REG - Independent Oil &Gas - Final Results for the Year Ended 31 December 2016 <Origin Href="QuoteRef">IOG.L</Origin> - Part 2
26/05/2017 07:06
- Part 2: For the preceding part double click ID:nRSZ2982Ga
options are pursued wherever possible
Credit to support field development programmes may not be available at reasonable cost · The Company seeks to build and maintain strong banking relationships and initiates funding discussions at as early a stage a practicable
Corporate Hedging Strategy and Implementation
The primary objective of the Company's hedging policy is to protect projected future cash flows, generated from operations,
against unforeseen changes in short and medium term market conditions.
No hedging instruments were utilised during 2016 in view of the limited exposures carried during the year. As the
Company's capital investment programmes increase, hedging will be carried out in a simple and cost effective manner,
retaining exposure to upside but avoiding any speculative exposure to commodity prices or exchange rates. The application
of the policy is within a range to require exercise of management judgement in the light of market conditions and business
variables.
Details of the Group's financial instruments can be found in note 19 to the financial statements.
Insurance
The Group insures the risks it considers appropriate for the Group's needs and circumstances. However, the Group may elect
not to have insurance for certain risks, due to the high premium costs associated with insuring those risks or for various
other reasons, including an assessment that the risks are remote.
Funding & Liquidity
The Board has reviewed the Group's cash flow forecasts up until December 2018 having regard to its current financial
position and operational objectives. These forecasts indicate that the Group will need additional funding to enable it to
meet its liabilities as they fall due in the next twelve months. The Board is satisfied that the Group will have
sufficient financial resources available to meet its commitments based on the amount of available cash within the Group,
its existing debt facilities that can be drawn down, the likelihood of it being able to secure additional funding from
existing shareholders or new investors and to agree either the rescheduling of certain existing liabilities to creditors or
conversion of such amounts to equity. Additionally, the Group can cut discretionary expenditure and reduce headcount to
reduce financing requirements further. Accordingly, the Board continues to adopt the going concern basis for the
preparation of these financial statements.
However, at the date of approval of these financial statements there are no legally binding agreements in place relating
for either fundraising or the deferral or settlement of existing creditors through equity issues. There can be no
certainty that additional funds will be forthcoming or the creditors will agree to changes in contractual terms and these
conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to
continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the
normal course of business. The financial statements do not include the adjustments that would result if the Group was
unable to continue as a going concern.
Hywel John
Chief Financial Officer
25 May 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
Consolidated Statement of Comprehensive Income
Notes 2016 2015
£000 £000
Other administration expense (279) (833)
(Impairment)/impairment reversal of oil and gas properties 8 (20,013) 6,169
Impairment of creditors 307 -
Exploration costs written off (712) (10)
Net gain on settlement of liabilities 458 -
Foreign exchange loss (299) (65)
_________ _________
Operating (loss)/profit 3 (20,538) 5,261
Finance (expense)/gain 5 (899) 61
_________ _________
(Loss)/profit for the year before taxation (21,437) 5,322
Taxation 6 - -
_________ _________
Loss and total comprehensive (loss)/profit for the year attributable to equity holders of the parent 7 (21,437) 5,322
_________ _________
(Loss)/profit for the year per ordinary share - basic 7 (23.2p) 7.4p
(Loss)/profit for the year per ordinary share - diluted 7 (23.2p) 6.5p
The loss for the year (2015: profit for the year) arose from continuing operations.
