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

ACCOUNTING PRINCIPLES Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets. Qualifying assets are assets that take a substantial period of time to complete for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending to be used for the qualifying asset is deducted from the borrowing costs eligible for capitalisation. This applies on the interest on borrowings to finance fields under development which is capitalised within oil and gas properties until production commences. All other borrowing costs are recognised in profit or loss in the period in which they occur. Interest on borrowings to finance the acquisition of producing oil and gas properties is charged to income as incurred. Leases For a lease to qualify as a finance lease, substantially all of the risks and benefits of ownership must pass to the lessee. In all other cases the lease will be classified as an operating lease. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Movements in deferred tax assets and liabilities are reported in the income statement unless they relate to items recorded directly in shareholders’ equity. Lundin Petroleum divides the tax accounts between corporation tax and petroleum tax. Petroleum Revenue Tax (PRT) is classified as Petroleum tax and charged as a tax expense on taxable field profits included in the income statement. Employee benefits Short-term employee benefits Short-term employee benefits such as salaries, social premiums and holiday pay, are expensed when incurred. Pension obligations Pensions are the most common long-term employee benefit. The pension schemes are funded through payments to insurance companies. The Group’s pension obligations consist mainly of defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an expense when they are due. The Group has one obligation under a defined benefit plan. The relating liability recognised in the balance sheet is valued at the discounted estimated future cash outflows as calculated by an external actuarial expert. Actuarial gains and losses are charged to the income statement. The Group does not have any designated plan assets. Share-based payments Lundin Petroleum recognises equity-settled share-based payments in the income statement as expenses and as an equity reserve in relation to the incentive warrants programme. The equity reserve in relation to incentive warrants programmes is valued at fair value at grant date of the options using the Black & Scholes option pricing method. The fair value of the incentive warrant programme is charged to personnel costs over the vesting period. The fair value of the equity reserve under the incentive warrant programme is remeasured at each reporting date recognising changes that affect the number of options expected to vest. The impact of the revision to original estimates, if any, is recognised in the income statement, with a corresponding adjustment to equity. Lundin Petroleum recognises cash-settled share-based payments in the income statement as expenses during the vesting period and as a liability in relation to the long-term incentive plan. The liability is measured at fair value and revalued at each balance sheet date and at the date of settlement, with any change in fair value recognised in the income statement for the period. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to management, which, due to the unique nature of each country’s operations, commercial terms or fiscal environment, is at a country level. Information for segments is only disclosed when applicable. Related party transactions Lundin Petroleum recognises the following related parties: associated companies, jointly controlled entities, members or the family of the key management personnel or other parties that are partly, directly or indirectly, controlled by key management personnel or of its family or of any individual that controls, or has joint control or significant influence over the entity. Critical accounting estimates and judgements The management of Lundin Petroleum has to make estimates and judgements when preparing the Financial Statements of the Group. Uncertainties in the estimates and judgements could have an impact on the carrying amount of assets and liabilities and the Group’s result. The most important estimates and judgements in relation thereto are: Estimates in oil and gas reserves The business of the Group is the exploration for, development of and production of oil and gas reserves. Estimates of oil and gas reserves are used in the calculations for impairment tests and accounting for depletion and site restoration. Changes in estimates in oil and gas reserves, resulting in different future production profiles, will affect the discounted cash flows used in impairment testing, the anticipated date of site decommissioning and restoration and the depletion charges in accordance with the unit of production method. For 2009, impairment charges were recorded for oil and gas properties based upon the value in use from those assets. Investments in associated companies The Group determines if the carrying value for investments in associated companies has suffered any impairment where any objective evidence of impairment exists. This assessment is performed to identify where the carrying value exceeds its recoverable amount. The recoverable amounts Income taxes The main components of tax are current and deferred. Current tax is tax that is to be paid or received for the year in question and also includes adjustments of current tax attributable to previous periods. 65 FINANCIALS

Sivu: 67 Sivu: 66 Sivu: 65 Sivu: 64 Sivu: 63 Sivu: 62 Sivu: 61 Sivu: 59 Sivu: 60 Sivu: 56 Sivu: 57 Sivu: 58 Sivu: 55 Sivu: 54 Sivu: 53 Sivu: 52 Sivu: 51 Sivu: 50 Sivu: 49 Sivu: 48 Sivu: 47 Sivu: 45 Sivu: 46 Sivu: 44 Sivu: 43 Sivu: 42 Sivu: 40 Sivu: 41 Sivu: 39 Sivu: 38 Sivu: 37 Sivu: 36 Sivu: 35 Sivu: 34 Sivu: 33 Sivu: 32 Sivu: 31 Sivu: 29 Sivu: 30 Sivu: 26 Sivu: 27 Sivu: 28 Sivu: 23 Sivu: 24 Sivu: 25 Sivu: 20 Sivu: 21 Sivu: 22 Sivu: 17 Sivu: 18 Sivu: 19 Sivu: 16 Sivu: 11 Sivu: 12 Sivu: 13 Sivu: 14 Sivu: 15 Sivu: 8 Sivu: 9 Sivu: 10 Sivu: 1 Sivu: 2 Sivu: 3 Sivu: 4 Sivu: 5 Sivu: 6 Sivu: 7