KUWAIT ENERGY plc GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
F-43
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and
revenue can be reliably measured.
Revenue represents the value of sales exclusive of related sales taxes of oil and gas arising from upstream
operations when the oil has been lifted and the title has passed.
Interest income is recognised on an accrual basis in accordance with the substance of the relevant agreement.
Royalties
Royalties are accounted for in the consolidated statement of income in the same period as the income to which
they relate and are included within operating expenses. Royalty arrangements that are based on production, sales
and other measures are recognised by reference to the underlying arrangement.
Inventories
Crude oil is valued at fair value less costs to sell. Any changes arising on the revaluation of inventories are
recognised in the consolidated statement of income. Other inventories comprising mainly of spare parts, materials
and supplies are valued at cost, determined on a weighted average cost basis, less allowance for any obsolete or
slow-moving items. Purchase cost includes the purchase price, import duties, transportation, handling and other
direct costs.
Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each entity are expressed in USD, which is the functional and
presentation currency of the Company.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the
transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the
rates prevailing at the consolidated statement of financial position date. Non-monetary items carried at fair value
that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value
was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences are recognised in the consolidated statement of income in the period in which they arise
except for exchange differences on monetary items receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and
which are recognised in the foreign currency translation reserve and recognised in the consolidated statement of
income on disposal of the net investment.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are expressed in USD using exchange rates prevailing at the balance sheet date. Income and expense
items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly
during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences
arising, if any, are classified as equity and transferred to the Group’s foreign currency translation reserve. Such
exchange differences are recognised in the consolidated statement of income in the period in which the foreign
operation is disposed of.
