NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES  Basis of Preparation Principles of Consolidation  a) Income Tax  The consolidated financial report of Sundance Energy Australia Limited (“SEAL”) and its wholly owned subsidiaries,  (collectively, the “Company”, “Consolidated Group” or “Group”), for the year ended 31 December 2014 was  authorised for issuance in accordance with a resolution of the Board of Directors on 31 March 2015. The Group has  the power to amend and reissue the financial report.  The Group is a for-profit entity for the purpose of preparing the financial report. The principal activities of the Group  during the financial year are the exploration for, development and production of oil and natural gas in the United  States of America, and the continued expansion of its mineral acreage portfolio in the United States of America.  The consolidated financial report is a general purpose financial report that has been prepared in accordance with  Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the  Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. These consolidated financial statements comply with International Financial Reporting Standards (“IFRS”) as issued  by the International Accounting Standards Board (“IASB”). Material accounting policies adopted in the preparation  of this financial report are presented below. They have been consistently applied unless otherwise stated.  The consolidated financial statements are prepared on a historical basis, except for derivative financial instruments  which are measured at fair value. The consolidated financial statements are presented in US dollars and all values  are rounded to the nearest thousand (US$’000), except where stated otherwise.  A controlled entity is any entity over which SEAL is exposed, or has rights to variable returns from its involvement  with the entity and has the ability to affect those returns through its power over the entity. The consolidated  financial statements incorporate the assets and liabilities of all entities controlled by SEAL as at 31 December 2014  and the results of all controlled entities for the year then ended.  All inter-group balances and transactions between entities in the Group, including any recognised profits or losses,  are eliminated on consolidation. The income tax expense for the period comprises current income tax expense/(income) and deferred income tax  expense/(income).  Current income tax expense charged to the statement of profit or loss is the tax payable on taxable income calculated  using applicable income tax rates enacted, or substantially enacted, as at the reporting date. Current tax  liabilities/(assets) are therefore measured at the amounts expected to be paid to/(recovered from) the relevant  taxation authority.  Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the  period. Current and deferred income tax expense/(income) is charged or credited directly to equity instead of the  statement of profit or loss when the tax relates to items that are credited or charged directly to equity.  - 59 - 