just in case others want to read it this section is taken from AWE half yearly report. First couple paragraphs are clear enough both PRRT and APR are imposts that will impact PPP. Although I'm curious about one line on PRRT which says subject to the satisfaction of certain tests, offshore exploration costs incurred by the consolidated entity can be transferred to PRRT profit projects thereby having the effect of reducing or deferring the actual liability to pay PRRT.
Does it mean all other exploration projects the consolidated entity has, not just ones directly related to the Tui project? Ie Maitland Exploration costs of Libra exploration costs etc??
When they start to expalin the fact that they changed the Accounting std is where the fun realy starts I will need to read that part a couple of times to get the gist. And you do need to be sober to read it if you like me are not an Accountant.
"As a producer of oil and gas in Australian and New Zealand offshore waters, the consolidated entity is subject to, in addition to income tax, additional government imposts in the form of PRRT in Australia and APR in New Zealand. PRRT is levied on Australian offshore oil and gas production operations at a rate of 40% of project profits after allowing for the recoupment of past deductible project costs and after appropriate compounding of these past costs. Further, subject to the satisfaction of certain tests, offshore exploration costs incurred by the consolidated entity can be transferred to PRRT profit projects thereby having the effect of reducing or deferring the actual liability to pay PRRT. Similarly, APR is levied on our Tui production operations in New Zealand at a rate of 20% of project profits after allowing for the recoupment of past deductible project costs. However, these past project costs are not compounded and exploration costs incurred outside of the Tui project cannot be transferred to the Tui project. Accordingly, as a consequence of the ability to recoup past costs, the consolidated entity has not incurred, on a cash accrual basis, a liability to pay either PRRT or APR in the half year. Further, the consolidated entity does not expect to pay PRRT in the current financial year due to the level of past costs and assumed level of future Australian offshore exploration expenditures. However, the consolidated entity does expect to incur APR liabilities in the current financial year due to commencement of Tui production operations in July 2007. As required by the Australian Accounting Standards Board (“AASB”), AWE changed its accounting policy in June 2007 to apply tax effect accounting to both PRRT and to APR. Previously, the consolidated entity had applied accrual accounting to both PRRT and APR whereby an expense would have been recognised as an operating cost at the time that a liability actually became payable. Applying tax effect accounting principles to both PRRT and APR causes the tax effect of the difference between the PRRT/APR tax base and the accounting base of these assets to be recognised as a deferred tax liability on the balance sheet and an income tax expense in the income statement. The PRRT/APR tax base represents remaining deductible project costs of the project which will reduce to zero once all past deductible costs are recouped. The accounting base represents the written down balance sheet value of the profit project which is amortised over the life of reserves. Accordingly, the application of tax effect accounting to PRRT and APR to the consolidated entity has impacted reported after tax profit before a liability to pay PRRT or APR has accrued. The tax effected PRRT/APR expense recognised in the half-year which does not represent an amount paid or presently payable is $38.4 million. The major reason for the recognition of this expense in the half year is the start-up of the Tui operations. The accounting base of the project has reduced in line with amortisation whereas the APR tax base has reduced significantly due to the high level of assessable APR receipts caused by high oil prices and better than expected production levels.
PPP Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