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER
Consolidated and Company Statements of Changes in Equity
Share capital Share premium Share-based payment reserve Accumulated losses Total equity
Group £000 £000 £000 £000 £000
At 1 January 2015 692 17,163 1,754 (13,629) 5,980
Profit for the year - - - 5,322 5,322
_____ ________ ________ ________ _______
Total comprehensive income attributable to owners of the parent - - - 5,322 5,322
Share capital issued 30 315 - - 345
Issue costs - (10) - - (10)
Settlement of loan via issue of shares 65 181 - 246
Issue of warrants - - 1,272 - 1,272
Issue of share options - - 321 - 321
_____ ________ ________ ________ _______
At 31 December 2015 787 17,649 3,347 (8,307) 13,476
Loss for the year - - - (21,437) (21,437)
_____ ________ ________ ________ _______
Total comprehensive expense attributable to owners of the parent - - - (21,437) (21,437)
Settle creditors via issue of shares 208 2,181 - - 2,389
Issue of warrants - - 31 - 31
Lapse/exercise of warrants 58 630 (186) 186 688
Issue of share options - - 513 - 513
Lapse/exercise of share options 40 - (820) 820 40
_____ ______ ________ ________ _______
At 31 December 2016 1,093 20,460 2,885 (28,738) (4,300)
_____ ________ _______ ________ _______
Company
At 1 January 2015 692 17,163 1,754 (13,629) 5,980
Profit for the year - - - 5,667 5,667
_____ ________ ________ ________ _______
Total comprehensive income - - - 5,667 5,667
Share capital issued 30 315 - - 345
Issue costs - (10) - - (10)
Settlement of loan via issue of shares 65 181 - - 246
Issue of warrants - - 1,272 - 1,272
Issue of share options - - 321 - 321
_____ ________ ________ ________ _______
At 31 December 2015 787 17,649 3,347 (7,962) 13,821
Profit for the year - - - 1,784 1,784
_____ ________ ________ ________ _______
Total comprehensive income - - - 1,784 1,784
Settle creditors via issue of shares 208 2,181 - - 2,389
Issue of warrants - - 31 - 31
Lapse/exercise of warrants 58 630 (186) 186 688
Issue of share options - - 513 - 513
Lapse/exercise of share options 40 - (820) 820 40
_____ ________ _______ _______ _______
At 31 December 2016 1,093 20,460 2,885 (5,172) 19,266
______ ________ _______ ________ _______
Share capital - Amounts subscribed for share capital at nominal value.
Share premium - Amounts received on the issue of shares, more than the nominal value of the shares.
Share-based payment reserve - Amounts reflecting fair value of options and warrants issued.
Accumulated losses - Cumulative net losses recognised in the Statement of Comprehensive Income net of amounts recognised
directly in equity.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER
Consolidated Statement of Financial Position
Company Number: 07434350
Notes 2016 2015
£000 £000
Non-current assets
Intangible assets: exploration & evaluation 8 5,825 14,818
Intangible assets: other 8 2 -
Property, plant and equipment: development & production 9 7,506 -
Property, plant and equipment: other 9 24 -
_________ _________
13,357 14,818
_________ _________
Current assets
Other receivables and prepayments 13 285 1,493
Cash and cash equivalents 17 247 23
_________ _________
532 1,516
_________ _________
Total assets 13,889 16,334
Current liabilities
Loans 14 (4,076) (1,460)
Trade and other payables 14 (5,782) (1,105)
_________ _________
(9,858) (2,565)
_________ _________
Non-current liabilities
Loans 15 (4,733) -
Trade and other payables 15 - (293)
Provisions 15 (3,598) -
_________ _________
(8,331) (293)
_________ _________
Total liabilities (18,189) (2,858)
_________ _________
NET (LIABILITIES)/ASSETS (4,300) 13,476
_________ _________
Capital and reserves
Called-up equity share capital 16 1,093 787
Share premium account 16 20,460 17,649
Share-based payment reserve 2,885 3,347
Accumulated losses (28,738) (8,307)
_________ _________
(4,300) 13,476
_________ _________
The financial statements were approved and authorised for issue by the Board of Directors on 25 May 2017 and were signed on
its behalf by:
Hywel John
Director
COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER
Company Statement of Financial Position
Company Number: 07434350 Notes 2016 2015
£000 £000
Non-current assets
Intangible assets 8 2 -
Property, plant and equipment 9 24 -
Investments 11 14,514 10,507
Amounts due from subsidiaries 11 10,125 2,908
_________ _________
24,665 13,415
_________ _________
Current assets
Other receivables and prepayments 13 80 1,493
Cash and cash equivalents 17 247 23
_________ _________
327 1,516
_________ _________
Total assets 24,992 14,931
Current liabilities
Trade and other payables 14 (5,726) (1,086)
Non-current liabilities
Trade and other payables 15 - (24)
_________ _________
Total liabilities (5,726) (1,110)
_________ _________
NET ASSETS 19,266 13,821
_________ _________
Capital and reserves
Called-up equity share capital 16 1,093 787
Share premium account 16 20,460 17,649
Share-based payment reserve 2,885 3,347
Accumulated losses (5,172) (7,962)
_________ _________
19,266 13,821
_________ _________
The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented
its own Statement of Comprehensive Income in these financial statements.
The Company profit for the year was £1,784,000 (2015: £5,667,000).
The financial statements were approved and authorised for issue by the Board of Directors on 25 May 2017 and were signed on
its behalf by: -
Hywel John
Director
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER
Consolidated Cash Flow Statement
Notes 2016 2015
£000 £000
(Loss)/profit for the year (21,437) 5,322
Adjustments for:
Depreciation and amortisation 8,9 4 -
Impairment of intangible oil and gas assets 8 20,013 (6,169)
Impairment of creditors (307) -
Gain on settlement of liabilities 3 (73) -
Share based payments 3 206 321
Movement in trade and other receivables (146) (136)
Movement in trade and other payables (853) 187
Interest and financing fees 5 899 123
Impairment/(gain on) of derivative financial assets - (204)
Foreign exchange loss 3 299 65
_________ _________
Net cash used in operating activities (1,395) (491)
Cash flows from investing activities
Purchase of intangible oil and gas assets (3,784) (494)
Purchase of intangible assets - other 8 (3) -
Purchase of PP&E - other 9 (30) -
Acquisitions 10 (2,834) -
_________ _________
Net cash used in investing activities (6,651) (494)
Cash flows from financing activities
Proceeds from issue of ordinary shares 16 728 345
Costs of share issue - (10)
Net proceeds from loans received/(repaid) 7,542 (237)
Amounts received for derivative financial instruments - 512
_________ _________
Net cash generated from financing activities 8,270 610
Increase/(decrease) in cash and cash equivalents in the year 224 (375)
Cash and cash equivalents at start of year 23 398
_________ _________
Cash and cash equivalents at end of year 17 247 23
_________ _________
Company Cash Flow Statement
Notes 2016 2015
£000 £000
Profit for the year 1,784 5,667
Adjustments for:
Depreciation, depletion and amortisation 8,9 4 -
Impairment/(impairment reversal) of investments in and amounts due from subsidiaries 11 (2,085) (6,169)
Gain on settlement of liabilities 3 (73) -
Recharges to subsidiary for management and technical services - (200)
Share-based payment charges 3 206 321
Movement in trade and other receivables 1,413 (136)
Movement in trade and other payables (689) 184
Interest and financing fees - 22
Foreign exchange loss (5) (204)
_________ _________
Net cash used inoperating activities 555 (515)
Cash flows from investing activities
Purchase of intangible assets 8 (3)
Purchase of property, plant and equipment 9 (30) -
Amounts loaned to subsidiaries (7,396) (470)
Amounts paid to acquire subsidiary (1,172)
_________ _________
Net cash used in investing activities (8,601) (470)
Cash flows from financing activities
Proceeds from issue of ordinary shares 728 345
Costs of share issue - (10)
Net proceeds from loans received/(repaid) 7,542 (237)
Amounts received for derivative financial instruments - 512
_________ _________
Net cash generated from financing activities 8,270 610
Increase/(decrease) in cash and cash equivalents in the year 224 (375)
Cash and cash equivalents at start of year 23 398
_________ _________
Cash and cash equivalents at end of year 17 247 23
_________ _________
NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016
Notes Forming Part of the Financial Statements
1 Accounting policies
General information
Independent Oil and Gas plc is a public limited company incorporated and domiciled in England and Wales. The Group's and
Company's financial statements for the year ended 31 December 2016 were authorised for issue by the Board of Directors on
25 May 2017 and the balance sheets were signed on the Board's behalf by the CFO, Hywel John.
Basis of preparation and accounting
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies
have been consistently applied to all years presented, unless otherwise stated. The consolidated financial statements are
presented in GBP Sterling, which is also the functional currency of the Company and its subsidiaries. Amounts are rounded
to the nearest thousand, unless otherwise stated.
These financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the
European Union, International Accounting Standards and Interpretations (collectively 'IFRSs') and with those parts of
Companies Act 2006 applicable to companies preparing their accounts under IFRS.
The preparation of financial statements in compliance with adopted IFRSs requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas
where significant judgments and estimates have been made in preparing the financial statements and their effect are
disclosed in Note 1 on page 41.
The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial
instruments at fair value as disclosed in Note 1 on page 39.
Going concern
The Board has reviewed the Group's cash flow forecasts up until December 2018 having regard to its current financial
position and operational objectives. These forecasts indicate that the Group will need additional funding to enable it to
meet its liabilities as they fall due in the next twelve months. The Board is satisfied that the Group will have
sufficient financial resources available to meet its commitments based on the amount of available cash within the Group,
its existing debt facilities that can be drawn down, the likelihood of it being able to secure additional funding from
existing shareholders or new investors and to agree either the rescheduling of certain existing liabilities to creditors or
conversion of such amounts to equity. Additionally, the Group can cut discretionary expenditure and reduce headcount to
reduce financing requirements further. Accordingly, the Board continue to adopt the going concern basis for the
preparation of these financial statements.
However, at the date of approval of these financial statements there are no legally binding agreements in place relating
for either fundraising or the deferral or settlement of existing creditors through equity issues. There can be no
certainty that additional funds will be forthcoming or the creditors will agree to changes in contractual terms and these
conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to
continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the
normal course of business. The financial statements do not include the adjustments that would result if the Group was
unable to continue as a going concern.
New and revised accounting standards
(i) New and amended standards adopted by the Group:
The accounting policies adopted are consistent with those of the previous financial year. There are no new or amended
financial standards or interpretations adopted during the year that have a significant impact upon the financial
statements.
(ii) The following standards, amendments and interpretations, which are effective for reporting periods beginning after the
date of these financial statements, have not been adopted early: -
Standard Description Effective date
IFRS 15 Revenue from contracts with customers 1 January 2018
IFRS 9 Financial instruments 1 January 2018
IFRS 16 Leases 1 January 2019
IAS 12 Recognition of deferred tax assets for unrealised losses (amendments) 1 January 2017
IAS 7 Disclosure initiative (amendments) 1 January 2017
IFRS 15 Clarifications to IFRS 15 - revenue from contracts with customers 1 January 2018
IFRS 2 Classification and measurement of share-based payment transactions (amendments) 1 January 2018
Annual improvements to IFRSs 2012-2014 cycle 1 January 2017 and
1 January 2018
IFRIC 22 Foreign currency transactions and advance consideration 1 January 2018
The application of the above standards in future financial statements is not expected to have a material impact on the
financial statements.
IFRS9 introduces significant changes to the classification and measurement requirements for financial instruments.
Management are currently assessing the impact of this standard on the consolidated and Company statement of financial
positon.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all
three of the following elements are present: power over the investee, exposure to variable returns from the investee, and
the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these elements of control. De-facto control exists in
situations where the Company has the practical ability to direct the relevant activities of the investee without holding
most its voting rights. In determining whether de-facto control exists the Company considers all relevant facts and
circumstances, including:
- the size of the Company's voting rights relative to both the size and dispersion of other parties who hold voting
rights;
- substantive potential voting rights held by the Company and by other parties;
- other contractual arrangements; and
- historic patterns in voting attendance.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single
entity. Inter-company transactions and balances between Group companies are therefore eliminated in full. The financial
statements of subsidiaries are included in the Group's financial statements from the date that control commences until the
date that control ceases. During the year, the Company acquired Oyster Petroleum Limited and the results of this Group
subsidiary are included from the date that control commenced, being 28 October 2016.
