Notes to the Consolidated Financial Statements For the Financial Year Ended 30 June 2021 Note 1. Significant Accounting Policies The consolidated financial statements are for the consolidated entity consisting of the Company and its subsidiaries (the ‘Group’). Information on the nature of the operations and principal activities of the Group are described in the Directors’ Report. The following is a summary of significant accounting policies adopted by the Group in the preparation of these consolidated financial statements. The accounting policies have been consistently applied to all the financial years presented, unless otherwise stated. As a result of acquiring an Oil and Gas asset during the financial year a number of new accounting policies were adopted. These new accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards. Currency of Presentation The Directors elected to change the Group’s presentation currency in accordance with AASB 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ from Australian dollars (‘A$’) to United States dollars (‘US$’), effective from 1 July 2020. The Directors believe that the change provides investors and other stakeholders with a clearer and more reliable understanding of the Group’s global business performance as a whole and is more comparable to the Company’s peers, most of which are presented in US$. The change is accounted for retrospectively and as such comparative information has been restated in US$, including presentation of Statement of Financial Position as at 1 July 2019. The financial report has been restated to US$ using the procedures below: Foreign currency amount Applicable exchange rate Income and expenses Average rate prevailing for the relevant period1 Assets and liabilities Period‑end rate Equity Historical rate Statement of cash flows Average rate prevailing for the relevant period 1. Unless this is not a reasonable approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions. The average rate used for the current financial year was A$/US$ 1:0.7472 (2020: 1:0.6714) and the period‑end exchange rate used was A$/US$ 1:0.7518 (2020: 1:0.6863). In addition, the Company has changed the presentation in the profit or loss to aggregate expenses according to their function as opposed to nature. It is the view of the Company that following the completion of Baúna, presenting expenses in this manner provides information that is more relevant and enhances comparability to other international oil and gas companies. Where necessary, comparative information has been reclassified to achieve consistency in disclosure with financial year amounts and other disclosures. (a) Basis of Preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (the ‘AASB’) and the Corporations Act 2001 (Cth). The Company is a for‑profit entity for the purpose of preparing financial statements. Rounding The amounts in the financial statements are rounded to the nearest thousand dollars (US$’000) unless otherwise indicated, under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies. Historical Cost Convention The consolidated financial statements have been prepared on an accrual basis under the historical cost convention as modified, when relevant, by the revaluation of selected financial assets and financial liabilities for which the fair value basis of accounting has been applied. Significant Accounting Estimates, Assumptions and Judgements The preparation of financial statements requires the use of certain significant accounting estimates. It also requires management to exercise its judgement in the process of applying Group accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2. Compliance with International Financial Reporting Standards Compliance with Australian Accounting Standards ensures that the consolidated financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. Karoon Energy Ltd 81 Annual Report 2021