Annual Report 2012

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
for the year ended 31 December 2012
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(12) Impairment of financial assets and non-financial long-term assets (Continued)
(b) Impairment of other non-financial long-term assets
Internal and external sources of information are reviewed at each balance sheet date for indications that the following assets, including fixed
assets, construction in progress, goodwill, intangible assets and investments in subsidiaries, associates and jointly controlled entities may be
impaired.
Assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
The recoverable amounts of goodwill and intangible assets with uncertain useful lives are estimated annually no matter there are any
indications of impairment. Goodwill is tested for impairment together with related asset units or groups of asset units.
An asset unit is the smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets
or groups of assets. An asset unit comprises related assets that generate associated cash inflows. In identifying an asset unit, the Group
primarily considers whether the asset unit is able to generate cash inflows independently as well as the management style of production and
operational activities, and the decision for the use or disposal of asset.
The recoverable amount is the greater of the fair value less costs to sell and the present value of expected future cash flows generated by the
asset (or asset unit, set of asset units).
Fair value less costs to sell of an asset is based on its selling price in an arm’s length transaction less any direct costs attributable to
the disposal. Present value of expected future cash flows is the estimation of future cash flows to be generated from the use of and upon
disposal of the asset, discounted at an appropriate pre-tax discount rate over the asset’s remaining useful life.
If the recoverable amount of an asset is less than its carrying amount, the carrying amount is reduced to the recoverable amount. The
amount by which the carrying amount is reduced is recognised as an impairment loss in profit or loss. A provision for impairment loss of
the asset is recognised accordingly. Impairment losses related to an asset unit or a set of asset units first reduce the carrying amount of any
goodwill allocated to the asset unit or set of asset units, and then reduce the carrying amount of the other assets in the asset unit or set of
asset units on a pro rata basis. However, the carrying amount of an impaired asset will not be reduced below the highest of its individual fair
value less costs to sell (if determinable), the present value of expected future cash flows (if determinable) and zero.
Impairment losses for assets are not reversed.
(13) Long-term deferred expenses
Long-term deferred expenses are amortised on a straight-line basis over their beneficial periods.
(14) Employee benefits
Employee benefits are all forms of considerations given and other related expenses incurred in exchange for services rendered by employees.
When an employee has rendered service to the Group during an accounting period, the Group shall recognise the employee benefits payable (other
than termination benefits) as a liability and charged to the cost of an asset or as an expense in the same time.
(a) Social insurance and housing fund
Pursuant to the relevant laws and regulations of the PRC, employees of the Group participate in the social insurance system established and
managed by government organisations. The Group makes social insurance contributions, including contributions to basic pension insurance,
basic medical insurance, unemployment insurance, work-related injury insurance, maternity insurance and etc., as well as contributions to
housing fund, at the applicable benchmarks and rates stipulated by the government for the benefit of its employees. The social insurance and
housing fund contributions are recognised as part of the cost of assets or charged to profit or loss on an accrual basis.
(b) Termination benefits
When the Group terminates the employment relationship with employees before the employment contracts expire, or provides compensation
as an offer to encourage employees to accept voluntary redundancy, a provision for the termination benefits provided is recognised in profit
or loss when both of the following conditions are satisfied:
– the Group has a formal plan for the termination of employment or has made an offer to employees for voluntary redundancy, which will
be implemented shortly; and
– the Group is not allowed to withdraw from termination plan or redundancy offer unilaterally.
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CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2012
Financial Statements (PRC)