Joint arrangements
Joint arrangements are arrangements in which the Group shares joint control with one or more parties. Joint control is the
contractually agreed sharing of control of an arrangement, and exists only when decisions about the activities that
significantly affect the arrangement's returns require the unanimous consent of the parties sharing control.
Joint arrangements are classified as either joint operations or joint ventures based on the rights and obligations of the
parties to the arrangement. In joint operations, the parties have rights to the assets and obligations for the liabilities
relating to the arrangement, whereas in joint ventures, the parties have rights to the net assets of the arrangement.
Joint arrangements that are not structured through a separate vehicle are always joint operations. Joint arrangements that
are structured through a separate vehicle may be either joint operations or joint ventures depending on the substance of
the arrangement. In these cases, consideration is given to the legal form of the separate vehicle, the terms of the
contractual arrangement and, when relevant, other facts and circumstances. When the activities of an arrangement are
primarily designed for the provision of output to the parties, and the parties are substantially the only source of cash
flows contributing to the continuity of the operations of the arrangement, this indicates the parties to the arrangements
have rights to the assets and obligations for the liabilities.
The Group accounts for all its joint arrangements as joint operations by recognising the assets, liabilities, and expenses
for which it has rights or obligations, including its share of such items held or incurred jointly.
Business Combinations
The Company uses the acquisition method of accounting to account for business combinations. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the
acquisition date.
Business combinations requires the excess (or shortfall) of the purchase price of acquisitions over the net book value of
assets acquired to be allocated to the assets and liabilities of the acquired entity. The Company makes judgements and
estimates in relation to the fair value allocation of the purchase price.
The fair value exercise is performed at the date of acquisition. Owing to the nature of fair value assessments in the oil
and gas industry, the purchase price allocation exercise and acquisition-date fair value determinations require subjective
judgements based on a wide range of complex variables at a point in time. Management uses all available information to
make these fair value determinations.
In determining fair value for the acquisition, the Company has utilised valuation methodologies including discounted cash
flow analysis. The assumptions made in performing these valuations include assumptions as to discount rates, foreign
exchange rates, commodity prices, the timing of developments, capital costs and future operating costs. Any significant
change in key assumptions may cause the acquisition accounting to be revised. Acquisition related expenses may be included
in the underlying cost of investment.
Revenue
Sales of oil and gas are recognised, net of any sales taxes, when risks and rewards of ownership have passed to the
customer, typically, this is at the point of physical lifting. Royalties and tariff income, if applicable, are recognised
as earned on an entitlement basis.
Oil and gas exploration, development and producing assets
The Group adopts the following accounting policies for oil and gas asset expenditure, based on the stage of development of
the assets:
1) Pre-Licence
Expenditure incurred prior to the acquisition and/or award of a licence interest is expensed to the Statement of
Comprehensive Income as exploration costs written off.
2) Exploration and evaluation ('E&E')
Capitalisation
Costs incurred after rights to explore have been obtained, such as geological and geophysical surveys, drilling and
commercial appraisal costs, and other directly attributable costs of exploration and appraisal including technical and
administrative costs, are capitalised as intangible exploration and evaluation ('E&E') assets. The assessment of what
constitutes an individual E&E asset is based on technical criteria but essentially either a single licence area or
contiguous licence areas with consistent geological features are designated as individual E&E assets. Costs relating to
the exploration and evaluation of oil and gas interests are carried forward until the existence, or otherwise, of
commercial reserves have been determined.
E&E costs are not amortised prior to the conclusion of appraisal activities. Once active exploration is completed the
asset is assessed for impairment. If commercial reserves are discovered then the carrying value of the E&E asset is
reclassified as a development and production ('D&P') asset, within property, plant and equipment ('PPE'), following
development sanction by the Board, but only after the carrying value is assessed for impairment at point of transfer and,
where appropriate, its carrying value adjusted. Following development sanction by the Board a Field Development Plan
('FDP') may be submitted. If it is subsequently assessed that commercial reserves have not been discovered, the E&E asset
is written off to the Statement of Comprehensive Income. The Group's definition of commercial reserves for such purpose is
proven and probable reserves on an entitlement basis. On commencement of production, the D&P asset is amortised on a
unit-of-production ('UOP') basis over the life of the commercial reserves of the asset to which they relate.
