Page 197 - Pakistan Oilfield Limited - Annual Report 2022

195
Annual Report 2022

S.No. Key Audit Matters How the matter was addressed in our audit
(ii) Investment in associated companies
(Refer note 17 to the consolidated financial
statements)
The Group has investment in its associated Our audit procedures in relation to assessment of
companies National Refinery Limited (NRL) and carrying value of investment in associated companies,
Attock Petroleum Limited (APL). As at June 30, amongst others, included the following:
2022, the carrying amount of investment in above • Assessed the appropriateness of management’s
referred associated companies amounted to Rs accounting for investment in associated companies;
10,536 million (net of recognised impairment loss
of Rs 5,791 million) and Rs 3,862 million respectively • Understood management’s process for identifying
which carrying values are higher by Rs 5,487 million the existence of impairment indicators in respect
and Rs 1,620 million respectively in relation to the of investment in associated companies;
quoted market value of their respective shares. • Evaluated the independent external investment
advisor’s and management expert’s competence,
The Group carries out impairment assessment at capabilities and objectivity;
each reporting period end of the value of investment
where there are indicators of impairment. The • Made inquiries of the independent external
Group has assessed the recoverable amount of investment advisor/ management expert and
the investment in associated companies based assessed the valuation methodology used;
on the higher of the value-in-use (“VIU”) and fair • Checked, on sample basis, the reasonableness of
value (quoted market price as at June 30, 2022). the input data provided by the management to the
VIU is based on valuation analysis carried out independent external investment advisor and the
by an independent external investment advisor management’s expert, to supporting evidence;
engaged by the management for NRL and by • Assessed the reasonableness of cash flow
the management’s expert for APL. VIU is based projections, challenging and performing audit
on a discounted cash flow model which involves procedures on assumptions such as growth rate,
estimation of future cash flows. This estimation future revenue and costs, terminal growth rate
is inherently uncertain and requires significant and discount rate by comparing the assumptions
judgement on both future cash flows and the to historical results, budgets and comparing the
discount rate applied to the future cash flows. current year’s results with prior year forecast and
other relevant information;
In view of significant management judgement • Checked mathematical accuracy of cash flows
involved in the determination of recoverable value projections;
i.e. higher of VIU and fair value, we considered this
as a key audit matter. • Performed independently a sensitivity analysis in
consideration of the potential impact of reasonably
possible upside or downside changes in key
assumptions; and
• Checked quoted price of investment in NRL and
APL as of June 30, 2022 with publicly available
stock exchange data; and
• Assessed the adequacy of the Group’s disclosures
in the consolidated financial statements in this
respect.