Note 1. Summary of Material Accounting Policies continued (p) Foreign currency transactions and balances (i) Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the Company’s functional and presentation currency. The functional currency of the Group’s foreign operations is primarily US Dollars. (ii) Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period end exchange rate. Exchange differences arising on the translation of foreign currency transactions are recognised in profit or loss. (iii) Group companies The results and the financial position of all the Group entities (none of which has a currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: – Assets and liabilities are translated at period-end exchange rates prevailing at the reporting date; – Income and expenses are translated at average exchange rates for the period; and – Retained profits are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on the translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in the Statement of Financial Position. These differences are recognised in the profit or loss in the period in which the operation is disposed. (q) Application of new and revised Accounting Standards In the current year, there were no new and revised AASBs issued by the Australian Accounting Standards Board (AASB) that had a significant impact on the Group’s financial statements for the accounting period that began on1 July 2025. (r) New Accounting Standards issued but not yet effective Aside from those listed below, there were no accounting standards which were issued but not yet effective and that are expected to have a material impact to the Group in the current or future reporting periods and on foreseeable future transactions. – AASB 18 Presentation and Disclosure in Financial Statements has been issued by the AASB, and is effective for annual reporting periods beginning on or after 1 January 2027. This accounting standard replaces AASB 101 Presentation of Financial Statements, with many of the original disclosure requirements retained and there will be no impact on the recognition and measurement of items in the financial statements. However, the standard will affect presentation and disclosure in the financial statements, including introducing five categories in the statement of profit or loss and other comprehensive income: operating, investing, financing, income taxes and discontinued operations. The standard introduces two mandatory sub-totals in the statement: ‘Operating profit’ and ‘Profit before financing and income taxes’. There are also new disclosure requirements for ‘management-defined performance measures’, such as earnings before interest, taxes, depreciation and amortisation (‘EBITDA’) or ‘adjusted profit’. The standard provides enhanced guidance on grouping of information (aggregation and disaggregation), including whether to present this information in the primary financial statements or in the notes. The consolidated entity will adopt this standard from 1 July 2027 and it is expected that there will be a significant change to the structure of the statement of profit or loss and other comprehensive income. Note 2. Critical accounting estimates and judgements Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. Below are key estimates and assumptions that have a significant risk of causing a material adjustment to carrying amounts of certain assets and liabilities within the next annual reporting period. Exploration and evaluation assets have been capitalised on the basis that the Group will commence commercial production in the future from which the costs will be amortised in proportion to the depletion of the mineral resources. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. The carrying value of exploration and evaluation assets at 30 June 2026 was $96,014,471 (2025: $90,323,654). 49 Sunstone Metals Limited Annual Report 2026
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