Page 92 - Sundance Resources Ltd Annual Report 2013

90 SUNDANCE RESOURCES LIMITED ANNUAL REPORT 2013
NOTES TO THE
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2013
o) Exploration and evaluation expenditure
Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an
exploration and evaluation asset in the year in which they are incurred where the following conditions
are satisfied:
(i) the rights to tenure of the area of interest are current; and
(ii) at least one of the following conditions is also met:
(a) the exploration and evaluation expenditures are expected to be recouped through successful
development and exploration of the area of interest, or alternatively, by its sale; or
(b) exploration and evaluation activities in the area of interest have not, at the reporting date, reached
a stage which permits a reasonable assessment of the existence or otherwise of economically
recoverable reserves, and active and significant operations in, or in relation to, the area of interest
are continuing.
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore,
studies, exploratory drilling, trenching and sampling and associated activities and on allocation of depreciation
and amortisation of assets used in exploration and evaluation activities. General and administrative costs are only
included in the measurement of exploration and evaluation costs where they are related directly to operational
activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the
carrying amount of an exploration and evaluation asset may exceed its recoverable amount.
p) Mine Development
When the economic viability of a project is determined, capitalised exploration and evaluation expenditure is
reclassified as Mine Development and separately disclosed in the Financial Statements.
All subsequent expenditure on the area of interest is capitalised including mine infrastructure, pre-production
development costs, development excavation, project execution costs and other subsurface expenditure
pertaining to that area of interest. Costs related to surface plant and equipment and any associated land
and buildings are accounted for as property, plant and equipment.
Development costs are carried forward in respect of areas of interest in the development phase until production
commences. When production commences, carried forward development costs are to be amortised over the
life of economically recoverable reserves.
q) Inventories
Inventories are stated at the lower of cost and net realisable value. Costs, including an appropriate portion of
fixed and variable overhead expenses, are assigned to inventories by the method most appropriate to each
particular class of inventory, with all categories being valued on a first in first out basis. Net realisable value
represents the estimated selling price for inventories less all estimated costs of completion and costs
necessary to make the sale.
r) Financial liabilities and equity instruments issued by the Group
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct
issue costs.
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method,
with interest expense recognised on an effective yield basis.
Note 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Critical accounting judgements and the key sources
of estimation uncertainty (continued)