Page 177 - Pakistan Oilfields Limited - Annual Report 2021

Following are the key audit matters:

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 14 and 15 to the consolidated
financial statements)
As at June 30, 2021, the development and Our audit procedures in relation to management’s
decommissioning costs amounted to Rs impairment test, amongst others, included the
13,673 million and exploration and evaluation following:
assets amounted to Rs 512 million.
• Assessed the methodology used by management
The Group assesses at the end of each to estimate value in use of each CGU;
reporting period whether there is any • Assessed the assumptions of cash flow
indication that a Cash Generating Unit (CGU) projections in calculation of the value in use of
may be impaired. CGUs, challenging the reasonableness of key
Where impairment indicator is triggered for assumptions i.e. oil and gas reserves, oil and gas
any CGU, an impairment test is performed by prices, production costs, foreign exchange rates
the Group based on estimates of the value in and discount rates based on our knowledge of
use of that CGU. the business and industry by comparing the
The calculation of value in use of development assumptions to historical results, and published
and decommissioning costs requires the market and industry data;
exercise of significant management’s • Assessed the impairment indicators as per IFRS
estimates and judgements on certain 6 “Exploration for and Evaluation of Mineral
assumptions such as (i) estimation of the Resources” for material balances included in
volume of oil and gas recoverable reserves; exploration and evaluation assets;
(ii) estimation of future oil and gas prices; (iii) • Performed sensitivity analysis in consideration
cost profiles and inflation applied; (iv) foreign of the potential impact of reasonably possible
exchange rates; and (v) discount rates. downside changes in assumptions relating
We considered this matter as key audit to oil and gas prices, discount rate, and other
matter due to the significant value of the assumptions; and
related assets at reporting date and due • Assessed the appropriateness of disclosures
to significance of judgements used by made in the financial statements.
management.

ANNUAL REPORT 2021 175