REG - Jupiter Energy - Final Results <Origin Href="QuoteRef">JPR.AX</Origin> - Part 3
29/10/2014 13:45
- Part 3: For the preceding part double click ID:nRSW3515Sb
The nature of the operations and principal activities of the Group are described in
the Directors Report on pages 2 to 11 of this report.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial report is a general purpose financial report, which has been prepared
in accordance with the requirements of the Corporations Act 2001, Australian
Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board. The financial report has also been prepared on a
historical cost basis except for certain financial instruments measured at fair
value. The financial report is presented in Australian dollars. The amounts
contained within this report have been rounded to nearest $1 (where rounding is
applicable) under the option available to the Company under ASIC Class Order 98/100.
Going Concern The consolidated financial statements have been prepared on a going
concern basis with the Directors of the opinion that the Group can meet its
obligations as and when they fall due. At 30 June 2014 the Group has a net working
capital surplus of $0.74 million. The Group is reliant on planned production
forecasts being achieved during 2014 / 2015 and being able to raise additional
capital. The Directors are currently reviewing a range of financing options which may
include the further issue of new equity, reserve based debt, convertible debt or a
combination of these and other funding instruments. While financing is expected to
be finalised within the short term to allow the Group to further the development of
the East Akkar field during 2014 - 2015 there is no certainty that financing will be
completed as anticipated. The Directors are confident of being able to raise the
required capital, but note that financing has not been secured at the date of this
report. Should the Group not achieve the matters set out above, there is uncertainty
whether the Group would continue as a going concern and therefore whether it would
realise its assets and extinguish its liabilities in the normal course of business
and at the amounts stated in the financial report. The financial report does not
include adjustments relating to the recoverability or classification of the recorded
assets amounts nor to the amounts or classification of liabilities that might be
necessary should the Group not be able to continue as a going concern. The
consolidated financial statements have been prepared on a going concern basis with
the Directors of the opinion that the Group can meet its obligations as and when they
fall due.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
(b) Statement of compliance
The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
From 1 July 2013, the Group has adopted the following Standards and Interpretations, mandatory for annual periods beginning on 1 July 2013. Adoption of these standards and interpretations did not have any significant effect on the financial position or performance of the Group:
AASB 10 Consolidated Financial Statements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
AASB 119 Employee Benefits
AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective
have not been adopted by the Group for the annual reporting period ending 30 June 2014. These are outlined in the following
table.
AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation 1 January 2014 The group has not yet determined the financial impact of the change. 1 July 2014
to address inconsistencies identified in applying some of the offsetting criteria of
AASB 132, including clarifying the meaning of "currently has a legally enforceable
right of set-off" and that some gross settlement systems may be considered equivalent
to net settlement.
AASB 9 Financial Instruments AASB 9 includes requirements for the classification and measurement of financial 1 January 2018 The group has not yet determined the financial impact of the change. 1 July 2018
assets. It was further amended by AASB 2010-7 to reflect amendments to the accounting
for financial liabilities.These requirements improve and simplify the approach for
classification and measurement of financial assets compared with the requirements of
AASB 139. The main changes are described below.a. Financial assets that are debt
instruments will be classified based on (1) the objective of the entity's business
model for managing the financial assets; (2) the characteristics of the contractual
cash flows.b. Allows an irrevocable election on initial recognition to present
gains and losses on investments in equity instruments that are not held for trading
in other comprehensive income. Dividends in respect of these investments that are a
return on investment can be recognised in profit or loss and there is no impairment
or recycling on disposal of the instrument.c. Financial assets can be designated
and measured at fair value through profit or loss at initial recognition if doing so
eliminates or significantly reduces a measurement or recognition inconsistency that
would arise from measuring assets or liabilities, or recognising the gains and losses
on them, on different bases.d. Where the fair value option is used for financial
liabilities the change in fair value is to be accounted for as follows:► The
change attributable to changes in credit risk are presented in other comprehensive
income (OCI)► The remaining change is presented in profit or lossIf this
approach creates or enlarges an accounting mismatch in the profit or loss, the effect
of the changes in credit risk are also presented in profit or loss.Consequential
amendments were also made to other standards as a result of AASB 9, introduced by
AASB 2009-11 and superseded by AASB 2010-7 and 2010-10.The AASB issued a revised
version of AASB 9 (AASB 2013-9) during December 2013. The revised standard
incorporates three primary changes:1. New hedge accounting requirements including
changes to hedge effectiveness testing, treatment of hedging costs, risk components
that can be hedged and disclosures2. Entities may elect to apply only the
accounting for gains and losses from own credit risk without applying the other
requirements of AASB 9 at the same time 3. In February 2014, the IASB tentatively
decided that the mandatory effective date for AASB 9 will be 1 January 2018
AASB 2013-3 Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of Assets. The 1 January 2014 The group has not yet determined the financial impact of the change. 1 July 2014
amendments include the requirement to disclose additional information about the fair
value measurement when the recoverable amount of impaired assets is based on fair
value less costs of disposal.
