Audit procedures conducted Evaluation of Santos measurement of the

Audit procedures conducted evaluation of santos

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Audit procedures conducted: - Evaluation of Santos’ measurement of the consideration amount with respect to cash consideration paid and share sales. - Consideration of the accounting date of acquisition applied with respect to the criteria of control over the acquired interests. - Evaluation of the competence and qualifications of experts used by Santos to estimate the fair value of assets acquired. - Assessment of the fair value of assets acquired with the expertise of our own (qualified, competent and objective) valuation specialists, including the following: Checking if the applied modelling methodology complies with the Australian Accounting Standards Valuation cross checks on the acquired assets Assessment of assumptions applied by comparing fundamental assumptions (such as gas prices and inflation rates) to sales agreements and market data Assessment of operating cost and capital expenditure forecasts with reference to historically incurred costs
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8 2. AASB16 Lease Amendment Impact Why significant How the audit addresses the KAM AASB 16 Leases was applied within the group starting on 1st January 2019. The new accounting standard requires companies to report the majority of leases on balance sheet. Leased assets are recognised based on the right-of-use asset underlying where lease liabilities which shows the company’s lease commitments. This is a Key Audit Matter because this leads to a change in Santos’ accounting policy for lease assets and liabilities. Risks resulted from the change of standard may result in misstatements in the Balance Sheet as a result of not applying the accounting policy correctly. This valuation is critical to Santos as the change of policy leads to a significant increase in both assets and liability in Santos’ Balance Sheet. Under AASB 16, Santos’ recognition of leases will change as follows: Assets: right-of-use assets are recognised at date when underlying assets is first available for use Liabilities: convey a right to control the identified asset for a period of time in exchange for consideration AASB 16 requires companies to give investors a more accurate representation of their financial position by including all of its assets and liabilities to provide more information to investors. Santos must adopt to the new AASB standard to ensure their financial statements are accurate, complete and presented according to accounting standards. The adjustments made to lease assets and liabilities led to a net adjustment of US$ 6 million in retained earnings. The financial statement as at 1st January 2019 will reflect the new standard. Audit procedures conducted: Assessment of the appropriateness of the discount rate and the incremental borrowing rate that used to determine the lease liabilities in AASB 16 calculation with our own valuation specialists.
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