Staatsolie Annual Report 2017

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Annual Report 2017 137 Staatsolie Maatschappij Suriname N.V. Notes to the Consolidated financial statements for the years ended December 31, 2017 and 2016 (continued) Financial Inventories risk are management stated at the lower objectives of cost and and policies net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated Market risk costs to sell. Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because The cost of of changes crude oil in and market refined prices. products Market is risk the comprises purchase three cost, types the cost of risk: of refining, commodity including price risk, the interest appropriate rate risk proportion and foreign of depreciation, currency risk. depletion Financial and instruments amortization affected and by overheads market risk based include on loans normal and borrowings, operating capacity, deposits, determined trade receivables, on a weighted trade payables average basis. and accrued liabilities. Market The net risks realizable due to value interest of rate crude (LIBOR) oil and risk refined have products been accepted is based and on is the evaluated estimated and selling managed price as in part the of ordinary the portfolio course risk of business, management less the policies. estimated In addition costs of Staatsolie completion monitors and the a estimated desired ratio costs for necessary its available to cash make in the US$ sale. to fulfill its foreign currency business obligations. Furthermore Staatsolie accepts the risks of price Materials fluctuations and supplies of oil are products, valued while using takes the weighted into account average a conservative cost method. low price for its work program and budget. Pipeline fill Interest Crude oil, rate which risk is necessary to bring a pipeline into working order, is treated as a part of the related Interest pipeline. rate This risk on is the the risk basis that that the it fair is value not held or future for sale cash or flows consumed of a financial a production instrument process, will fluctuate but is because necessary of to changes the operation in market of a interest facility rates. during The more Group’s than one exposure operating to the cycle, risk and of changes its cost cannot in market be interest recouped rates through relates sale primarily (or is to significantly the Group’s impaired). long-term This debt obligations applies even with if floating the part interest of inventory rates. that is deemed to be an item of property, plant and equipment cannot be separated physically from the rest of Interest inventory. rate It is sensitivity valued at cost and is depreciated over the useful life of the related asset. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of n. loans Impairment and borrowings of non-financial affected. With assets all other variables held constant, the Group’s profit before tax The is Group affected assesses through at the each impact reporting on floating date whether rate borrowings, there is an as indication follows: that an asset may be impaired. If any indication Increase exists, / decrease or when annual Effect impairment on profit before testing tax for an Effect asset on is profit required, before the tax Group estimates the x US$ asset’s 1 in basis points Corporate term loan Loan SPCS recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating 2017 units (CGU) fair value less costs of disposal and its value in use. It is determined for an individual US dollar asset, unless +60the asset does not generate cash 1,595 inflows that are largely independent 470 of those -60 (1,595) (470) from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable 2016 amount, the asset is considered impaired and is written down to its recoverable amount. In US dollar +60 1,778 587 assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks -60 (1,778) (587) specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses of continuing operations are recognized in the consolidated statement of profit or loss in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to OCI. In this case, the impairment is also recognized in OCI up to the amount of any previous revaluation. Page 137 63
Confidence in Our Own Abilities 138 Staatsolie Maatschappij Suriname N.V. Notes to the Consolidated financial statements for the years ended December 31, 2017 and 2016 (continued) Available-for-sale Foreign Currency (AFS) risk financial investments AFS Foreign financial currency investments risk is the include risk that equity the and fair debt value securities. or future Equity cash investments flows of an exposure classified as will availablefor-sale because are of changes those neither in foreign classified exchange as held-for-trading rates. The Group’s nor designated exposure at to fair the value risk of through changes profit in or foreign loss. fluctuate exchange After initial rates measurement, relates primarily AFS to financial the Group’s investments operating are activities subsequently of subsidiary measured GOw2 at (as fair revenues value with and expenses unrealized are gains denominated or losses in recognized a foreign currency). as OCI until the investment is derecognized, at which time, the The cumulative Group gain manages or loss trade is recognized transactions in by other offsetting operating local income payments or expense, and local or receivables the investment SRD is creating determined a natural to be impaired, hedge for at the which SRD time, transactions. the cumulative loss is reclassified to the consolidated statement of profit or loss in finance costs and removed from the OCI. The Group evaluates its AFS financial assets to Commodity determine price whether risk the ability and intention to sell them in the near term is still appropriate. The Group is exposed to the risk of fluctuations in prevailing market commodity prices on the mix of oil (ii) products Financial it produces. liabilities The Group’s policy is to manage these risks through the use of contract-based prices with customers. As mentioned in the market risk section above, Staatsolie takes a conservative low Recognition and measurement price approach for its work program and budget. Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or The loss, analysis loans and is based borrowings, on the payables, assumption appropriate. that changes All in financial the crude liabilities oil price are result recognized in a change initially of 10% at fair in the value sale and, prices in the of case the oil of products, loans and with borrowings all other and variables payables, held net constant. of directly Reasonably attributable possible transaction movements costs. in The commodity Group’s financial prices were liabilities determined include based trade and on other a review payables, of the loans last two and years’ borrowings historical including prices bank and economic overdrafts. forecasters’ expectations. x US$ 1,000 Loans and borrowings Effect on profit before tax Effect on profit before tax Increase / decrease in crude oil for the year ended 31 This is the category most relevant for to the the year Group. ended After 31 December initial recognition, interest bearing loans and prices December 2016 2017 (increase/decrease) borrowings are subsequently measured at amortized cost using the EIR (increase/decrease) method. Gains and losses are recognized in the consolidated statement of profit or loss when the liabilities are derecognized as well as +10% 38,025 28,493 through the EIR -10% amortization process. Amortized cost is calculated (38,025) by taking into account (28,493) any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included Liquidity in risk finance costs in the consolidated statement of profit or loss. This category generally applies to interest-bearing Liquidity risk is loans the risk and that borrowings. the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. m. Inventories The Group manages its liquidity risk based on reporting covenants, encompassing sensitivity analysis for Petroleum products are valued at the lower of cost and net realizable value. production and conservative price assumptions, and restrained capital expenditures. Furthermore, optional Raw materials: debt is available within the credit agreement in accordance with the debt basket. Cash in excess is • being Purchase managed cost by is valued the corporate on weighted treasury average department method through “intercompany cash pooling” agreements with Finished its subsidiaries. goods and work in progress: • Cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs Page 138 62
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Staatsolie Annual Report 2017

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