Page 149 - Pakistan Oilfield Limited - Annual Report 2022

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Annual Report 2022

(ii) Separate approved contributory provident funds for management and non-management
employees for which contributions are made by the Company and the employee at the rate
of 10% of basic salary. Charge included in these financial is Rs 31,779 thousand (2021: Rs
31,214 thousand).
4.10 Trade and other payables

Liabilities for trade and other payables are carried at cost which is the fair value of the consideration
to be paid in future for goods and services received.

4.11 Contingent liabilities
A contingent liability is disclosed when the Company has a possible obligation as a result of past
events, whose existence will be confirmed only by the occurrence or non-occurrence, of one or
more uncertain future events not wholly within the control of the Company; or the Company has a
present legal or constructive obligation that arises from past events, but it is not probable that an
outflow of resources embodying economic benefits will be required to settle the obligation, or the
amount of the obligation cannot be measured with sufficient reliability.

4.12 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment
losses except for freehold land and capital work in progress, which are stated at cost.
Depreciation is provided on straight line method at rates specified in note 12.1 to the financial
statements. Depreciation is charged on additions from the month the assets become available for
the intended use up to the month in which these are derecognized.
Maintenance and normal repairs are charged to income as and when incurred. Major renewals and
improvements are capitalized and the assets so replaced, if any, are retired. Gains and losses on
derecognition of assets are included in income currently.

4.13 Exploration assets / costs and development costs
4.13.1 Exploration and development costs are accounted for using the “Successful Efforts Method” of
accounting.

4.13.2 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 after impairment
loss, 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.
4.13.3 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 annum where
the life of the field is more than 20 years.