Staatsolie Annual Report 2017

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Annual Report 2017 151 Staatsolie Maatschappij Suriname N.V. Notes to the Consolidated financial statements for the years ended December 31, 2017 and 2016 (continued) IFRS Inventories 15 will are not stated change at the the assessment lower of cost of and the net existence realizable of embedded value. Net derivatives. realizable value IFRS is 15 the states estimated that if a selling contract price is partially in the ordinary within scope course of this of business, standard less and partially estimated in the costs scope of completion of another standard, the estimated an entity will costs first to apply sell. the separation and measurement requirements of the other standard(s). Therefore, to the extent The cost that of provisional crude oil pricing and refined features products are considered is the purchase embedded cost, derivatives the cost that of require refining, separation including from the their appropriate host contract, proportion they of will depreciation, continue to be depletion outside and the scope amortization of IFRS and 15 and overheads entities will based be required on normal to account operating for capacity, these in determined accordance on with a weighted IFRS 9. average Revenue basis. in respect of the host contract will be recognized when control passes to the customer (which has been determined to be the same point in time, i.e., when The net realizable value of crude oil and refined products is based on the estimated selling price in the the crude oil is physically transferred into a vessel, pipe or other delivery mechanism) and will be ordinary course of business, less the estimated costs of completion and the estimated costs necessary to measured at the amount the entity expects to be entitled – being the estimate of the price expected to be make the sale. received, based on the most recently determined estimate of crude quality differential and the estimated forward Materials price and (which supplies is are consistent valued with using current the weighted practice). average As noted cost above method. in the discussion on the potential impact of IFRS 9, the embedded derivative will no longer be separated from the host contract. This is because Pipeline fill the existence of the provisional pricing features will mean the receivable will fail to meet the requirements Crude oil, which to be is measured necessary at to amortized bring a pipeline cost and into instead working the order, entire is receivable treated as will a be part measured of the related to fair value pipeline. with This subsequent is on the basis movements that it is being not held recognized for sale in or the consumed statement in a of production profit or loss process, and but other is comprehensive necessary to the income. operation of a facility during more than one operating cycle, and its cost cannot be recouped through sale (or is significantly impaired). This applies even if the part of inventory that is When it comes to the presentation of amounts arising from such provisionally priced contracts, IFRS 15 deemed to be an item of property, plant and equipment cannot be separated physically from the rest of requires “revenue from contracts with customers” to be disclosed separately from other types of revenue. inventory. It is valued at cost and is depreciated over the useful life of the related asset. This means that revenue recognized from the initial sale must be separately disclosed in the consolidated financial statements from any revenue/income recognized from subsequent movements in the fair value n. Impairment of non-financial assets of the related receivable. The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates (b) Other presentation and disclosure requirements the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash In addition to the presentation and disclosure requirements discussed above, IFRS 15 contains other generating units (CGU) fair value less costs of disposal and its value in use. It is determined for an presentation and disclosure requirements which are more detailed than current IFRS. The presentation individual asset, unless the asset does not generate cash inflows that are largely independent of those requirements represent a significant change from current practice and will increase the volume of from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its disclosures required in Staatsolie’s consolidated financial statements. Many of the disclosure recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In requirements in IFRS 15 are completely new. In 2017 Staatsolie started to consider the new systems, 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 internal controls, policies and procedures necessary to collect and disclose the required information. 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 Page 151 63
Confidence in Our Own Abilities 152 Staatsolie Maatschappij Suriname N.V. Notes to the Consolidated financial statements for the years ended December 31, 2017 and 2016 (continued) Available-for-sale 3. IFRS 16 Leases (AFS) financial investments AFS IFRS financial 16 was investments issued January include 2016 equity and and it replaces debt securities. IAS 17 Equity Leases, investments IFRIC 4 Determining classified as whether availablefor-sale Arrangement are those contains neither a classified Lease, SIC-15 as held-for-trading Operating nor Leases-Incentives designated at fair and value SIC-27 through Evaluating profit or loss. the an After Substance initial of measurement, Transactions Involving AFS financial the Legal investments Form of a are Lease. subsequently IFRS 16 sets measured out the at principles fair value for with the unrealized recognition, gains measurement, or losses presentation recognized as and OCI disclosure until the of investment leases and is requires derecognized, lessees at to which account time, for the all cumulative leases under gain a single or loss on-balance is recognized sheet model in other similar operating to the accounting income or for expense, finance or leases the under investment IAS 17. is The determined standard to be includes impaired, two at recognition which time, exemptions the cumulative for loss lessees is reclassified – leases to of the ’low-value’ consolidated assets statement (e.g., personal of profit or computers) loss in finance and costs short-term and removed leases (i.e., from leases the OCI. with The a lease Group term evaluates of 12 months its AFS financial or less). assets At the commencement to determine whether date the of a ability lease, and a lessee intention will to recognize sell them a in liability the near to make term is lease still appropriate. payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use (ii) Financial asset). liabilities Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Recognition and measurement Lessees Financial will liabilities be also are required classified, to re-measure at initial recognition, the lease liability as financial upon liabilities the occurrence at fair value of certain through events profit (e.g., or a loss, change loans in and the borrowings, lease term, a payables, change in as future appropriate. lease payments All financial resulting liabilities from are a change recognized in an initially index or at rate fair used value and, to determine the case those of loans payments). and borrowings The lessee and payables, will generally net of directly recognize attributable the amount transaction of the costs. remeasurement The Group’s financial of the lease liabilities liability include as an adjustment trade and other to the payables, right-of-use loans asset. and borrowings including bank Lessor overdrafts. accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish Loans and borrowings between two types of leases: operating and finance leases. IFRS 16 also requires lessees and lessors This is to the make category more most extensive relevant disclosures to the Group. than under After IAS initial 17. recognition, IFRS 16 is effective interest bearing for annual loans periods and beginning borrowings on are or subsequently after January 1, measured 2019. Early at amortized application cost is permitted, using the but EIR not method. before an Gains entity and applies losses IFRS are 15. recognized A lessee in can the choose consolidated to apply statement the standard of profit using or loss either when a full the retrospective liabilities are or derecognized a modified retrospective as well as approach. through the The EIR standard’s amortization transition process. provisions Amortized cost permit is calculated certain reliefs. by taking In 2017, into account Staatsolie any is discount currently or assessing premium on the acquisition potential effect and fees of IFRS or costs 16 on that its consolidated are an integral financial part of statements. the EIR. The EIR amortization is included in finance costs in the consolidated statement of profit or loss. This category generally applies to interest-bearing loans and borrowings. m. Inventories Petroleum products are valued at the lower of cost and net realizable value. Raw materials: • Purchase cost is valued on weighted average method Finished 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 Page 152 62
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Staatsolie Annual Report 2017

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