Staatsolie Annual Report 2017

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Confidence in Our Own Abilities 84 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) Available-for-sale (AFS) financial investments Environmental risk liability Liabilities AFS financial for environmental investments include costs are equity recognized and debt when securities. a clean-up Equity is investments probable and classified the associated availablefor-sale be are reliably those estimated. neither classified Generally, as held-for-trading the timing of recognition nor designated of these at fair provisions value through coincides profit with or loss. the costs can commitment After initial measurement, to a formal plan AFS of action financial or, investments if earlier, on are divestment subsequently or on closure measured of inactive at fair value sites. with The amount unrealized recognized gains or is losses the best recognized estimate as of OCI the until expenditure the investment required. is derecognized, If the effect of at the which time time, value the of money cumulative is material, gain or the loss amount is recognized in is other present operating value income of the estimated or expense, future or expenditure. the investment is determined to be impaired, at which time, the cumulative loss is reclassified to the consolidated statement Contingent of profit or loss liabilities in finance costs and removed from the OCI. The Group evaluates its AFS financial assets Contingent to determine liabilities whether may the ability arise and from intention the ordinary to sell course them in of the business near term in is relation still appropriate. to claims against the Group, including legal, contractual and other claims. By their nature, contingencies will be resolved only when (ii) Financial one or liabilities more uncertain future events occur or fail to occur. The assessment of the existence, and potential Recognition quantum, and measurement of contingencies inherently involves the exercise of significant judgment and the use of estimates Financial liabilities regarding are the classified, outcome of at future initial events. recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, as appropriate. All financial liabilities are recognized initially at fair Recoverability value and, in the of case assets of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s assesses financial each liabilities asset include or cash trade generating and other unit payables, (CGU) (excluding loans and goodwill, borrowings which including is assessed bank annually overdrafts. regardless of indicators) in each reporting period to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is Loans made, and which borrowings is considered to be the higher of the fair value less cost of disposal (FVLCD) and valuein-use This is (VIU). the category The assessments most relevant require to the the use Group. of estimates After initial and assumptions recognition, interest such as long-term bearing loans oil prices and (considering borrowings are current subsequently and historical measured prices, at amortized price trends cost and using related the EIR factors), method. discount Gains rates, and losses operating are costs, recognized future in capital the consolidated requirements, statement decommissioning of profit or costs, loss when exploration the liabilities potential, are derecognized reserves and as operating well as performance through the EIR (which amortization includes process. production Amortized and sales cost volumes). is calculated These by taking estimates into account and assumptions any discount are or subject premium to on risk acquisition and uncertainty. and fees Therefore, costs there that are is a an possibility integral that part changes of the EIR. in circumstances The EIR amortization will impact is these included projections, in finance which costs may in the impact consolidated the recoverable statement amount of profit assets or loss. and/or This category CGUs. generally applies to interest-bearing loans and borrowings. Units of production (UOP) depreciation of oil assets Oil properties m. Inventories are depreciated using UOP method over total proved developed and undeveloped Petroleum hydrocarbon products reserves. are This valued results at the in lower a depreciation/amortization of cost and net realizable charge value. proportional to the depletion of the anticipated remaining production from the field. 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 62 Page 84
Annual Report 2017 85 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 The life of each item, which is assessed at least annually, has regard to both its physical life limitations selling price in the ordinary course of business, less estimated costs of completion and the estimated and present assessments of economically recoverable reserves of the field at which the asset is located. costs to sell. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves The cost of and crude estimates oil and of refined future products capital is expenditure. the purchase The cost, calculation the cost of of refining, the UOP including rate the of depreciation/amortization appropriate proportion of will depreciation, be impacted depletion to the extent and amortization that actual production and overheads in the based future is on different normal from operating current capacity, forecast determined production on based a weighted on total average proved basis. reserves, or future capital expenditure estimates change. The net realizable Changes to value prove of crude reserves oil and could refined arise due products to changes is based in on the the factors estimated or assumptions selling price used in the in estimating ordinary course reserves, of business, including: less the estimated costs of completion and the estimated costs necessary to make • the The sale. effect on proved reserves of differences between actual commodity prices and commodity price assumptions Materials and supplies are valued using the weighted average cost method. • Unforeseen operational issues Pipeline fill Defined benefit plans (pension benefits) Crude oil, which is necessary to bring a pipeline into working order, is treated as a part of the related The cost of defined benefit pension plans and other post-employment medical benefits and the present pipeline. This is on the basis that it is not held for sale or consumed in a production process, but is value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves necessary to the operation of a facility during more than one operating cycle, and its cost cannot be making various assumptions which may differ from actual developments in the future. These include the recouped through sale (or is significantly impaired). This applies even if the part of inventory that is determination of the discount rate, future salary increases, mortality rates and future pension increases. deemed to be an item of property, plant and equipment cannot be separated physically from the rest of Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined inventory. It is valued at cost and is depreciated over the useful life of the related asset. benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. n. Impairment of non-financial assets The Group parameter assesses most subject at each to reporting change date is the whether discount there rate. is In an determining indication that the an appropriate asset may discount be impaired. rate, management If any indication considers exists, or the when interest annual rates impairment of government testing for bonds an asset in is currencies required, the consistent Group estimates with the currencies the asset’s of recoverable the post-employment amount. An benefit asset’s obligation recoverable with at amount least an is ‘AA’ the higher rating or of above, an asset’s set or by cash an internationally generating units acknowledged (CGU) fair value rating less agency, costs of and disposal extrapolated and its as value needed in use. along It is the determined yield curve for an to correspond individual asset, with unless the expected the asset term does of the not defined generate benefit cash inflows obligation. that The are underlying largely independent bonds are of further those reviewed from other for assets quality. or Those groups having of assets. excessive Where credit the spreads carrying are amount removed of an from asset the analysis or CGU of exceeds bonds on its which recoverable the discount amount, rate the is asset based, is on considered the basis impaired that they do and not is represent written down high to quality its recoverable bonds. amount. In The assessing mortality value rate in is use, based the on estimated publicly future available cash mortality flows are tables discounted for the specific to their present countries. value Those using mortality a pretax discount tend to rate change that only reflects at intervals current in market response assessments to demographic of the changes. time value Future of money salary increases and the risks and tables pension specific to increases the asset. are In determining based on expected fair value future less costs inflation of disposal, rates for recent the market respective transactions countries. are Further taken details into account. about pension If no such obligations transactions are can provided be identified, in Note 4.8. 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 63 Page 85
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Contact Information Head Office Dr.
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Staatsolie Annual Report 2017

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