Cue Energy Resources Limited Notes to the financial statements 30 June 2023 Note 3. Critical accounting estimates and judgements (continued) 9 (i) Recovery of deferred tax assets Management recognise deferred tax assets on unutilised carry forward tax losses if management considers it is probable that future tax profits will be available to utilise the unused tax losses (refer to note 9). Management are required to make assumptions on and consider inherent uncertainties in respect of the various inputs used in the estimation of future taxable income against which unutilised losses may be applied. These assumptions include but are not limited to the nature, timing and extent of project development and reserves, production and sales performance, energy prices where not contractually fixed and which are subject to global macroeconomic factors and inflation and its impact on future tax deductions. The inherent estimation uncertainty when forecasting future operational and financial performance also directly the actual generation of future taxable income, which may differ to the estimated taxable income and associated deferred tax asset. (ii) Impairment of production properties Production properties impairment testing requires an estimation of recoverable amount, which management have determined using either fair value less costs to sell or a value-in-use model for the respective cash generating units (CGUs). Management is required to apply its judgement in concluding on the definition of CGUs to which an asset or group of assets relates. Furthermore, in defining the discount rate appropriate to calculate the present value of future outflows when determining the fair value less costs to sell or value-in-use, management is requirement to apply judgement in determining the relevant risks and basis of calculating the risks associated with compiling an appropriate discount rate. The calculation of a CGU's recoverable amount through either the fair value less costs to sell or its value-in-use requires the entity to make certain assumptions on reserves, future production volumes, pricing of its energy products and cost estimates, exchange rates and how they impact on future cashflows, where appropriate the costs to sell and in respect of the inputs utilised in defining an appropriate discount rate. These assumptions are inherently uncertain inputs and assumptions and accordingly management review their accuracy and appropriateness periodically, no less than twice a year. Other assumptions used in the calculations which could have an impact on future years are detailed in note 11. Management have considered and made assumptions in respect of the impact of climate change and the development of commercially viable alternative energy sources on future cashflows and the respective CGUs' value in use and fair value less costs to sell. The assumptions are based on current information, historical trends and future expectations which may differ to the assumptions made by management when concluding on the impact of climate change and the development of commercially viable alternative energy sources. The Russian-Ukrainian conflict continues to develop, the result of which has had significant global macro-economic impacts, including increasing instability in global energy prices. Related impacts include volatility in commodity prices, currency movements, supply-chain and travel disruptions, disruption in banking systems and capital markets, increased costs and expenditures and cyberattacks. The conflict’s development and conclusion is inherently uncertain and the consequences for the global economy and the Company’s operations unpredictable. The Consolidated Entity has, to the extent possible, in assessing its CGUs for impairment, made certain assumptions on the potential impact which the conflict has and will have on its future financial performance. (iii) Useful life of production properties and their amortisation As detailed in note 11, certain production properties are amortised on a unit-of-production basis, with separate calculations being made for each resource. As noted below, estimates of reserve quantities and future production volumes are based on certain assumptions and subject to inherent estimation uncertainties. These factors are critical elements of the calculation of the amortisation of production property assets. 55 Cue Energy Resources Limited Annual Report 2023
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