NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
 
NOT E 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued  
 
Impairment of Non-Financial Assets 
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead 
to impairment of assets. Where an indicator of impairment exists, the recoverable amount of the cash -generating 
unit to which the assets belong is then estimated based on the present value of future discounted cash flows . For 
development and production assets , the expected future cash flow estimation is always based on a number of 
factors, variables and assumptions, the most important of wh ich are estimates of reserves, future production 
profiles, commodity prices and costs.   In most cases, the present value of future cash flows is most sensitive to  
estimates of future oil price and discount rates. A change in the modeled assumptions in isol ation could materially 
change the recoverable amount. However, due to the interrelated nature of the assumptions, movements in any 
one variable can have an indirect impact on others and individual variables rarely change in isolation. Additional, 
management can be expected to respond to some movements, to mitigate downsides and take advantage of 
upsides, as circumstances allow. Consequently, it is impracticable to estimate the indirect impact that a change in 
one assumption has on other variables and theref ore, on the extent of impairments under different sets of 
assumptions in subsequent reporting periods.  In the event that future circumstances vary from these assumptions, 
the recoverable amount of the Group’s development and production assets could change  materially and result in 
impairment losses or the reversal of previous impairment losses. 
 
Exploration and Evaluation 
The Company’s policy for exploration and evaluation is discussed in Note 1 (b). The application of this policy requires 
the Company to ma ke certain estimates and assumptions as to future events and circumstances , particularly in 
relation to the assessment of whether economic quantities of reserves have been found . Any such estimates and 
assumptions may change as new information becomes avai lable. If, after having capitalised exploration and 
evaluation expenditure, management concludes that the capitalised expenditure is unlikely to be recovered by 
future sale or exploitation, then the relevant capitalised amount will be written off through t he consolidated 
statement of profit or loss and other comprehensive income. 
 
Restoration Provision 
A provision for rehabilitation and restoration is provided by the Group to meet all future obligations for the 
restoration and rehabilitation of oil and gas producing areas when oil and gas reserves are exhausted and the oil and 
gas fields are abandoned. Restoration liabilities are discounted to present value and capitalised as a component part 
of capitalised development expenditure. The capitalised costs are amortised over the units of production and the 
provision is revised at each balance sheet date thro ugh the consolidated statement of profit or loss and other 
comprehensive income as the discounting of the liability unwinds.   
 
In most instances, the removal of the assets associated with these oil and gas producing areas will occur many years 
in the future.  The estimate of future removal costs therefore requires management to make significant judgements 
regarding removal date or well lives, the extent of restoration activities required, discount and inflation rates.  
 
Units of Production Depreciation 
Development and production assets  are depreciated using the units of production method over economically 
recoverable reserves representing total proved and probable developed reserves.  This results in a depreciation or 
amortisation charge proportional to the depletion of the anticipated remaining production from the area of interest. 
  
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