Page 61 - 2024 CPC Corporation,Taiwan

Financial Statements ● 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 “non-operating 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 Company’s payments for this purchase or investments in foreign joint ventures involving interest in oil sites - including the Company’s share in the costs of drilling commercial wells, production, transport and storage equipment but excluding the Company’s share in the costs of drilling exploratory wells and other exploration expenses - are capitalized as oil and gas interests. The Company’s share in joint ventures’ net earnings (or net losses) is recognized as other operating revenues (or other operating costs). The Company 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 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.
(l) 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 pretax 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.
(m) Provisions
A provision, 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, is recognized if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current
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