NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
NOT E 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued  
 
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value 
of the leased property or the present value of the minimum lease payments, including any guaranteed residual 
values. Lease payments are allocated between the reduction of the lease liability and  the lease interest expense for 
the period.  
Assets under financing leases are depreciated on a straight-line basis over the shorter of their estimated useful lives 
or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with 
the lessor, are charged as expenses in the periods in which they are incurred. 
 
Lease incentives under operating leases are recognised as a liability and amortised on a straight -line basis over the 
life of the lease term. 
 
e) Financial Instruments 
  
Recognition and Initial Measurement 
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes 
a party to the contractual provisions of the instrument. T rade date accounting is adopted for financial assets that 
are delivered within timeframes established by marketplace convention.  
 
Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified 
at fair value through profit or loss. Transaction costs related to ins truments classified at fair value through profit or 
loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out belo w. 
 
Derivative Financial Instruments 
The Group uses derivative financial instruments to economically hedge its exposure to changes in commodity prices 
arising in the normal course of business. The principal derivatives that may be used are commodity crude oil price 
swap, option and costless collar contracts and interest rate swaps. Their use is subject to policies and procedures as 
approved by the Board of Directors. The Group does not trade in derivative financial instruments for speculative 
purposes.  
 
Derivative financial instruments are re cognised at fair value. Subsequent to initial recognition, derivat ive financial 
instruments are recognised at fair value.  The fair value of these derivative financial instruments is the estimated 
amount that the Group would receive or pay to terminate the contracts at the reporting date, taking into account 
current market prices and the current creditworthiness of the contract counterparties.  The derivatives are valued 
on a mark to market valuation and the gain or loss on re -measurement to fair value is r ecognised through the 
statement of profit or loss and other comprehensive income. 
 
i) Financial assets at fair value through profit or loss 
Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of 
short term profit taking, when they are derivatives not held for hedging purposes, or designated as such to avoid an 
accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key 
management personnel on a fair value basis in accordance with a documented risk management or investment 
strategy.  Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in 
the period in which they arise. 
  
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