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NOTES TO AND FORMING
PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
128
PAKISTANOILFIELDS LIMITED
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1
Basis of measurement
These financial statements have been prepared under the historical cost convention except as
otherwise disclosed in the respective accounting policy notes.
4.2
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified
as the Board of Directors that makes strategic decisions. The management has determined that
the Company has a single reportable segment as the Board of Directors views the Company's
operations as one reportable segment.
4.3
Functional and presentation currency
Items included in the financial statements aremeasured using the currency of the primary economic
environment in which the Company operates. The financial statements are presented in Pakistan
Rupees, which is the Company's functional currency.
4.4
Foreign currency transactions and translation
Transactions in foreign currencies are recorded at the rates of exchange ruling on the date of
transaction. All assets and liabilities in foreign currencies are translated into rupees at the rates of
exchange ruling on the date of the statement of financial position. Exchange differences are dealt
with through the statement of profit or loss.
4.5
Taxation
Provision for current taxation is based on taxable income at applicable tax rates, adjusted for royalty
payments to the Government.
Deferred tax is accounted for on all temporary differences using the liability method. Deferred
tax liability has been calculated at the estimated effective rate of 30% after taking into account
availability of future depletion allowance and set off available in respect of royalty payments to the
Government.
4.6
Provisions
Provisions are recognized when the Company has a legal or constructive obligation as a result
of past events and when it is probable that an outflow of resources will be required to settle the
obligation and a reliable estimate of the amount can be made.
4.7
Provision for decommissioning costs
Provision for decommissioning costs is recognized in full for development wells and production
facilities. The amount recognized is the present value of the estimated cost to abandon a well
and remove production facilities. A corresponding intangible asset of an amount equivalent to
the provision is also created and is amortized on unit of production basis over the total proved
developed reserves of the field or @ 5% where the life of a field is more than 20 years.