AASB 2013-4 Amendments to Australian Accounting Standards - Novation of Derivatives and Continuation of Hedge Accounting [AASB 139] AASB 2013-4 amends AASB 139 to permit the continuation of hedge accounting in 1 January 2014 The group has not yet determined the financial impact of the change. 1 July 2014
specified circumstances where a derivative, which has been designated as a hedging
instrument, is novated from one counterparty to a central counterparty as a
consequence of laws or regulations.
AASB 2013-5 Amendments to Australian Accounting Standards - Investment Entities These amendments define an investment entity and require that, with limited 1 January 2014 The group has not yet determined the financial impact of the change. 1 July 2014
[AASB 1, AASB 3, AASB 7, AASB 10, AASB 12, AASB 107, AASB 112, AASB 124, AASB 127, AASB 132, AASB 134 & AASB 139] exceptions, an investment entity does not consolidate its subsidiaries or apply AASB
3 Business Combinations when it obtains control of another entity. These amendments
require an investment entity to measure unconsolidated subsidiaries at fair value
through profit or loss in its consolidated and separate financial statements. These
amendments also introduce new disclosure requirements for investment entities to AASB
12 and AASB 127.
AASB 2013-7 Amendments to AASB 1038 arising from AASB 10 in relation to Consolidation and Interests of Policyholders [AASB 1038] AASB 2013-7 removes the specific requirements in relation to consolidation from AASB 1 January 2014 The group has not yet determined the financial impact of the change. 1 July 2014
1038, which leaves AASB 10 as the sole source for consolidation requirements
applicable to life insurer entities.
AASB 1031 Materiality The revised AASB 1031 is an interim standard that cross-references to other Standards 1 January 2014 The group has not yet determined the financial impact of the change. 1 July 2014
and the Framework (issued December 2013) that contain guidance on materiality. AASB
1031 will be withdrawn when references to AASB 1031 in all Standards and
Interpretations have been removed.
AASB 2013-9 Amendments to Australian Accounting Standards - Conceptual Framework, Materiality and Financial Instruments The Standard contains three main parts and makes amendments to a number Standards and 1 January 2014 The group has not yet determined the financial impact of the change. 1 July 2014
Interpretations. Part A of AASB 2013-9 makes consequential amendments arising from
the issuance of AASB CF 2013-1. Part B makes amendments to particular Australian
Accounting Standards to delete references to AASB 1031 and also makes minor editorial
amendments to various other standards.Part C makes amendments to a number of
Australian Accounting Standards, including incorporating Chapter 6 Hedge Accounting
into AASB 9 Financial Instruments.
1 January 2014
The group has not yet determined the financial impact of the change.
1 July 2014
AASB 2013-9
Amendments to Australian Accounting Standards - Conceptual Framework, Materiality and Financial Instruments
The Standard contains three main parts and makes amendments to a number Standards and Interpretations. Part A of AASB
2013-9 makes consequential amendments arising from the issuance of AASB CF 2013-1. Part B makes amendments to particular
Australian Accounting Standards to delete references to AASB 1031 and also makes minor editorial amendments to various
other standards.Part C makes amendments to a number of Australian Accounting Standards, including incorporating Chapter 6
Hedge Accounting
into AASB 9
Financial Instruments
.
1 January 2014
The group has not yet determined the financial impact of the change.
1 July 2014
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Jupiter Energy Limited and its subsidiaries (as outlined in Note 28). Interests in associates are equity accounted (see accounting policy Note 2(e)). Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:§ Power
over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);§ Exposure, or rights, to variable returns from its involvement with the investee; and§ The ability to use its power over the
investee to affect its returns.When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:§ The contractual
arrangement with the other vote holders of the investee;§ Rights arising from other contractual arrangements; and§ The Group's voting rights and potential voting rights.The Group re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.Profit or loss and each
component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments
are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated on consolidation.A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:§ De-recognises the assets
(including goodwill) and liabilities of the subsidiary;§ De-recognises the carrying amount of any non-controlling interests;§ De-recognises the cumulative translation differences recorded in equity;§ Recognises the fair value of the consideration
received;§ Recognises the fair value of any investment retained;§ Recognises any surplus or deficit in profit or loss; andReclassifies the parent's share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as
would be required if the Group had directly disposed of the related assets or liabilities.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
certain assets and liabilities within the next annual reporting period are:
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black and Scholes model, trinomial and Monte
Carlo using the assumptions detailed in note 21.
