KUWAIT ENERGY plc GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
F-41
Where the asset does not generate cash flows that are independent from other assets, the group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell or value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of tangible assets (continued)
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.
Assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sales transaction rather than through continuing use. This condition is regarded as met only
when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms
that are usual and customary for sales of such an asset (or disposal group) and its sale is highly probable.
Management must be committed to the sale, which should be expected to qualify for recognition as a completed
sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous
carrying amount and fair value less costs to sell.
Operating leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased
asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period
in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed.
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and oil
price fluctuations, including interest rate caps and oil price put options.
Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is
recognised in the consolidated statement of income immediately unless the derivative is designated and effective
as a hedging instrument, in which event the timing of the recognition in the consolidated statement of income
depends on the nature of the hedge relationship (see below). A derivative with a positive fair value is recognised
as a financial asset while a derivative with a negative fair value is recognised as a financial liability.
