Icon Energy Annual Report 2019

Notes to the Consolidated Financial Statements for the year ended 30 June 2019 ICON ENERGY LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2019 (q) Inventories (r) Leases Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost comprises direct materials and delivery costs, direct labour, import duties and other taxes and an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Inventories consist of drilling consumables predominantly chemicals and proppant. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 24 - STATEMENT OF ACCOUNTING POLICIES (Continued) A sale and leaseback transaction is one where the Group sells an asset and immediately reacquires the use of the asset by entering into a lease with the buyer. For sale and finance leasebacks, any profit from the sale is deferred and amortised over the lease term. For sale and operating leasebacks, generally the assets are sold at fair value, and accordingly the profit or loss from the sale is recognised immediately in profit or loss. Lease payments for operating leases, where substantially all risks and benefits remain with the lessor, are recognised as an expense on a straight-line basis over the lease term. Leases of plant and equipment, under which the Group assume substantially all the risks and benefits of ownership, but not the legal ownership, are classified as finance leases. Other leases are classified as operating leases. 67 63 Icon Energy Annual Report 2019