Woodside Petroleum Ltd|Financial Statements 137
Independent audit report (cont.)
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TH:CT:WOODSIDE:2018:017
Page 2
1. Impairment of non-current assets
Why significant How our audit addressed the key audit matter
Australian Accounting Standards require the Group to assess
whether there are any indicators that non-current assets
may be impaired. If any indicator exists, the Group must
estimate the recoverable amount of the asset. At year end,
the Group concluded that there were no indicators of
impairment or reversal of previous impairments for any of its
Cash Generating Units (CGUs), apart from an impairment
indicator in respect of LNG vessels classified as non-current
assets held for sale at 31 December 2018. An impairment
charge of $39 million was recognised during the year.
In determining whether there was an indicator of impairment
or impairment reversal, the Group considered whether there
was a significant change in the external and internal factors
as set out in the financial report in note B.4.
The assessment of indicators of impairment and reversal of
impairment is judgmental, and includes assessing a range of
external and internal factors that could impact the
recoverable amount of a CGU. Accordingly, this matter was
considered to be a key audit matter.
We evaluated whether there had been significant changes in the
external and internal factors considered by the Group in assessing
whether indicators of impairment or reversal of impairment exist.
This included assessing, in conjunction with our valuation
specialists, any significant changes in discount rates and
commodity prices and the impact this would have on the
conclusions drawn by the Group based on the impairment
assessments of previous years. Our assessment of commodity
prices makes reference to market prices (where available), market
research, market practice, market indices, market consensus and
historical performance.
We used the work of the Group’s internal experts with respect to
the hydrocarbon reserve assumptions used in the Group’s
assessment of movements in reserves in its impairment indicator
considerations. This included understanding the reserve
estimation processes carried out, the Group’s internal certification
process for technical and commercial experts who are responsible
for reserves, the design of the Group’s Petroleum Resources
Management procedures and its alignment with the guidelines
prepared by the Society of Petroleum Engineers. We also
examined the competence and objectivity of the Group’s experts,
the scope and appropriateness of their work. We assessed whether
key reserves economics assumptions were consistent with other
operational information.
We examined sales agreements utilised in determining the
recoverable amount of non-current assets held for sale at 31
December 2018.
We also focused on the adequacy of the financial report
disclosures regarding the assumptions, key estimates and
judgements applied by management for the Group’s assessment of
indicators of impairment and reversal of impairment of non-
current assets. These have been disclosed in Note B.4.
2. Accounting for petroleum resources rent tax (PRRT) assets
Why significant How our audit addressed the key audit matter
The consolidated financial statements of the Group include
deferred tax assets arising from PRRT and associated PRRT
tax benefits. The determination of the quantum, likelihood
and timing of the realisation of deferred tax assets arising
from PRRT is highly judgemental and assessed on a basis
consistent with the impairment trigger assessment set out
above as well as other factors such as the long term bond
rate applied to the augmentation of deductible expenditure.
As such, this matter was considered to be a key audit matter.
The Group’s disclosures about PRRT are included in the
summary of significant accounting policies in Note A.5.
We considered the application of the judgements and
methodologies used by the Group to calculate the deferred tax
assets arising from PRRT and estimate their utilisation in the
future. In particular, we assessed those judgements and
methodologies relating to the estimation of future PRRT
assessable profits, the interpretation of PRRT legislation and the
consistency in application of forecasted performance with other
forecasts made, including analysis of impairment indicators.