Page 211 - Pakistan Oilfield Limited - Annual Report 2022
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                                                                                              Annual Report 2022












                      Deferred tax is accounted for on all temporary differences using the liability method. Deferred
                      tax liability has been calculated at the estimated effective rate of 32% (2021: 30%) after taking
                      into account availability of future depletion allowance and set off available in respect of royalty
                      payments to the Government whereas deferred tax asset / liability of CAPGAS has been calculated
                      at applicable tax rate.

             4.7      Provisions
                      Provisions are recognized when the Group has a legal or constructive obligation as a result of past
                      events, when it is probable that an outflow of resources will be required to settle the obligation and
                      a reliable estimate of the amount can be made.
             4.8      Provision for decommissioning costs

                      Provision for decommissioning costs is recognized in full for development wells and production
                      facilities. The amount recognized is the present value of the estimated cost to abandon a well
                      and remove production facilities. A corresponding intangible asset of an amount equivalent to
                      the provision is also created and is amortized on unit of production basis over the total proved
                      developed reserves of the field or @ 5% where the life of a field is more than 20 years.
                      Most of these abandonment and removal events are many years in the future and the precise
                      requirements that will have to be met when the abandonment and removal event actually occurs
                      are uncertain. Abandonment and asset removal technologies and costs are constantly changing, as
                      are political, environmental, safety and public expectations. Consequently, the timing and amount
                      of future cash flows are subject to significant uncertainty.

                      The timing and amount of future expenditures are reviewed annually, together with the interest rate
                      to be used in discounting the cash flows. Any difference between the liability recognized and actual
                      costs incurred are charged/credited to statement of profit or loss in the year of decommissioning.
                      The effect of changes resulting from revisions to the estimate of the liability are incorporated on a
                      prospective basis.
                      The decommissioning cost has been discounted at a real discount rate of 1.00% (2021: 1.30%) per
                      annum.

             4.9      Employee compensated absences
                      The Group provides for compensated absences for all eligible employees in accordance with the
                      rules of the Group.
             4.10     Staff retirement benefits
                      The Company and its subsidiary operates the following staff retirement benefits plans:

                      POL
                      POL operates the following staff retirement benefits plans:

                (i)   A pension plan for its management staff and a gratuity plan for its management and non-management
                      staff. The pension and gratuity plans are invested through approved trust funds. Both are defined benefit
                      final salary plans. The pension and gratuity plans are complementary plans for management staff.
                      Pension payable to management staff is reduced by an amount determined by the actuary equivalent
                      to amount paid by the gratuity fund. Management staff hired after January 1, 2012 are only entitled
                      to benefits under gratuity fund. Actuarial valuations are conducted annually using the "Projected Unit
                      Credit Method" and the latest valuation was conducted as at June 30, 2022.
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