Page 204 - Pakistan Oilfields Limited - Annual Report 2020

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NOTES TO AND FORMING
PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
202
PAKISTAN OILFIELDS LIMITED
4.14 Other intangible assets
These are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Amortization is calculated using the straight line method over the period of useful life of the asset
at the rates specified in note 17. Costs associated with maintaining intangibles are recognized as
expense as and when incurred. Amortization on additions is charged from the month in which an
intangible asset is acquired or capitalized, while no amortization is charged for the month in which
the intangible asset is disposed off.
4.15 Exploration assets / costs and development costs
4.15.1
Exploration and development costs are accounted for using the “Successful Efforts Method” of
accounting.
4.15.2 Exploration costs
All exploration costs, other than those relating to exploratory drilling, are charged to income as
incurred. Exploratory drilling costs i.e. costs directly associated with drilling of an exploratory well,
are initially capitalized pending determination of proven reserves. These costs are either charged to
income if no proved reserves are found or transferred to development costs if proved reserves are
found.
All capitalized costs are subject to review for impairment at least once a year and any impairment
determined is immediately charged to income.
4.15.3 Development costs
Development costs are stated at cost less accumulated amortization and impairment losses.
Expenditure on drilling of development wells, including unsuccessful development wells, is
capitalized within development costs. Capitalized development costs are amortized on a unit of
production basis over the total proved developed reserves of the field or @ 5% per annumwhere the
life of the field is more than 20 years.
4.16 Stores and spares
Stores and spares are valued at cost determined on moving average formula less allowance for
obsolete items. Stores in transit are stated at invoice value plus other charges paid thereon.
4.17 Stock in trade
Stocks are valued at the lower of average annual cost (including appropriate production overheads)
and net realizable value. Net realizable value is determined on the basis of estimated selling price of
the product in the ordinary course of business less costs necessary to be incurred for its sale.