Page 210 - Pakistan Oilfield Limited - Annual Report 2022

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PAKISTAN OILFIELDS LIMITED

Notes to and Forming Part of the -
Consolidated Financial Statements

For the year ended June 30, 2022

b) Associates
Associates are all entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investment in
associates are accounted for using the equity method of accounting. Under this method, the
investment is initially recognized at cost, and the carrying amount is increased or decreased to
recognise the investor's share of the profit or loss of the investee after the date of acquisition. The
Group's investment in associates includes goodwill identified on acquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only a
proportionate share of the amounts previously recognized in other comprehensive income is
reclassified to statement of profit or loss where applicable.

The Group's share of post-acquisition profit is recognized in the statement of profit or loss, and its
share of post-acquisition movements in other comprehensive income is recognized in statement of
profit or loss and other comprehensive income with the corresponding adjustment to the carrying
amount of the investment. When the Group's share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Group does not recognize
further losses, unless it has incurred legal or constructive obligations or made payments on behalf
of the associate.
The Group determines at each reporting date whether there is any objective evidence if the associate
is impaired. If this is the case, the Group calculates the amount of impairment as the difference
between the recoverable amount of the associate and its carrying amount and recognises the
amount adjacent to share of profit/ (loss) of associates in the statement of profit or loss.
4.3 Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as
the Board of Directors that makes strategic decisions. The management has determined that the
Group has a single reportable segment as the Board of Directors views the Group's operations as
one reportable segment.

4.4 Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary
economic environment in which the Group operates. The financial statements are presented in
Pakistan Rupees, which is the Group's functional currency.

4.5 Foreign currency transactions and translation
Transactions in foreign currencies are recorded at the rates of exchange ruling on the date of
transaction. All assets and liabilities in foreign currencies are translated into rupees at the rates of
exchange ruling on the date of the statement of financial position. Exchange differences are dealt
with through the statement of profit or loss.

4.6 Taxation
Provision for current taxation is based on taxable income at applicable tax rates, adjusted for royalty
payments to the Government.