Intangible E&E assets that relate to E&E activities that are not yet determined to have resulted in the discovery of
commercial reserves remain capitalised as intangible E&E assets at cost, subject to impairment assessments as set out
below.
Oil and gas interests (continued)
Impairment
The Group's oil and gas assets are analysed into cash generating units ('CGU') for impairment reporting purposes, with E&E
asset impairment testing being performed at an individual asset level. E&E assets are reviewed for impairment when
circumstances arise which indicate that the carrying value of an E&E asset exceeds the recoverable amount. The recoverable
amount of the individual asset is determined as the higher of its fair value less costs to sell and value in use.
Impairment losses resulting from an impairment review are separately recognised and written off to the Statement of
Comprehensive Income.
Impaired assets are reviewed annually to determine whether any substantial change to their fair value amounts previously
impaired would require reversal.
A previously recognised impairment loss is reversed if the recoverable amount increases because of a change in the
estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have
been determined (net of depletion or amortisation) had no impairment loss been recognised in prior periods. Reversal of
impairments and impairment charges are credited/(charged) to a separate line item within the Statement of Comprehensive
Income.
Development and production ('D&P')
Capitalisation
Costs of bringing a field into production, including the cost of facilities, wells and sub-sea equipment together with E&E
assets reclassified in accordance with the above policy, are capitalised as a D&P asset within property, plant and
equipment. Normally each individual field development will form an individual D&P asset but there may be cases, such as
phased developments, or multiple fields around a single production facility when fields are grouped together to form a
single D&P asset.
Depreciation and depletion
All costs relating to a development are accumulated and not depreciated until the commencement of production. Depreciation
is calculated on a UOP basis based on the proven and probable reserves of the asset. Any re-assessment of reserves affects
the depreciation rate prospectively. Significant items of plant and equipment will normally be fully depreciated over the
life of the field; however, these items are assessed to consider if their useful lives differ from the expected life of the
D&P asset and should this occur a different depreciation rate may be charged. The key areas of estimation regarding
depreciation and the associated unit of production calculation for oil and gas assets are recoverable reserves and future
capital expenditures.
Impairment
A review is carried out for any indication that the carrying value of the Group's D&P assets may be impaired. The
impairment review of D&P assets is carried out on an annual, asset by asset basis and involves comparing the carrying value
with the recoverable value of an asset. The recoverable amount of an asset is determined as the higher of its fair value
less costs to sell and value in use. The value in use is determined from estimated future net cash flows, being the
present value of the future cash flows expected to be derived from production of commercial reserves. Impairment resulting
from the impairment testing is charged to a separate line item within the Statement of Comprehensive Income.
The pre-tax future cash flows are adjusted for risks specific to the CGU and are discounted using a pre-tax discount rate.
The discount rate is derived from the Group's post-tax weighted average cost of capital and is adjusted where applicable to
consider any specific risks relating to the country where the CGU is located, although other rates may be used if
appropriate to the specific circumstances. The discount rates applied in assessments of impairment are reassessed each
year. The Company uses a risk adjusted discount rate of 10%, unless otherwise stated.
The CGU basis is generally the field, however, oil and gas assets, including infrastructure assets may be accounted for on
an aggregated basis where such assets are economically inter-dependent.
Assets other than oil and gas interests
Assets other than oil and gas interests are stated at cost, less accumulated depreciation and any provision for impairment.
Depreciation is provided at rates estimated to write off the cost, less estimated residual value, of each asset over its
expected useful life as follows: -
Computer and office equipment: 33% straight line, with one full year's depreciation in year of acquisition; and Tenants
improvements: 20% straight line, with one full year's depreciation in year of acquisition.
Decommissioning
Provisions for decommissioning costs are recognised in accordance with IAS 37 Provisions, Contingent Liabilities and
Contingent Assets. Provisions are recorded at the present value of the expenditures expected to be required to settle the
Group's future obligations.
