2011 Annual Report PDF - Tullow Oil plc

Company balance sheet
As at 31 December 2011
(a) Basis of accounting
The financial statements have been prepared under the
historical cost convention in accordance with the Companies
Act 2006 and UK Generally Accepted Accounting Principles
(UK GAAP). The financial statements are presented in US
dollars and all values are rounded to the nearest $0.1 million,
except where otherwise stated. The following paragraphs
describe the main accounting policies under UK GAAP which
have been applied consistently.
In accordance with the provisions of Section 408 of the
Companies Act, the profit and loss account of the Company is
not presented separately. During the year the Company made
a loss of $16.5 million. In accordance with the exemptions
available under FRS 1 ‘Cash Flow Statements’, the Company
has not presented a cash flow statement as the cash flow of
the Company has been included in the cash flow statement of
Tullow Oil plc Group set out on page 117.
In accordance with the exemptions available under FRS 8
‘Related party transactions’, the Company has not separately
presented related party transactions with other Group
companies.
The Company closely monitors and manages its liquidity risk.
Cash forecasts are regularly produced and sensitivities run
for different scenarios including, but not limited to, changes
in commodity prices, different production rates from the
Company’s portfolio of producing fields and delays in
development projects. In addition to the Company’s operating
cash flows, portfolio management opportunities are reviewed
to potentially enhance the financial capacity and flexibility of
the Company. The Company’s forecasts, taking into account
reasonably possible changes as described above, show that
the Company will be able to operate within its current debt
facilities and have significant financial headroom for the 12
months from the date of approval of the 2011 Annual Report
and Accounts.
(b) Investments
Fixed asset investments, including investments in subsidiaries,
are stated at cost and reviewed for impairment if there are
indications that the carrying value may not be recoverable.
(c) Finance costs and debt
Finance costs of debt are recognised in the profit and loss
account over the term of the related debt at a constant rate on
the carrying amount.
Interest-bearing bank loans are recorded as the proceeds
received, net of direct issue costs. Finance charges, including
premiums payable on settlement or redemption and direct
issue costs, are accounted for on an accruals basis in the profit
and loss account using the effective interest method and are
added to the carrying amount of the instrument to the extent
that they are not settled in the period in which they arise.
(d) Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that
evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
(e) Foreign currencies
The US dollar is the reporting currency of the Company.
Transactions in foreign currencies are translated at the rates
of exchange ruling at the transaction date. Monetary assets
and liabilities denominated in foreign currencies are
translated into US dollars at the rates of exchange ruling at
the balance sheet date, with a corresponding charge or credit
to the profit and loss account. However, exchange gains and
losses arising on long-term foreign currency borrowings,
which are a hedge against the Company’s overseas
investments, are dealt with in reserves.
(f) Share issue expenses
Costs of share issues are written off against the premium
arising on the issues of share capital.
(g) Taxation
Current tax, including UK corporation tax, is provided at
amounts expected to be paid using the tax rates and laws that
have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date
where transactions or events that result in an obligation to pay
more tax or a right to pay less tax in the future have occurred.
Timing differences are differences between the Company’s
taxable profits and its results as stated in the financial
statements that arise from the inclusion of gains and losses in
tax assessments in periods different from those in which they
are recognised in the financial statements.
A deferred tax asset is regarded as recoverable only to the
extent that, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable
taxable profits from which it can be deducted.
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FINANCIAL STATEMENTS
157
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