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PAKISTANOILFIELDS LIMITED
S.No.
Key Audit Matters
How the matter was addressed in our audit
(i)
Analysis of impairment of development and
decommissioning costs and exploration
and evaluation assets
(Refer note 14 and 15 to the financial statements)
As at June 30, 2020, the development and
decommissioning costs amounted to Rs
12,356 million and exploration and evaluation
assets amounted to Rs 2,774 million.
The Company assesses at the end of each
reporting period whether there is any
indication that a Cash Generating Unit (CGU)
may be impaired.
Where impairment indicator is triggered for
any CGU, an impairment test is performed by
the Company based on estimates of the value
in use of that CGU.
The calculation of value in use of development
and decommissioning costs requires the
exerciseof significantmanagement’sestimates
and judgements on certain assumptions such
as (i) estimation of the volume of oil and gas
recoverable reserves; (ii) estimation of future
oil and gas prices; (iii) cost profiles and inflation
applied; (iv) foreign exchange rates; and (v)
discount rates.
We considered this matter as key audit matter
due to significant value of the related assets
at reporting date and due to significance of
judgements used by management.
Our audit procedures in relation to management’s
impairment test, amongst others, included the
following:
•
Assessed the methodology used by
management to estimate value in use of each
CGU;
•
Assessed the assumptions of cash flow
projections in calculation of the value in use
of CGUs, challenging the reasonableness
of key assumptions i.e. oil and gas reserves,
oil and gas prices, production costs, foreign
exchange rates and discount rates based on
our knowledge of the business and industry
by comparing the assumptions to historical
results, and published market and industry
data;
•
Assessed the impairment indicators as per
IFRS 6 “Exploration for and Evaluation of
Mineral Resources” for material balances
included in exploration and evaluation assets;
•
Performed sensitivity analysis in consideration
of the potential impact of reasonably possible
downside changes in assumptions relating to
oil and gas prices and discount rate; and
•
Assessed the appropriateness of disclosures
made in the financial statements.
Following are the key audit matters: