ACCOUNTABILITY | FINANCIAL STATEMENTS 229 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 January 2024 4. STANDARDS, AMENDMENTS TO PUBLISHED STANDARDS AND INTERPRETATIONS TO EXISTING STANDARDS THAT ARE APPLICABLE TO THE GROUP AND THE COMPANY BUT NOT YET EFFECTIVE (CONTINUED) (b) Financial year beginning on/after 1 February 2025 (i) Amendments to MFRS 121 “Lack of Exchangeability” The amendments clarify that a currency is exchangeable when an entity is able to exchange it into another currency within a time frame that allows for a normal administrative delay and through a market or exchange mechanism that creates enforceable rights and obligations. If an entity can only obtain no more than an insignificant amount of the other currency at the measurement date for the specified purpose, then the currency is not exchangeable. In such cases, the entity is required to estimate the spot exchange rate at the measurement date. The Group intends to adopt these new and amended standards and interpretation, if applicable, when they become effective. The amendments are not expected to have a material impact on the Group’s financial statements. 5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. (a) Critical judgement in determining the lease classification Finance leases - Group as lessor The Group has determined, based on the analysis of the terms and conditions of the contract on assessing whether the Group retains the significant risks and rewards of ownership of the FPSO subject of the lease contract. To identify whether risks and rewards are retained, the Group systematically considers, amongst others, the indicators listed by MFRS 16 Leases on a contract-by-contract basis. The Group makes significant judgements to determine whether the arrangement results in a finance lease or an operating lease. This judgement can have a significant effect on the amounts recognised in the financial statements and its recognition of profits in the future. The most important judgement areas assessed by the Group in respect of finance leases are as follows: • Determination of fair value of the leased FPSOs For the Group’s awarded lease contracts that were classified under MFRS 16 as finance leases for accounting purposes, the fair value of the leased FPSO is recorded as an outright sale at the commencement of the lease. Significant judgments are used to estimate the charter rates and the fair value of the leased FPSO. The determination of fair value of the leased asset takes into account among others: time value of money, financing structure, country risk and risk profile of a client and project. Therefore, the fair value of the leased FPSO requires estimation, particularly when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.
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