NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued  b) Exploration and Evaluation Expenditure  c) Development and Production Assets and Property and Equipment  Exploration and evaluation expenditures incurred are accumulated in respect of each identifiable area of interest. These costs are capitalised to the extent that they are expected to be recouped through the successful development  of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the  existence of economically recoverable reserves. Any such estimates and assumptions may change as new  information becomes available. If, after the expenditure is capitalized, information becomes available suggesting  that the recovery of the expenditure is unlikely, for example a dry hole, the relevant capitalized amount is written  off in the consolidated statement of profit or loss and other comprehensive income in the period in which new  information becomes available. The costs of assets constructed within the Group includes the leasehold cost,  geological and geophysical costs, and an appropriate proportion of fixed and variable overheads directly attributable  to the exploration and acquisition of undeveloped oil and gas properties.  When approval of commercial development of a discovered oil or gas field occurs, the accumulated costs for the  relevant area of interest are transferred to development and production assets. The costs of developed and  producing assets are amortised over the life of the area according to the rate of depletion of the proved and probable  developed reserves. The costs associated with the undeveloped acreage are not subject to depletion.  The carrying amounts of the Group’s exploration and evaluation assets are reviewed at each reporting date, in  conjunction with the impairment review process referred to in Note 1(f), to determine whether any of impairment  indicators exists. Impairment indicators could include i) tenure over the licence area has expired during the period  or will expire in the near future, and is not expected to be renewed, ii) substantive expenditure on further exploration  for and evaluation of mineral resources in the specific area is not budgeted or planned, iii) exploration for and  evaluation of resources in the specific area have not led to the discovery of commercially viable quantities of  resources, and the Group has decided to discontinue activities in the specific area, or iv) sufficient data exist to  indicate that although a development is likely to proceed, the carrying amount of the exploration and evaluation  asset is unlikely to be recovered in full from successful development or from sale. Where an indicator of impairment  exists, a formal estimate of the recoverable amount is made and any resulting impairment loss is recognized in the  income statement.  Development and production assets, and property and equipment are carried at cost less, where applicable, any  accumulated depreciation, amortisation and impairment losses. The costs of assets constructed within the Group  includes the cost of materials, direct labor, borrowing costs and an appropriate proportion of fixed and variable  overheads directly attributable to the acquisition or development of oil and gas properties and facilities necessary  for the extraction of resources.  The carrying amount of development and production assets and property and equipment are reviewed at each  reporting date to ensure that they are not in excess of the recoverable amount from these assets. Development and  production assets are assessed for impairment on a cash-generating unit basis. A cash-generating unit is the smallest  grouping of assets that generates independent cash inflows. Management has assessed its CGUs as being an  individual basin, which is the lowest level for which cash inflows are largely independent of those of other assets. Impairment losses recongised in respect of cash-generating units are allocated to reduce the carrying amount of the  assets in the unit on a pro-rata basis.  - 61 - 