Staatsolie Annual Report 2017

Annual Report 2017 83
Staatsolie Maatschappij Suriname N.V.
Staatsolie Maatschappij Suriname N.V.
Notes to the Consolidated financial statements for the years ended December 31, 2017 and 2016
Notes (continued) to the Consolidated financial statements for the years ended December 31, 2017 and 2016
(continued)
Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated
This assessment often requires significant judgment. A different conclusion about both joint control and
selling price in the ordinary course of business, less estimated costs of completion and the estimated
whether the arrangement is a joint operation or a joint venture, may materially impact the accounting
costs to sell.
treatment.
The cost of crude oil and refined products is the purchase cost, the cost of refining, including the
Estimates appropriate and proportion assumptions of depreciation, depletion and amortization and overheads based on normal
The operating key assumptions capacity, determined concerning a the weighted future average and other basis. key sources of estimation uncertainty at the
reporting The net realizable date, that value have of a crude significant oil and risk refined of causing products a material is based adjustment on the estimated to the carrying selling amounts price in the of
assets ordinary and course liabilities of business, within the less next the financial estimated year, costs are of described completion below. and The the Group estimated based costs its necessary assumptions to
and make estimates the sale. on parameters available when the consolidated financial statements were prepared.
Existing circumstances and assumptions about future developments, however, may change due to
Materials and supplies are valued using the weighted average cost method.
market changes or circumstances arising beyond the control of the Group. Such changes are reflected in
the assumptions when they occur.
Pipeline fill
Crude oil, which is necessary to bring a pipeline into working order, is treated as a part of the related
Functional currency
pipeline. This is on the basis that it is not held for sale or consumed in a production process, but is
The functional currency for the parent entity and each of its subsidiaries, is the currency of the primary
necessary to the operation of a facility during more than one operating cycle, and its cost cannot be
economic environment in which the entity operates. The functional currency for GOw2 is Surinamese
recouped through sale (or is significantly impaired). This applies even if the part of inventory that is
dollar (SRD). The functional currency of Staatsolie, SPCS and Ventrin is the US dollar (US$).
deemed to be an item of property, plant and equipment cannot be separated physically from the rest of
Determination of functional currency may involve certain judgements to identify the primary economic
inventory. It is valued at cost and is depreciated over the useful life of the related asset.
environment and the parent entity reconsiders the functional currency of its entities if there is a change in
events and conditions which determined the primary economic environment.
n. Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired.
Decommissioning liability
If any indication exists, or when annual impairment testing for an asset is required, the Group estimates
Decommissioning costs will be incurred by the Group at the end of the operating life of some of the
the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash
Group’s facilities and properties. The Group assesses its decommissioning provision at each reporting
generating units (CGU) fair value less costs of disposal and its value in use. It is determined for an
date. The ultimate decommissioning costs are uncertain and cost estimates can vary in response to many
individual asset, unless the asset does not generate cash inflows that are largely independent of those
factors, including changes to relevant legal requirements, estimates of the extent and costs of
from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its
decommissioning activities, the emergence of new restoration techniques or experience at other
recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In
production sites, cost increases as compared to the inflation rates of 3% (2016: 3%), and changes in
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
discount rates of 8% (2016: 10%). The expected timing, extent and amount of expenditure may also
change, for example, in response to changes in oil and gas reserves or changes in laws and regulations
specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken
or their interpretation. Therefore, significant estimates and assumptions are made in determining the
into account. If no such transactions can be identified, an appropriate valuation model is used.
provision for decommissioning. As a result, there could be significant adjustments to the provisions
established Impairment losses which of would continuing affect operations future financial are recognized results. The in the provision consolidated reporting statement date of profit represents or loss
management’s in those expense best categories estimate of consistent the present with value the of function the future of decommissioning the impaired asset, costs except required. 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.
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