NOTES TO THE FINANCIAL STATEMENTS 2. MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (f) Investments in subsidiaries Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses. (g) Inventories Inventories are stated at the lower of cost and net realisable value. Cost of raw materials, work in progress, manufactured inventories and consumables are calculated using on the weighted average cost method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work in progress and finished goods, cost includes an appropriate share of production overheads based on normal operating capacity. Petroleum products of spares, other than crude oil, are stated at the lower of cost and net realisable value. Crude oil are stated at fair value less cost to sell. Cost of trading merchandise is determined on the first-in-first-out cost method and includes the purchase price, production or conversion costs and incidentals incurred in bringing the inventories to their present location and condition. (h) Provisions (i) Decommissioning costs Provision for future decommissioning costs is made in full when the Group has an obligation to dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reasonable estimate of that liability can be made. The estimated cost of decommissioning and restoration is discounted to its net present value. An amount equivalent to the discounted initial provision for decommissioning costs is capitalised and amortised over the life of the underlying asset on a unit-of-production basis over proven and probable reserves. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the oil and gas asset. The unwinding of the discount applied to future decommissioning provisions is included under finance costs in profit or loss as crude oil are produced. The estimated interest rate used in discounting the cash flow is reviewed at least annually. Any change in the expected future cost, interest rate and inflation rate are reflected as an adjustment in the provision for decommissioning costs of the corresponding oil and gas asset. (ii) Other provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The unwinding of the discount is recognised as finance cost. 151 OPERATIONAL REVIEW SUSTAINABILITY STATEMENT GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDERS’ INFORMATION INTELLIGENCE POWERING
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