2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n) 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. Periodic estimates are made for such future facility abandonment costs. 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 hydrocarbons 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. The present value of decommissioning costs are revalued at the financial year-end translation rates. (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. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (o) Revenue and other income (i) Revenue Revenue is measured based on the consideration specified in a contract with a customer in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. The Group or the Company recognises revenue when (or as) it transfers control over a product or service to a customer. An asset is transferred when (or as) the customer obtains control of the asset. The Group or the Company transfers control of a good or service at a point in time unless one of the following over time criteria is met: • the customer simultaneously receives and consumes the benefits provided as the Group or the Company performs; • the Group’s or the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or • the Group’s or the Company’s performance does not create an asset with an alternative use and the Group or the Company has an enforceable right to payment for performance completed to date. 229 DNeX INTEGRATED REPORT 2022
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