NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011 Note 1. Summary of Significant Accounting Policies  (continued) Goods and Services Tax (‘GST’) (g) Cash and Cash Equivalents (h) Receivables (i) Inventories (f) Income Taxes and Other Taxes  (continued) Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which  deductible temporary tax differences or unused tax losses and tax offsets can be utilised. Deferred tax assets and tax liabilities are offset when there is a legally enforceable right to offset current tax assets and tax  liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset  where the Group has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and  settle the liability simultaneously. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse  change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income  to enable the benefit to be realised and comply with the conditions of deductibility imposed by law. Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not  recoverable from the ATO. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or equity  or as part of an item of expense. Receivables and payables in the consolidated statement of financial position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as current other receivables or sundry payables  respectively in the consolidated statement of financial position. Cash flows are included on a gross basis in the consolidated statement of cash flows. The GST components of cash flows arising  from investing and financing activities, which are recoverable from, or payable to, the ATO, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the ATO. Cash and cash equivalents in the consolidated statement of financial position and for presentation in the statement of cash flows  comprise cash at banks and on hand (including share of joint venture operation cash balances) and short term bank deposits that  are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. Receivables, which generally have 30 day terms, are recognised initially at fair value and subsequently measured at amortised  cost using the effective interest method, less any accumulated impairment losses. They are presented as current assets unless  collection is not expected for more than 12 months after the reporting date. Cash flows relating to receivables are not discounted if the effect of discounting would be immaterial. Collectability of receivables is reviewed on an ongoing basis. Individual receivables that are known to be uncollectible are written  off when identified. Receivables are tested for impairment in accordance with the accounting policy described in Note 1(n). An impairment provision  is recognised when there is objective evidence that the Group will not be able to collect the receivable. The amount of the  impairment loss is the receivable’s carrying amount compared to the present value of estimated future cash flows, discounted  when material, at the original effective interest rate. Inventories are measured at the lower of cost and net realisable value. Inventories are represented by assets acquired from third  parties, in the form of casing and other drilling inventory to be consumed or used in exploration and evaluation activities. The cost of casing and other drilling inventory includes direct materials, direct labour and transportation costs. 40 Karoon Gas Australia Ltd  Annual Report 2011