has sufficient resources to complete development. The capitalised expenditure includes the cost of materials,
direct labour, an attributable proportion of direct overheads and capitalised borrowing costs. Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment losses (refer accounting policy 5.15).
5.9.3 Software and other intangible assets
Software and other intangible assets acquired or developed by the Group are stated at cost less accumulated amortisation and impairment losses (refer accounting policy 5.15).
5.9.4 Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill, is expensed as incurred.
5.9.5 Amortisation
Amortisation is calculated over the cost of the asset less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangibles assets with an indefinite life are systematically tested for impairment annually or when there is an indication for impairment (refer accounting policy 5.15). Other intangible assets and software are amortised from the date they are available for use. The estimated useful life of software and other capitalised development costs is five years. Amortisation methods, useful lives and residual values are reassessed at each financial year-end and adjusted if appropriate.
5.10 I n v e s t m e n t s i n e q u i t y a c c o u n t e d i n v e s t e e s
Investments in equity accounted investees are accounted for using the equity method and are recognised initially at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses (refer accounting policy 5.15). The consolidated financial statements include the Group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or has made payments on behalf of the investee.
5.11 O t h e r i n v e s t m e n t s
5.11.1 Other investments in equity instruments
Other investments in equity instruments do not have a quoted market price in an active market. As the fair value cannot be reliably measured the equity instruments are stated at cost. Dividends received are accounted for in profit or loss when these become due.
5.11.2 Long-term loans and other receivables
Long-term loans and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. The initial recognition of loans and receivables takes place on the date that they are originated at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses (refer accounting policy 5.15).
5.11.3 Available for sale financial assets
Available for sale financial assets are non-derivative financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences, are recognised in other comprehensive income and presented within equity. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.
96
5.12 I n v e n t o r i e s
5.12.1 Seismic data libraries
The seismic data libraries consist of completed and in progress collection of seismic data that can be sold non- exclusively to one or more clients. These seismic data libraries are valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Costs include direct costs and an attributable portion of direct overheads, but exclude a profit element. As it is expected that sales lead to a lower net realisable value, these expected decreases in value are taken into account at the moment of sale throughout the financial year. The Group evaluates the net realisable value on a regular basis and reassesses the net realisable value at each reporting date.
5.12.2 Other inventories
Other inventories are stated at the lower of cost or net realisable value. The cost of other inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.
5.13 Tr a d e a n d o t h e r r e c e i v a b l e s
Services rendered on contract work completed but not yet billed to customers are included in trade and other receivables as unbilled revenues on completed contracts.
Trade and other receivables are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method less, any impairment losses (refer accounting policy 5.15).
5.14 C a s h a n d c a s h e q u i v a l e n t s
Cash and cash equivalents, comprising cash balances and call deposits, are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method less, any impairment losses (refer accounting policy 5.15). Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.
5.15 I m p a i r m e n t
5.15.1 Financial assets
Financial assets are assessed at each reporting date to determine whether there is objective evidence that they are impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
The Group considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant
receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics. In assessing collective
impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
97