Exploration and evaluation
The Group's accounting policy for exploration and evaluation is set out in note 2(f). The application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances, in particular the
assessment of whether economic quantities of reserves may be found. Any such, estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under the Group's policy, management concludes that the
Group is unlikely to recover the expenditure by future exploitation or sale, then the relevant capitalised amount will be written off to the income statement.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Provision for restoration
Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs
include the dismantling and removal of plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the permits.
Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the
costs are accounted on a prospective basis. 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.
Units of production depreciation of oil and gas properties
Oil and gas properties are depreciated using the units of production (UOP) method over total proved and probable developed hydrocarbon reserves. This results in a
depreciation/amortisation charge proportional to the depletion of the anticipated remaining production from the field. Each items' life, which is assessed annually, has
regard to both its physical life limitations and to present assessments of economically recoverable reserves of the field at which the asset is located. These
calculations require the use of estimates and assumptions, including the amount of recoverable reserves. The calculation of the UOP rate of depreciation could be impacted
to the extent that actual production in the future is different from current forecast production based on total proved reserves. Changes to proved reserves could arise
due to changes in the factors or assumptions used in estimating reserves, including: · The effect on proved reserves of differences between actual commodity prices
and commodity price assumptions; or· Unforeseen operational issues. Changes are accounted for prospectively.
Recoverability of oil and gas properties
The Group assesses each asset or cash generating unit (CGU) (excluding goodwill, which is assessed annually regardless of indicators) every reporting period to determine
whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the
higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term oil prices (considering
current and historical prices, price trends and related factors), discount rates, operating costs, future capital requirements, decommissioning costs, exploration
potential, reserves operating performance (which includes production and sales volumes). These estimates and assumptions are subject to risk and uncertainty. Therefore,
there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of assets and/or CGUs.
Production start date
The group assesses each well to determine when the well moves into the production stage. This is when the well is substantially completed and ready for intended use. The
group considers various criteria in determining the production start date, including but not limited to, results of well testing, the ability of the well to sustain
ongoing production, installation of the relevant well infrastructure and receiving the relevant regulatory approvals. When the well moves into the production stage the
capitalisation of certain development costs ceases and costs incurred are expensed as a production cost. It also at this point when that the well commences depreciation.
Any proceeds received from oil sales prior to the production start date as part of any well testing, are capitalised to the asset.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Production start date (continued)
Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. Fair
value for oil and gas assets is generally determined as the present value of estimated future cash flows arising from the continued use of the assets, which includes
estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Cash flows are
discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Management has assessed its CGUs as being an individual field, which is the lowest level for which cash inflows are largely independent of those of other assets.
(e) Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that
are eligible for capitalisation when the cost of replacing the part is incurred. Similarly, when each major inspection is performed, its cost is recognised in the
carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in profit or loss
as incurred. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: · Plant and equipment - over 3 to 10 years
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. Disposal An item of property,
plant and equipment is derecognised upon disposal or when no further future economic benefits are expected to be derived from its use or disposal. Any gain or loss
arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income
statement in the year the asset is derecognised.
(f) Exploration and Evaluation Expenditure
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that
they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable
assessment of the existence of economically recoverable reserves. 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. Costs of evaluation, seismic and unsuccessful exploration in the area of interest are expensed as incurred
even if activities in this area of interest are continuing. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which
the decision to abandon the area is made. When a discovered oil or gas field enters the development phase the accumulated exploration and evaluation expenditure is
transferred to oil and gas assets - assets in development.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Oil and Gas Properties
Oil and gas properties are usually single oil or gas fields being developed for future production or which are in the production phase. Where several individual oil
fields are to be produced through common facilities, the individual oil field and the associated production facilities are managed and reported as a single oil and gas
asset.
Assets in developmentWhen the technical and commercial feasibility of an undeveloped oil or gas field has been demonstrated, the field enters its development phase. The
costs of oil and gas assets in the development phase are separately accounted for as tangible assets and include past exploration and evaluation costs, development
drilling and plant and equipment and any associated land and buildings. When commercial operation commences the accumulated costs are transferred to oil and gas assets -
producing assets.
Producing assetsThe costs of oil and gas assets in production are separately accounted for as tangible assets and include past exploration and evaluation costs, pre
-production development costs and the ongoing costs of continuing to develop reserves for production and to expand or replace plant and equipment and any associated land
and buildings. Producing assets are depreciated over proved reserves on a unit of production basis.
(h) Impairment of assets
At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have
been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell and value in use, is
compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the income statement.
(i) Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An
estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.
(j) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the
purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
(k) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less any
estimated selling costs. Cost includes those costs incurred in bringing each component of inventory to its present location and condition.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Trade and other payables
Trade payables and other payables are carried at amortised costs and due to their short-term nature are not discounted. They represent liabilities for goods and services
provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase
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