Provisions are reviewed at each reporting date to reflect the current best estimate of the cost at present value. Any
change in the date on which provisions fall due will change the present value of the provision. These changes are treated
as an administration expense. The unwinding of the discount is reflected as a finance expense.
In the case of a D&P asset, a decommissioning asset is also established, since the future cost of decommissioning is
regarded as part of the total investment to gain access to future economic benefits, and included as part of the cost of
the relevant development and production asset. Depletion on this asset is calculated under the UOP method based on
commercial reserves.
Disposals
Net proceeds from any disposal of an E&E asset are initially credited against the previously capitalised costs of that
asset and any surplus proceeds are credited to the Statement of Comprehensive Income. Net proceeds from any disposal of
D&P assets are credited against the previously capitalised cost of that asset and any surplus proceeds are credited to the
Statement of Comprehensive Income.
Foreign currencies
The functional and presentation currency of the Group and the Company is GBP Sterling.
The Group translates foreign currency transactions into the functional currency at the rate of exchange prevailing at the
transaction date. Monetary assets and liabilities denominated in foreign currency are translated into the functional
currency at the rate of exchange prevailing at the reporting date. Exchange differences arising are taken to the
Consolidated Statement of Comprehensive Income except for those incurred on borrowings specifically allocable to
development projects, which are capitalised as part of the cost of the asset.
Taxation
Current Tax
Tax is payable based upon taxable profit for the year. Taxable profit differs from net profit as reported in the Statement
of Comprehensive Income because it excludes items of income or expense that are taxable or deductible on other years and it
further excludes items that are never taxable or deductible. Any Group liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the reporting date.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised.
Taxation (continued)
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interests in Joint Ventures, except where the Group can control the reversal of the temporary differences
and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to
items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax
assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle
its current tax assets and liabilities on a net basis.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax
balances are not discounted.
Investments & Loans (Company)
Non-current investments in subsidiary undertakings are shown in the Company's Statement of Financial Position at cost less
any provision for permanent diminution of value.
Loans to subsidiary undertakings are stated at amortised cost. Provisions are made for any impairment in value.
Operating Leases
Rentals under operating leases are charged on a straight-line basis over the lease term.
Financial instruments
Cash and cash equivalents
Cash includes cash on hand and demand deposits with any bank or other financial institution. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known amounts of cash which are subject to an
insignificant risk of changes in value.
Derivative financial instruments
Derivative financial instruments are held at fair value with any changes in fair value arising charged to profit or loss.
Trade payables
Trade payables and other short-term monetary liabilities are held at amortised cost which, in view of their short-term
nature, is not materially different from their undiscounted cost.
Loans and borrowings
Loans and borrowings are initially recognised at fair value; less any issue costs. They are subsequently held at amortised
cost using the effective interest method.
Financial liabilities
Financial liabilities are classified per the substance of the contractual arrangements entered.
Convertible loan notes
Upon issue of a convertible loan note, the proceeds are split between the liability component and the equity component at
the date of issue, as necessary. The fair value of the equity component is included in equity and is not re-measured
whilst the liability component is included in liabilities, which is increased by the effective rate of interest charged in
each period. Upon conversion, the face value of the loan notes is transferred to the share capital and share premium
accounts. Interest is expensed to the Statement of Comprehensive Income.
Equity
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs, allocated
between share capital and share premium.
Share issue expenses and share premium account
The costs of issuing new share capital are written off against the share premium account arising out of the proceeds of the
new issue.
Share-based payments
The Company and Group have applied the requirements of IFRS 2 Share-based payments. The Company issues equity share-based
payments to certain employees, to incentivise and reward successful corporate performance. The fair value of these awards
has been determined at the date of the grant of the award allowing for the effect of any market-based performance
conditions. This fair value, adjusted by the estimate of the number of awards that will eventually vest because of
non-market conditions, is expensed uniformly over the vesting period and is charged to the Statement of Comprehensive
Income, together with an increase in equity reserves, over a similar period. The fair values are calculated using an
option pricing model with suitable
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