WEST AFRICA’S NEWEST LARGE GOLD PRODUCER Notes to the Consolidated Financial Statements For the year ended 30 June 2011 2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, including the  expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the  circumstances.  The Group makes estimates and assumptions concerning the future. The resulting accounting will, by definition, seldom equal the  actual results. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets  and liabilities within the next financial year are discussed below. In accordance with accounting policy note 1(n) management determines when an area of interest should be abandoned. When a  decision is made that an area of interest is not commercially viable, all costs that have been capitalised in respect of that area of  interest are written off. In determining this, assumptions, including the maintenance of title, ongoing expenditure and prospectively  are made. See note 13 for disclosure of carrying values. In accordance with accounting policy note 1(g), in determining whether the recoverable amount of each cash generating unit is  the higher of fair value less costs to sell or value-in-use against which asset impairment is to be considered, the Group undertakes  future cash flow calculations which are based on a number of critical estimates and assumptions including, for its assets under  construction, forward estimates of:  Variations to expected future cash flows, and timing thereof, could result in significant changes to the impairment test results,  which in turn could impact future financial results.  The consolidated entity measures the cost of equity-settled transactions with employees and consultants by reference to the fair  value of the equity instruments at the date at which they were granted. The fair value of options granted is determined using a  Black-Scholes model, using the assumptions detailed in note 29. As set out in accounting policy note 1(t), the value of the current restoration and rehabilitation provision is based on a number of  assumptions including the nature of restoration activities required and the valuation at the present value of a future obligation that  necessitates estimates of the cost of performing the work required, the timing of future cash flows and the appropriate discount  rate. Additionally current provisions are based on the assumption that no significant changes will occur in either relevant Federal  or State legislation covering restoration of mineral properties. A change in any, or a combination, of these assumptions used to  determine current provisions could have a material impact to the carrying value of the provision – see note 14 for disclosure of  carrying values. The Group makes judgements on the effectiveness of all derivative financial instrument entered into, including forward metal  contracts, metal options and foreign currency option contracts in accordance with accounting policy note 1(l). Management’s  assessment is that, unless otherwise disclosed the derivatives have been highly effective in offsetting changes in the fair value  of the future cash flows against which they have been designated and as such are compliant with the hedge effectiveness  requirements of AASB 139. Further information on the Group’s use of derivative financial instruments, including carrying values,  is set out in note 15. (i)  mine life including quantities of mineral reserves and resources for which there is a high degree of confidence of  economic extraction with given technology; (ii)  estimated production and sales levels; (iii)  estimate future commodity prices; (iv)  future costs of production; (v)  future capital expenditure;  (vi)  future exchange rates; and/or (vii)  discount rates applicable to the cash generating unit. (i)  Exploration and evaluation expenditure  (ii)  Impairment of assets (iii)  Share-based payment transactions (iv)  Restoration and rehabilitation provisions (v)  Derivative financial instruments 58