Annual Report 2012

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the year ended 31 December 2012
8 OTHER OPERATING INCOME/(EXPENSES), NET
The Group
2012 2011
RMB millions RMB millions
Fines, penalties and compensations (181) (236)
Donations (231) (90)
Gain on disposal of property, plant and equipment, net 133 754
Impairment losses on long-lived assets (i) (1,014) (2,809)
Net realised and unrealised losses on derivative financial instruments not qualified as hedging (68) (132)
Ineffective portion of change in fair value of cash flow hedges 1 134
Government grants (ii) 2,926 1,497
Others (337) (131)
1,229 (1,013)
Note:
(i) Impairment losses on long-lived assets for the year ended 31 December 2012 primarily represent impairment losses recognised for the exploration and production
(“E&P”) segment of RMB 1,006 million (2011: RMB 2,153 million) of property, plant and equipment (Note 17). The primary factor resulting in the E&P segment
impairment losses for the year ended 31 December 2012 was unsuccessful development drilling and high operating and development costs for certain small oil fields.
The carrying values of these E&P properties were written down to respective recoverable amounts which were determined based on the present values of the expected
future cash flows of the assets using a pre-tax discount rate 12.5% (2011: 12.0%). The oil and gas pricing was a factor used in the determination of the present values
of the expected future cash flows of the assets and had an impact on the recognition of the asset impairment.
(ii) Government grants for the years ended 31 December 2011 and 2012 primarily represent financial appropriation income and non-income tax refunds received from
respective government agencies without conditions or other contingencies attached to the receipts of these grants.
9 INTEREST EXPENSE
The Group
2012 2011
RMB millions RMB millions
Interest expense incurred 12,069 9,398
Less: Interest expense capitalised* (1,708) (898)
10,361 8,500
Accretion expenses (Note 32) 856 741
Interest expense 11,217 9,241
* Interest rates per annum at which borrowing costs were capitalised for construction in progress 2.6% to 6.2% 3.1% to 6.9%
151
CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2012
Financial Statements (International)