Icon Energy Limited Annual Report 2023

Icon Energy Annual Report 2023 61 ICON ENERGY LIMITED AND ITS CONTROLLED ENTITIES FOR THE YEAR ENDED 30 JUNE 2023 (g) Exploration, Evaluation and Development Expenditure (h) Loans and Borrowings (i) Trade Creditors (j) Cash and Cash Equivalents (k) Provisions (k) Provisions (Continued) Borrowings are classified as current liabilities unless the Consolidated Entity has an unconditional right to defer settlement of the libility for at lease 12 months after the reporting date. Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of 3 months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward if the rights to tenure of the area of interest are current and to the extent that they are expected to be recouped through the successful development of an area or sale of the respective area of interest or where activities in the area have not yet reached a stage which permits a reasonable assessment of the existence of economically recoverable reserves. NOTE 24 - STATEMENT OF ACCOUNTING POLICIES (Continued) Provisions for make good obligations are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Restoration provision A liability is recorded for the goods and services received prior to balance date, whether invoiced to the Group or not that remain unpaid. Trade creditors are normally settled within 30 days. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash-generating unit shall not be larger than the area of interest. Loans and borrowings are initially recognised at fair value, net of transaction costs incurred. This is measured as the present value of all future cash flows, discounted using a current borrowing rate. Any difference between fair value at initial recognition and the trasaction cost is recognised as a gain or loss in the Stetement of Consolidated Income or Loss. Borrowings are subsequently measured at amortised cost. The increase in the borrowing due to the passage of time is recognised as finance cost in profit or loss. Changes in the estimates of restoration costs are dealt with prospectively by recognising an adjustment to the restoration liability and a corresponding adjustment to the asset to which it relates. If any reduction in the restoration liability exceeds the carrying amount of that asset, any excess is recognised in profit or loss. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. Provisions are measured at the present value of directors' best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as finance cost in profit or loss. For the purpose of the Consolidated Statements of Cash Flows, cash and cash equivalents include cash and cash equivalents as above, net of outstanding bank overdrafts. The Group recognises a restoration provision to meet all future obligations for the restoration of petroleum assets when the petroleum assets are abandoned. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. The liability for restoration is discounted to present value and capitalised as part of the exploration expenditure of an area of interest and revised at the end of each reporting period through profit or loss. The periodic unwinding of the discount is recognised in profit or loss as part of finance costs. Capitalised costs in relation to an abandoned area are written off in full in profit or loss in the year in which the decision to abandon the area is made.