b'STAATSOLIE MAATSCHAPPIJ SURINAME N.V.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020 (Continued)ThedefaultratefortheGroupisdeterminedas Contingent liabilitiesan average of the write-offs compared to the outstanding trade receivables balances using aContingent liabilities may arise from the ordinary windowofafewyears.Thisdefaultrateisthen course of business in relation to claims against determinedperagebracketbyadjustingtherateto theGroup,includinglegal,contractualandotheralign with the variation in the provision percentagesclaims.Bytheirnature,contingencieswillbeperagebracket.ForcreditbalancesnoECLis resolved only when one or more uncertain future considered. eventsoccurorfailtooccur.Theassessmentoftheexistence,andpotentialquantum,ofcontingenciesTheGroupexpectsthesamepatternforthe inherentlyinvolvestheexerciseofsignificantfuture,thereforeforward-lookingestimatesarenot judgmentandtheuseofestimatesregardingtheconsidered to have an impact on the default rate.outcome of future events.At every reporting date the historical observedRecoverability of assets default rate will be updated and changes in the forward-lookingestimateswillbeanalyzed. TheGroupassesseseachassetorcashgeneratingunit(CGU)(excludinggoodwill,whichDecommissioning liability is assessed annually regardless of indicators) Decommissioning costs will be incurred by thein each reporting period to determine whether Group at the end of the operating life of some ofanyindicationofimpairmentexists.WhereantheGroupsfacilitiesandproperties.TheGroup indicatorofimpairmentexists,aformalestimateassesses its decommissioning provision at eachoftherecoverableamountismade,whichisreportingdate.Theultimatedecommissioning considered to be the higher of the fair value less costs are uncertain and cost estimates can varycostofdisposal(FVLCD)andvalue-in-use(VIU).inresponsetomanyfactors,includingchanges Theassessmentsrequiretheuseofestimatestorelevantlegalrequirements,estimatesofthe and assumptions such as long-term oil prices extentandcostsofdecommissioningactivities, (consideringcurrentandhistoricalprices,pricetheemergenceofnewrestorationtechniquesor trendsandrelatedfactors),discountrates,experienceatotherproductionsites,costincreases operatingcosts,futurecapitalrequirements,ascomparedtotheinflationratesof2.03%(2019: decommissioningcosts,explorationpotential,2.34%),andchangesindiscountratesof6.50% reserves and operating performance (which (2019:7.82%).Theexpectedtiming,extentand includesproductionandsalesvolumes).Theseamountofexpendituremayalsochange,for estimatesandassumptionsaresubjecttoriskexample,inresponsetochangesinoilandgas anduncertainty.Therefore,thereisapossibilityreserves or changes in laws and regulations orthat changes in circumstances will impact these theirinterpretation.Therefore,significantestimates projections,whichmayimpacttherecoverableand assumptions are made in determining theamountofassetsand/orCGUs.provisionfordecommissioning.Asaresult,there Units of production (UOP) depreciationcouldbesignificantadjustmentstotheprovisions of oil assets establishedwhichwouldaffectfuturefinancialresults.Theprovisionatreportingdaterepresents OilpropertiesaredepreciatedusingUOPmethodmanagementsbestestimateofthepresentvalue over total proved developed and undeveloped ofthefuturedecommissioningcostsrequired. hydrocarbonreserves.Thisresultsinadepreciation/amortizationchargeproportionaltotheEnvironmental risk liability depletion of the anticipated remaining production Liabilitiesforenvironmentalcostsarerecognized fromthefield.whenaclean-upisprobable,andtheassociated Thelifeofeachitem,whichisassessedatleastcostscanbereliablyestimated.Generally,the annually,relatestobothitsphysicallifelimitationstiming of recognition of these provisions coincidesand present assessments of economically withthecommitmenttoaformalplanofactionor,if recoverablereservesofthefieldatwhichtheearlier,ondivestmentoronclosureofinactivesites. assetislocated.ThesecalculationsrequiretheTheamountrecognizedisthebestestimateofthe useofestimatesandassumptions,includingtheexpenditurerequired.Iftheeffectofthetimevalue amount of recoverable reserves and estimates ofmoneyismaterial,theamountrecognizedisthe offuturecapitalexpenditure.Thecalculationofpresent value of the estimated future expenditure. theUOPrateofdepreciation/amortizationwillbeimpacted to the extent that actual production in the future is different from current forecast production basedontotalprovedreserves,orfuturecapital72 STAATSOLIE 2020 ANNUAL REPORT'