Icon Energy Annual Report 2019

Independent Auditor's Report continued 40 Key Audit Matter How we addressed the Key Audit Matter Impairment of Exploration and Evaluation Expenditure - Note 8 Exploration and evaluation (E&E) activity has a high level of inherent risk and there is the risk that projects may fail, requiring the impairment or write-off of the related capitalised costs when the relevant recognition criteria in AASB 6 Exploration for and Evaluation of Mineral Resources and Icon’s accounting policy are not met. There is a risk that certain capitalised E&E costs are either not impaired or written off promptly at the appropriate time, in line with information from, and decisions about E&E activities, and the impairment requirements of AASB 6. Through our detailed risk assessment, which is based on our analysis of the portfolio of E&E assets held by the Group, making reference to the Group’s own analysis of the same assets, we identified a significant risk in relation to tenements ATP 594 and ATP 855. In accordance with AASB 6, the carrying value of tenements ATP 594 and ATP 855 were required to be assessed for impairment in accordance with AASB 136 Impairment of Assets , to determine whether the carrying value of the asset exceeds the recoverable amount. As a result, the carrying value of tenement ATP 594 was impaired to $nil, and ATP 855 was impaired to $5,900,000, resulting in an impairment expense of $25,909,794. This matter is considered a key audit matter due to: • The significance of the impairment expense to the financial statements of the Group; • The specialised nature of the E&E assets which requires judgement by us to assess the appropriateness of the valuation methodologies and inputs when applying the requirements of AASB 136. The Group has appointed an external valuer to assist in this process; and • The low volume of comparable market transactions for similar E&E assets to corroborate valuation inputs and assumptions. • Our procedures included, but were not limited to: • conducting discussions with management regarding the criteria used in their impairment assessment and ensuring that this was in line with AASB 6 Exploration for and Evaluation of Mineral Resources; • utilising our valuation expert to assist us in assessing the competence, capabilities and objectivity of the expert engaged by management to perform this assessment • utilising our valuation expert to assist us in evaluating the appropriateness of the valuation methodology selected by the valuer to determine the value of the tenement ATP 855 E&E assets to accepted market practices, our industry experience and the requirements of AASB 136 Impairment of Assets • reviewing the appropriateness of the related disclosures within the financial statements; and • obtaining evidence that the Group continue to have valid rights to explore in the area by performing an independent search and corroborating to government registry. We also considered the Group’s compliance with the contractual obligations under the agreements. Valuation of Restoration Provision – Note 9 36 Icon Energy Annual Report 2019