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PAKISTAN OILFIELDS LIMITED
Following are the key audit matters:
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 15 and 16 to the consolidated
financial statements)
As at June 30, 2020, the development and
decommissioning costs amounted to Rs
12,356million and exploration and evaluation
assets amounted to Rs 2,774 million.
The Group 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 Group based on estimates of the value in
use of that CGU.
The calculationof value inuseof development
and decommissioning costs requires the
exercise
of
significant
management’s
estimates 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 the 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.