KUWAIT ENERGY plc GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2013
F-44
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Contingencies
A contingent asset is not recognised in the consolidated financial statements but disclosed when an inflow of
economic benefits is probable.
Contingent liabilities are not recognised in the consolidated financial statements unless the outflow of resources
embodying economic benefits is probable and the amount of the obligation can be measured reliably. They are
disclosed as contingent liabilities unless the possibility of an outflow of resources embodying economic benefits
is remote.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the
cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Other borrowing costs are calculated on the accrual basis and are recognised in the consolidated statement of
income in the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount
is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
A decommissioning provision is calculated as the net present value of the Group’s share of the expenditure which
may be incurred at the end of the producing life of each field in the removal and decommissioning of the
production, storage and transportation facilities currently in place. The cost of recognising the decommissioning
provision is included as part of the cost of the relevant property, plant and equipment and is thus charged to the
consolidated statement of income on a unit of production basis in accordance with the Group’s policy for
depletion and depreciation of tangible non-current assets. Period charges for changes in the net present value of
the decommissioning provision arising from discounting are included in finance costs.
Employee Benefits
The liability recognised in the balance sheet in respect of defined benefit plan is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit
obligation is calculated annually by independent actuaries using the projected unit credit method. The present
value of the defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be
paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries
where there is no deep market in such bonds, the market rates on government bonds are used.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged
or credited to equity in other comprehensive income in the period in which they arise.
