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Depreciation of the equipment in oil and gas production mine is computed using the unit-of-output method. Depreciation of
property, plant and equipment is computed using the fixed-percentage-on-declining-balance method. Each significant part is
depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimates accounted for prospectively.
On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying
amount of the asset is recognized in profit or loss.
Investment Properties
Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction
for such purposes). Investment properties also include land held for a currently undetermined future use.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment
properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is
recognized using the fixed-percentage-on-declining-balance method.
On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the
asset is included in profit or loss.
Intangible Assets
Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured
at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis
over the asset's estimated useful life. The estimated useful life, residual value, and amortization method are reviewed at the
end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual
value of an intangible asset with a finite useful life should be assumed to be zero unless the Corporation expects to dispose of
the intangible asset before the end of its economic life.
Oil and Gas Interests and Exploration Expenses
All geological and geophysical exploration costs are charged to current income.
The costs of drilling exploratory wells ("exploration well expenses") in sites that have not yet proven to contain reserves of
commercial quantities ("unproven sites") are initially charged to current income. Exploration well expenses are subsequently
capitalized as part of "oil and gas interests" accounts when (i) sites are proven to contain mineral reserves of commercial
quantities and (ii) the construction of the wellhead equipment or offshore production platforms and flow lines is complete.
The exploration expenses incurred in the current year are reclassified from "exploration expenses" to assets. Costs already
charged to income in prior years are recognized as assets and as "nonoperating income."
The costs of drilling commercial wells, which are constructed after the sites are proven to contain mineral reserves of commercial
quantities, are capitalized as assets. However, if the commercial wells turn out to be dry, such costs are charged to current income.
For oil site acquisitions, the Corporation's payments for this purchase or investments in foreign joint ventures involving interest
in oil sites - including the Corporation's share in the costs of drilling commercial wells, production, transport and storage
equipment but excluding the Corporation's share in the costs of drilling exploratory wells and other exploration expenses -
are capitalized as oil and gas interests. The Corporation's share in joint ventures' net earnings (or net losses) is recognized
as other operating revenues (or other operating costs). The Corporation recognizes earnings remitted by joint ventures as a
reduction of oil and gas interests. These costs are amortized at the ratio of the actual quantity of minerals extracted from the
wells for the year to the estimated mineral reserve. The amortized costs and operating expenses paid to joint ventures are
regarded as the cost of the Corporation's share of the oil and gas extracted. The accompanying financial statements included
the related sales and cost of goods sold attributable to the Corporation's share of the oil and gas sold by the joint ventures.
For domestic sites and sites of product-sharing contracts, the Corporation amortizes the amount recognized in oil and gas
interests by the ratio of actual quantity produced in the period over total estimated production quantity of the site. The
Corporation accounts for the cost of these mineral production in amortized cost plus the site operation expenses paid, and
recognize crude oil inventory and natural gas inventory by the output value method. The Corporation recognizes sales and
cost of good sold on sale of the inventory.
For sites of Provision of Services Contract, the Corporation amortized the amount recognized in oil and gas interests in the
same method of that of domestic sites and sites of product-sharing contract. The Corporation accounts for the amortized
amount and the site operation expenses paid as other operating costs. On the other hand the Corporation recognized other
operating income by multiplying produced quantity to a revenue rate contracted with local oil site governments.
The Corporation recognizes earnings from OPIC-Houston ("Huffco") and translation adjustments based on the financial
statements of Huffco for the same reporting period as that of the Corporation.
Profit and loss generated from the derecognition of oil and gas interest is measured as the difference between the net disposal
proceeds and the carrying amount of the asset and recognized in statement of consolidated income in the period of derecognition.
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Financial Statement