Page 196 - Pakistan Oilfield Limited - Annual Report 2022

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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 14 and 15 to the consolidated financial
statements)
As at June 30, 2022, the development and Our audit procedures in relation to management’s
decommissioning costs amounted to Rs 10,209 impairment test, amongst others, included the following:
million and exploration and evaluation assets • Assessed the methodology used by management
amounted to Rs 3,020 million. to estimate value in use of each CGU;
The Group assesses at the end of each reporting • Assessed the assumptions of cash flow projections
period whether there is any indication that a Cash in calculation of the value in use of CGUs, challenging
Generating Unit (CGU) may be impaired.
the reasonableness of key assumptions i.e. oil and
Where impairment indicator is triggered for any gas reserves, oil and gas prices, production costs,
CGU, an impairment test is performed by the Group foreign exchange rates and discount rates based
based on estimates of the value in use of that CGU. on our knowledge of the business and industry by
comparing the assumptions to historical results,
The calculation of value in use of development and published market and industry data;
and decommissioning costs requires the exercise
of significant management’s estimates and • Assessed the impairment indicators as per IFRS
judgements on certain assumptions such as (i) 6 “Exploration for and Evaluation of Mineral
estimation of the volume of oil and gas recoverable Resources” for material balances included in
reserves; (ii) estimation of future oil and gas prices; exploration and evaluation assets;
(iii) cost profiles and inflation applied; (iv) foreign • Performed sensitivity analysis in consideration
exchange rates; and (v) discount rates. of the potential impact of reasonably possible
We considered this matter as key audit matter downside changes in assumptions relating to oil
due to the significant value of the related assets and gas prices, discount rate and other assumptions
at reporting date and due to significance of and;
judgements used by management. • Assessed the appropriateness of disclosures made

in the consolidated financial statements.