1. Refining and Petrochemicals - Rompetrol.com

Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate
of the consideration transferred, measured at acquisition date
fair value and the amount of any non-controlling interest in the
acquiree. For each business combination, the acquirer measures
the non-controlling interest in the acquiree either at fair value
or at the proportionate share of the acquiree’s identifiable net
assets. Acquisition costs incurred are expensed and included
in administrative expenses. Acquisitions of the non-controlling
interests are considered as equity transactions.
The Group’s investments in associates are accounted for using
the equity method of accounting. Under the equity method,
the investment in an associate is carried in the balance sheet at
cost plus post acquisition changes in the Group’s share of net
assets of the associate. After application of the equity method,
the Group determines whether it is necessary to recognise an
additional impairment loss on the Group’s investment in its
associates.
All intra-group balances, income and expenses and unrealised
gains and losses resulting from intra-group transactions are
eliminated in full.
Goodwill is initially measured, at cost being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interest over the net identifiable
assets acquired and liabilities assumed. Goodwill is tested
for impairment annually (as at December 31) and when
circumstances indicate that the carrying value may be impaired.
Property, plant and equipment are stated at cost, except for
the Rompetrol Rafinare S.A., where the property, plant and
equipment are stated at revalued amounts, being the fair
value less any accumulated depreciation and accumulated
impairment loss.
When assets are sold or retired, their cost and accumulated
depreciation are eliminated from the accounts and any gain
or loss resulting from their disposal is included in the income
statement.
Depreciation for property, plant and equipment, except land
and construction in progress, is computed using the straightline
method over the following estimated useful lives, between
3 to 60 years.
At each balance sheet date the Group reviews the carrying
amounts of its property, plant and equipment and intangible
assets to determine whether there is any indication that those
assets have suffered impairment. If such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
Inventories, including work-in-process are stated at the lower
of cost and net realisable value. Net realisable value is the
selling price in the ordinary course of business, less the costs of
Finance « Rompetrol Annual Report 2010 // 42
completion, marketing and distribution. Cost comprises direct
materials and, where applicable, direct labour costs and those
overheads that have been incurred in bringing the inventories
to their present location and condition. The following cost
formulas were used to determine the cost applicable to different
types of inventories:
- The weighted average method for purchased crude oil and
petroleum products
- The first-in-first-out (FIFO) for supplies and materials.
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Cash includes cash on hand, cash with banks and checks
in course of being cashed. Cash equivalents are short-term,
highly liquid investments that are readily convertible to known
amounts of cash within the remaining three months or less to
maturity from the date of acquisition and that are subject to an
insignificant risk of change in value.
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can
be reliably measured.
Sales of goods are recognised when delivery has taken place
and transfer of significant risks and rewards has been completed.
Revenue comprises the fair value of the sale of goods and
services, net of value-added tax and any excise duties and other
sales taxes, rebates and discounts.
Revenue from rendering transportation services and other
services is recognised when services are rendered.
Payments to defined contribution retirement benefit plans are
charged as an expense as they fall due. Payments made to state
- managed retirement benefit schemes are dealt with as defined
contribution plans where the Group’s obligations under the
scheme are equivalent to those arising in a defined contribution
retirement benefit plan.
Income tax charge consists of current and deferred taxes. The
charge for the current tax is based on the results for the period
as adjusted for non-deductible and non-taxable items. The tax
rates and tax laws used to compute the amount are those that
are enacted or substantively enacted, by the reporting date, in
the countries where the Group operates and generates taxable
income.
Deferred tax is provided using the liability method on temporary
differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting
purposes.
The Group determines the classification of its financial assets and
liabilities at initial recognition. Financial assets are recognised and
derecognised on a trade date where a purchase or sale of an
investment is under a contract whose terms require delivery of
the investment within the timeframe established by the market
concerned and are initially measured at cost, including transaction
costs.
The Group’s financial assets include cash and cash equivalents,
trade and other receivables, unquoted financial instruments,
and derivative financial instruments. Financial liabilities
include finance lease obligations, interest-bearing bank loans
and overdrafts and trade and other payables and derivative
financial instruments. For each item the accounting policies
on recognition and measurement are disclosed in this note.
Management believe that the estimated fair values of these
instruments approximate their carrying amounts.
Financial assets within the scope of IAS 39 are classified as
financial assets at fair value through profit or loss, loans and
receivables, held to maturity investments, available-for-sale
financial assets, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. Financial
liabilities within the scope of IAS 39 are classified as financial
liabilities at fair value through profit and loss, loans and
borrowings, or as derivatives designated as hedging instruments
in an effective hedge, as appropriate.
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