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NOTES TO AND FORMING
PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
138
PAKISTANOILFIELDS LIMITED
The Company has recognized its share of assets, liabilities, income and expenditure jointly held
or incurred under the joint operations on the basis of latest available audited accounts of the
joint operations and where applicable, the cost statements received from operators of the joint
arrangements for the intervening period up to the statement of financial position date.
4.26 Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise cash in hand,
demand deposits and other short term highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of change in value, and
finances under mark up arrangements.
4.27 Dividend distribution
Dividend distribution to the shareholders is accounted for in the period in which dividend is
declared.
4.28 Leases
4.28.1 Right of use asset
The Company assesses whether a contract is or contains a lease at inception of the contract. If
the Company assesses contract contains a lease and meets requirements of IFRS 16, the Company
recognises a right-of-use asset and a lease liability at the lease commencement date. The right-
of-use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore
the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the earlier of the end of the useful life of the right-of-use asset or the end
of the lease term. The estimated useful lives of right-of-use assets are determined on the same
basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
4.28.2 Lease liability
If applicable, the lease liability is initially measured at the present value of the lease payments that
are not paid at the commencement date, discounted using the interest rate implicit in the lease or
if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the
Company uses its incremental borrowing rate as the discount rate.
Lease payments in the measurement of the lease liability comprise the following:
a. fixed payments, including in-substance fixed payments;
b. variable lease payments that depend on an index or a rate, initially measured using the index or
rate as at the commencement date;
c. amounts expected to be payable under a residual value guarantee; and
d. the exercise price under a purchase option that the Company is reasonably certain to exercise,
lease payments in an optional renewal period if the Company is reasonably certain to exercise
an extension option, and penalties for early termination of a lease unless the Company is
reasonably certain not to terminate early.