financial
statements of the Company, Santos Ltd
being the parent entity, and its
controlled entities.
The balances and effects of all
transactions between controlled entities
are eliminated in full on consolidation.
Interests in unincorporated joint ventures
are recognised by including in the
financial statements the Santos Group’s
proportion of the joint venture costs,
assets and liabilities.
(c) Non-current assets
With the exception of exploration
expenditure carried forward pertaining to
areas of interest in the exploration stage
(refer note 1(l)), the carrying amounts of
non-current assets are reviewed to
determine whether they are in excess of
their estimated recoverable amount at
balance date. If the carrying amount of a
non-current asset exceeds the estimated
recoverable amount, the asset is written
down to the lower value. The write-down
is expensed in the reporting period in
which it occurs.
In assessing recoverable amounts, the
relevant cash flows have not been
discounted to their present value.
(d) Acquisition of assets
All assets acquired are recorded at their cost
of acquisition, being the fair value of the
consideration provided plus incidental costs
directly attributable to the acquisition.
On acquisition of a controlled entity, the
identifiable net assets acquired are
recorded at their fair values. To the extent
that there is excess purchase consideration
representing goodwill, the goodwill is
amortised using the straight line method
over a period of 20 years. The unamortised
balance of goodwill is reviewed at each
balance date and charged against profit to
the extent that the balance exceeds the
value of expected future benefits.
Assets transferred between entities within
the Santos Group are recognised by the
acquiring entity at fair value.
(e) Foreign currency
Foreign currency transactions are
translated to Australian currency at the
rates of exchange in effect at the dates of
the transactions. Amounts receivable and
payable in foreign currencies at balance
date are translated at the rate of exchange
existing on that date. Exchange
differences relating to amounts receivable
or payable in foreign currencies are
brought to account in the statements of
financial performance in the period in
which they arise.
Monetary assets and liabilities of
integrated foreign operations are
translated at the exchange rate existing at
balance date, while non-monetary items
and revenue and expense items are
translated at exchange rates current when
the transactions occurred. Exchange
differences arising on the translation of
monetary assets and liabilities are brought
to account in the statement of financial
performance.
Assets and liabilities of self-sustaining
foreign operations are translated at the
exchange rate existing at balance date.
Equity items are translated at historical
rates. The statements of financial
performance are translated at a weighted