Investor Presentaiton
Armour Energy and controlled entities
Financial report continued
Notes to the consolidated financial statements continued
NOTE 19. NON-CURRENT ASSETS - OTHER FINANCIAL ASSETS
CONTINUED
armourenergy.com.au
NOTE 20. NON-CURRENT LIABILITIES - PROVISION FOR RESTORATION
AND ABANDONMENT
Consolidated
30 June
2020
$
30 June
2019
$
Restoration and abandonment
Consolidated
30 June
2020
$
30 June
2019
$
6,688,065
6,688,065
Movements in financial assets at fair value through Other Comprehensive Income
Opening balance at 1 July
Additions
Fair Value adjustments through Other Comprehensive Income
2,125,010
450,000
(1,487,500)
4,252,000
(2,126,990)
1,087,510
2,125,010
Financial assets at fair value through other comprehensive income comprise investments in the ordinary capital of Lakes Oil NL.
The fair values of financial assets approximate their carrying amounts principally due to the fact that they are measured and
recognised at fair value. Level 3 inputs, being unobservable inputs have been used in determining the fair value of the LKO
Investment. The fair value was based on an external valuation report that determined the implied equity value of the recent
convertible notes issued by LKO. Level 3 inputs were used as the basis of the fair value as LKO has currently been suspended from
the active market.
KEY JUDGEMENT - PROVISION FOR REHABILITATION
The Group's restoration and abandonment obligations for the Surat Basin processing plant and associated exploration and
production fields is treated as a non-current liability in accordance with AASB 137 - Provisions, Contingent Liabilities and
Contingent Assets. The restoration and abandonment liability are valued by an independent expert in accordance with legislative
requirements and is reviewed at each reporting period. For the provision recognised at 30 June 2020, the facts and circumstances
do not suggest that the carrying amount of the provision has changed.
ACCOUNTING POLICY FOR RESTORATION PROVISIONS
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable
the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
For personal use only,
86
Financial assurances are cash backed bank guarantees.
ACCOUNTING POLICY FOR OTHER FINANCIAL ASSETS
For equity securities that are not held for trading, the Group has made an irrevocable election at initial recognition to recognise
changes in fair value through other comprehensive income rather than profit or loss.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Financial assets
with embedded derivatives are considered in their entirety when determining whether cash flows are solely payment of principal
and interest. Refer to Note 27 detail of the Group's fair value accounting policy.
Security deposits and financial assurances are measured at amortised cost.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present
obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of
the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is
recognised in finance costs.
Provisions for rehabilitation and abandonment of Oil and Gas assets are measured at the cost of legal and constructive obligations
to restore operating locations in the period in which the obligation arises. The nature of rehabilitation activities includes the removal
of facilities, abandonment of wells and restoration of affected areas. Typically, the obligation arises when the asset is installed at the
production location.
A provision has been recognised for the costs to be incurred for the restoration and abandonment of the Surat Basin processing
plant and associated exploration and production fields, used for the production of oil, gas, LPG and condensate. It is anticipated
that the sites will require restoration in approximately 20 years.
87View entire presentation