2. MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) (e) Intangible assets (continued) (iii) Exploration and evaluation assets (continued) MFRS 6 Exploration for and Evaluation of Mineral Resources requires exploration and evaluation assets to be assessed for impairment when facts and circumstances suggest that the carrying amounts may exceed the recoverable amounts. One or more of the following facts and circumstances indicate that an impairment test should be conducted: • The period for which the right to explore in the specific area has expired during the period or will expire in the near future, and it is not expected to be renewed; • Substantive expenditure on further exploration in the specific area is neither budgeted or planned; • Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue activities in the specific area; and • Sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. (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. 136 Financial Statements DAGANG NeXCHANGE BERHAD Integrated Report 2024 NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2024
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