KUWAIT ENERGY plc GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011
F-138
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 consolidated statement of financial position 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.
Share-based payments
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at
the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions
are set out in note 24.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest.
