Page 202 - Pakistan Oilfields Limited - Annual Report 2021

NOTES TO AND FORMING

PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2021

Billings are generally raised in the following month which are payable within 30 to 45 days in
accordance with the contractual arrangement with customers.

Income on investments at amortised costs and bank deposits is recognized on time proportion basis
using the effective yield method.

Dividend income is recognized when the right to receive dividend is established.

4.26 Joint arrangements

Investments in joint arrangements are classified as either joint operations or joint ventures
depending on the contractual right and obligations of the parties to the arrangement. The Group
has assessed the nature of its joint arrangements and determined them to be joint operations. The
Group 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.
4.27 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.

4.28 Dividend distribution

Dividend distribution to the shareholders is accounted for in the period in which dividend is declared.

4.29 Leases
4.29.1 Right of use asset

The Group assesses whether a contract is or contains a lease at inception of the contract. If the
Company assesses contract contain a lease and meet requirements of IFRS 16, the Group 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.
4.29.2 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 Group’s incremental borrowing rate. Generally, the
Group uses its incremental borrowing rate as the discount rate.

200 PAKISTAN OILFIELDS LIMITED