b'REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)KEY AUDIT MATTERS (Continued)Key audit matter How our audit addressed the key audit matterIMPAIRMENT OFWe obtained an understanding of the process related to impairment UPSTREAM ANDtesting. We assessed data used in the Fair Value Less Cost of Disposal DOWNSTREAM OIL(FVLCD)model,includingtestingoftheforecastedfuturecashflows.AND GAS PPE ASSETS - NOTE 4.11 TO THEWeassessedmanagementsdefinitionoftheCashGeneratingUnitCONSOLIDATED(CGU) taking into consideration how management monitors and makes FINANCIAL STATEMENTS decisions about the companys operations.The groups consolidatedFurther we analyzed the sensitivity of key assumptions used in the statementoffinancialposition valuationmodel,andassessedhistoricalaccuracyofcashflowsas at 31 December 2020supplied by management. We tested the mathematical accuracy of the includes property, plant andmodels and assessed the assumptions utilized through the following equipmenttotaling$1.746 substantiveprocedures:billion(2019:$1.785billion), OIL AND PETROLEUM FUEL PRICESof which the combined upstream, downstream andWe assessed whether the assumptions used in the calculationsrelated corporate assetswere in line with the contracts;totaled$1.434billion.We agreed the relevant market price for each index to the reports directly Management recorded afrom third party sources;$16.8 million impairmentWe reviewed the mathematical accuracy of the formulas for eachcharge relating to thecomponent of the model for all years in the calculation;upstream, downstream andWe assessed whether the volumes allocated agreed to therelated corporate assetscontracted volumes and capacity of the Cash Generating Unit Cash Generating Unit(CGU);(CGU). The impairment assessment method adoptedWe reassessed the reasonableness of the price margins utilized in the in determining the recoverablemodel relative to historical trends. amount of the producingDISCOUNT RATE:assets was Fair Value LessWe independently evaluated the companys discount rate used in the Cost of Disposal (FVLCD).impairment tests with input from EYs valuation specialists; Managements judgment and estimates in the FairRESERVES AND RESOURCE ESTIMATES:Value Less Cost of DisposalWiththeassistanceofEYsoilandgasreservespecialistswe:(FVLCD) model makesAssessed the companys reserves estimation methods and policies;impairment of upstream, downstream and relatedWe compared total reserves included in the impairment assumptionscorporate assets a key model to the reserves as per the audited reserves report;audit matter. We held discussions with the Technical Resources Lead tounderstandtheproductionprofileandevaluatedwhetheritwasconsistent with our knowledge of the business activity.CAPITAL EXPENDITURE FORECAST:Obtained managements development CAPEX plan to maintain6 million barrels per year. The average annual CAPEX was also compared to the historical information of the company.We held discussions with the companys management to understandthe plan for the company, source of funding, and types of Improved Oil Recovery (IOR) and Enhanced Oil Recovery (EOR) to be implemented to maintain production;We reviewed the historical costs of the turnaround project on therefinery,thebudgetandnonrecurringexpenses;43'