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NOTES TO AND FORMING
PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
139
PAKISTANOILFIELDS LIMITED
The lease liability is measured at amortised cost using the effective interest method. It is remeasured
when there is a change in future lease payments arising from a change in an index or rate, if there
is a change in the Company’s estimate of the amount expected to be payable under a residual
value guarantee, or if the Company changes its assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of
the right-of-use asset has been reduced to zero.
Variable lease payments are recongnised in profit or loss in the period in which the condition that
triggers those payments occurs.
The Company has opted not to recognize right of use asssets for short-term leases i.e. leases with
a term of twelve(12) months or less. The payments associated with such leases are recognized in
profit or loss when incurred.
5.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with approved accounting standards requires
the use of certain accounting estimates. It also requires management to exercise judgment in the
process of applying the Company's accounting policies. Estimates and judgments are continually
evaluated and are based on historical experience, including expectation of future events that are
believed to be reasonable under the circumstances. The areas where various assumptions and
estimates are significant to the Company's financial statements or where judgment was exercised
in application of accounting policies are as follows:
i)
Estimated crude oil/gas reserves used for amortization of development and
decommissioning costs - note 4.13 and 14
ii)
Estimated useful life of property, plant and equipment - note 4.12 and 13.1
iii)
Estimated costs, discount and inflation rate used for provision for decommissioning costs
- note 4.7 and 9.2
iv)
Estimate of recoverable amount of investment in associated Company - note 4.14 and 16
v)
Estimated value of staff retirement benefits obligations - note 4.9 and 38
vi)
Provision for taxation - note 4.5 and 33
vii)
Price adjustment related to crude oil sales - note 4.24 and 25
viii)
Impairment of financial assets - note 4.21
ix)
Right of use asset and corresponding lease liability - note 4.28