Page 58 - CPC 2018 Annual Report

56 CPC Corporation, Taiwan 2018
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 Company’s share of the oil and gas extracted. The accompanying financial statements included the related sales and cost of goods sold attributable to the Company’s share of the oil and gas sold by the joint ventures.
For domestic sites and sites of product-sharing contracts, the Company 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 Company accounts for minerals produced at amortized cost plus the site operation expenses paid, and recognizes crude oil inventory and natural gas inventory by the output value method. The Company recognizes sales and cost of goods sold on the sale of inventory.
For sites of Provision of Services Contract, the Company 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 Company accounts for the amortized amount and the site operation expenses paid as other operating costs. On the other hand the Company recognized other operating income by multiplying produced quantity to a revenue rate contracted with local oil site governments.
The Company recognizes earnings from Sanga Sanga and translation adjustments based on the financial statements of Sanga Sanga for the same reporting period as that of the Company.
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 income in the period of derecognition.
(m) Impairment of non financial assets
The carrying amounts of the Company’s non financial assets, other than assets arising from inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. If it is not possible to determine the recoverable amount (the higher of its fair value less costs of disposal and its value in use) for the individual asset, then the Company will have to determine the recoverable amount for the asset’s cash generating unit (CGU).
The recoverable amount for an individual asset or a CGU is the higher of its fair value less costs to sell and its value in use. When evaluating value in use, the pre tax discount rate is used to estimate the future cash flows. The discount rate should reflect the evaluation of specific risk resulting from the impact of the current market on the time value of money and on the asset or CGU.
If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount; and that reduction will be accounted as an impairment loss, which shall be recognized immediately in profit or loss.
An assessment is made at the end of each reporting period as to whether there is any indication that an impairment loss recognized in prior periods for an asset may no longer exist or may have decreased. If any such indication exists, the recoverable amount of that asset is estimated.
An impairment loss recognized in prior periods for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized.
(n) Provisions
Provisions, including those arising from the contractual obligation specified in a service concession arrangement to maintain or restore the infrastructure before it is handed over to the grantor, are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.