Annual Report 2009

Sivu: 96 Sivu: 94 Sivu: 95 Sivu: 93 Sivu: 92 Sivu: 91 Sivu: 89 Sivu: 90 Sivu: 87 Sivu: 88 Sivu: 86 Sivu: 85 Sivu: 84 Sivu: 83 Sivu: 82 Sivu: 81 Sivu: 80 Sivu: 79 Sivu: 78 Sivu: 77 Sivu: 76 Sivu: 75 Sivu: 73 Sivu: 74 Sivu: 72 Sivu: 71 Sivu: 70 Sivu: 69 Sivu: 68 Sivu: 67 Sivu: 66 Sivu: 65

Sivu: 64

ACCOUNTING PRINCIPLES of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Other shares and participations Investments where the shareholding is less than 20 percent of the voting rights are treated as available for sale financial assets. If the value of these assets have declined significantly or has lasted for a longer period, an impairment charge is recognised in the income statement. If the event causing the impairment no longer exists, the impairment charge can be reversed in the income statement unless it involves an equity instrument. Dividend received attributable to these assets is recognised in the income statement as part of net financial items. For the preparation of the annual financial statements, the following currency exchange rates have been used. Average 1 EUR equals SEK 1 USD equals SEK 1 NOK equals SEK 1 RUR equals SEK 10.6200 7.6223 1.2166 0.2406 Period end 10.2520 7.1165 1.2352 0.2376 Classification of assets and liabilities Non-current assets, long-term liabilities and provisions consist for the most part solely of amounts that are expected to be recovered or paid more than twelve months after the balance sheet date. Current assets and current liabilities consist solely of amounts that are expected to be recovered or paid within twelve months after the balance sheet date. Jointly controlled entities – unincorporated Oil and gas operations are conducted by the Group as co-licencees in unincorporated joint ventures with other companies. The Group’s financial statements reflect the relevant proportions of production, capital costs, operating costs and current assets and liabilities of the joint venture applicable to the Group’s interests. Goodwill The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units from which the benefits of the business combination originates. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. If the carrying value exceeds its recoverable amount the impairment loss is allocated first to reduce the goodwill on the unit and thereafter to the other assets of the unit. Impairment losses on goodwill are subsequently not reversed. Upon disposal of a subsidiary or a jointly controlled entity the amount of goodwill is included in the profit or loss on disposal. Foreign currencies Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘functional currency’). The consolidated financial statements are presented in SEK, which is the currency the Group has elected to use as the presentation currency. IAS 21 states that a company may present its financial statements in any currency. The generally accepted currency of the oil industry is United States dollars and as such the Board of Directors of Lundin Petroleum has resolved that Lundin Petroleum will present its financial statements in United States dollars with effect from 1 January 2010. The Board believes that presenting the financial statements in this currency will further assist readers in understanding the underlying financial position of the company and its results. Transactions and balances Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange prevailing at the balance sheet date and foreign exchange currency differences are recognised in the income statement. Transactions in foreign currencies are translated at exchange rates prevailing at the transaction date. Exchange differences are included in Financial income/expenses in the income statement except when deferred in equity as qualifying cash flow hedges. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the balance sheet rate of exchange. Presentation currency The balance sheets and income statements of foreign subsidiary companies are translated for consolidation purposes using the current rate method. All assets and liabilities of the subsidiary companies are translated at the balance sheet date rates of exchange, whereas the income statements are translated at average rates of exchange for the year, except for transactions where it is more relevant to use the rate of the day of the transaction. The translation differences which arise are recorded directly in the foreign currency translation reserve within shareholders’ equity. Upon disposal of a foreign operation the translation differences relating to that operation will be transferred from equity to the income statement and included in the result on sale. Translation differences arising from net investments in subsidiaries, used for financing exploration activities, are recorded directly in shareholders’ equity. Other intangible assets Permitted projects and licences acquired in a business combination are recognised at fair value at the acquisition date. Permitted projects and licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate of permitted projects and licences over their estimated useful lives which are usually determined according to the term of the energy supply contract signed with the local grid operator for the solar power projects. Oil and gas properties Oil and gas operations are recorded at historical cost less depletion. All costs for acquiring concessions, licences or interests in production sharing contracts and for the survey, drilling and development of such interests are capitalised on a field area cost centre basis. Costs directly associated with an exploration well are capitalised until the determination of reserves is evaluated. During this phase no depletion is charged. Upon the completion of the development and the start of the production the field will be assessed for impairment, and any impairment loss recognised, and accounted for as a producing asset. If it is determined that a commercial discovery has not been achieved these exploration costs are charged to the income statement. 62 Lundin Petroleum ANNUAL REPORT 2009

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