2009 Annual Report - Rompetrol.com

Summary of
Significant Accounting Policies
These abbreviated financial statements have been prepared in
accordance with International Financial Reporting Standards
(“IFRS”) effective as of December 31, 2009, as endorsed by the E.U.
The consolidated financial statements are prepared under the
historical cost convention except for Rompetrol Rafinare S.A and
Rompetrol Petrochemicals S.R.L where the property, plant and
equipment are stated at revalued amounts being the fair value,
less any accumulated depreciation and accumulated impairment
loss. The financial statements of the Group are prepared on a
going concern basis.
The group’s consolidated financial statements are presented in
United States Dollar (“US Dollar” or “USD”), which is the Group’s
functional currency.
The consolidated financial statements comprise the financial
statements of the parent company and its subsidiaries as of
December 31, 2009.
Control is considered to be achieved where the Group (either
directly or indirectly), owns more than 50% of the voting rights of
the share capital of another enterprise and is able to govern the
financial and operating policies of an enterprise so as to obtain
benefits from its activities. Minority interests represent the portion
of the profit or loss and net assets that is not held by the Group and
are presented separately in the consolidated income statement
and within equity in the consolidated balance sheet, separately
from the parent shareholders’ equity.
Acquisitions of businesses are accounted for using the purchase
method. The cost of the business combination is measured as the
aggregate of the fair values (at the date of exchange) of assets
acquired, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination.
The interest of minority shareholders in the acquiree is initially
measured at the minority’s proportion of the net fair value of the
assets, liabilities and contingent liabilities recognized. Businesses
acquired or disposed during the year are included in the
consolidated financial statements from the date of acquisition or
the date of disposal.
The Group’s investments in associates are accounted for using
the equity method of accounting. Under the equity method, the
investment in an associate is carried in the balance sheet at cost
plus post acquisition changes in the Group’s share of net assets of
the associate. After application of the equity method, the Group
determines whether it is necessary to recognise an additional
impairment loss on the Group’s investment in its associates.
All intra-group balances, income and expenses and unrealised
gains and losses resulting from intra-group transactions are
eliminated in full.
Goodwill is initially measured at cost being the excess of the cost
of the business combination over the Group’s share in the net fair
value of the acquiree’s identifiable assets, liabilities and contingent
liabilities. Goodwill is tested for impairment annually (as at 31
December) and when circumstances indicate that the carrying
value may be impaired.
Property, plant and equipment are stated at cost, except for the
Rompetrol Rafinare S.A and Rompetrol Petrochemicals S.R.L,
where the property, plant and equipment are stated at re-valued
amounts, being the fair value less any accumulated depreciation
and accumulated impairment loss.
When assets are sold or retired, their cost and accumulated
depreciation are eliminated from the accounts and any gain or loss
resulting from their disposal is included in the income statement.
Depreciation for property, plant and equipment except land
and construction in progress is computed using the straight-line
method over the following estimated useful lives, between 3 to 60
years.
At each balance sheet date the Group reviews the carrying
amounts of its property, plant and equipment and intangible
assets to determine whether there is any indication that those
assets have suffered impairment. If such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not possible
to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs.
Inventories, including work-in-process are stated at the lower
of cost and net realisable value. Net realisable value is the
selling price in the ordinary course of business, less the costs of
completion, marketing and distribution. Cost comprises direct
materials and, where applicable, direct labour costs and those
overheads that have been incurred in bringing the inventories to
their present location and condition. The following cost formulas
were used to determine the cost applicable to different types of
inventories:
• the weighted average method for purchased crude oil and
petroleum products;
• the first-in-first-out (FIFO) for supplies and materials.
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Cash includes cash on hand, cash with banks and checks in course
of being cashed. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash
within remaining three months or less to maturity from the date of
acquisition and that are subject to an insignificant risk of change
in value.
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured.
Sales of goods are recognised when delivery has taken place and
transfer of significant risks and rewards has been completed.
Revenue comprises the fair value of the sale of goods and services,
net of value-added tax and any excise duties and other sales taxes,
rebates and discounts.
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