(i) Explain why geophysical exploration costs are recognized as an expense and costs directly associated with an exploration well are initially capitalized as an intangible asset.

(ii) Explain why if commercial quantities of hydrocarbons are not found, the exploration well costs are written off.

(iii) For inventories, explain how cost is determined and how net realizable value is determined.

1. Banks Financial Statements (e.g. Bank of Bahrain and Kuwait)

(i) Loans and advances to customers is shown under Assets

(ii) Customers current, savings and other deposits is shown under Liabilities