Icon Energy Annual Report 2019

41 Key Audit Matter How we addressed the Key Audit Matter As at 30 June 2019, the Group had a provision of $5,557,429 relating to the estimated cost of decommissioning, restoration and rehabilitation of areas disturbed during exploration activities. This was a key audit matter because the calculations of the provision were complex and based on the estimates of future costs of the required work, including volume and unit rates, the area of disturbance, the timing of future cash flows and the discount rate. Our procedures included, but were not limited to: • Evaluating and challenging the reasonableness of key assumptions used in the calculations of the provision; • Checking the mathematical accuracy of the calculations; • Assessing the competency and objectivity of the expert used by management and evaluating the appropriateness and adequacy of the restoration cost estimates; • Considering provision movements during the year to ensure they were consistent with our understanding of the Group’s activities during the year; • Assessing the adequacy of the Group’s disclosure in the financial statements in respect of the restoration provision. Valuation of Inventory – Note 6 Inventory is measured at the lower of cost or net realisable value. Inventory held by the Group relates to drilling consumables in respect to ATP 594 and ATP 855. This was a key audit matter because, the high level of inherent risk relating to exploration and evaluation (E&E) activity may cause significant changes in the carrying value of those E& E assets. Consequently, the book value of related inventory consumables may be lower than its net realisable value. The conditions and assessment undertaken in relation to inventory write down are disclosed in the Group’s accounting policy Note 24(q) and Note 6 in the financial report As a result of the carrying value of ATP 594 being impaired to $nil and ATP 855 being impaired to $5,900,000, related inventory consumables were written down by $2,305,425 to their recoverable amount of $516,820. Our procedures included, but were not limited to: • reviewing the consistency of the Groups accounting policy; • verifying the Group’s calculation of net realisable value; • assessing the adequacy of support for net realisable value amounts used; and • Assessing the adequacy of the Group’s disclosure in the financial statements in respect of the inventory write down. 37 Icon Energy Annual Report 2019