16. Intangible assets

Accounting policy

Intangible assets including goodwill

Intangible assets are stated at cost, less accumulated amortization and impairment. Development costs are capitalized if the recognition criteria according to IAS 38 are fulfilled. All other research and development costs are recognized as an expense in the period in which they incur. Software, licenses, concessions, and similar intangible assets are amortized on a straight-line basis over the contract or license period or the useful economic life, which is between 3 and 20 years.

Goodwill acquired in a business combination is tested for impairment at least yearly. Impairments are recorded immediately through profit or loss; subsequent write-ups are not possible.

Oil and gas assets with unproved reserves

E&P activities are recorded using the successful efforts method. The acquisition costs of geological and geophysical studies before the discovery of proved reserves are recognized in the period in which they are incurred. The costs of wells are capitalized and reported as intangible assets until the existence or absence of potentially commercially viable oil or gas reserves is determined. Wells that are not commercially viable are expensed. The costs of exploration wells whose commercial viability has not yet been determined continue to be capitalized as long as the following conditions are fulfilled:

1. Sufficient oil and gas reserves have been discovered that would justify completion as a production well.
2. Sufficient progress is being made in assessing the economic and technical feasibility to justify beginning field development in the near future.
3. The period for which the entity has the right to explore in the specific area has not expired.

Exploratory wells in progress at year-end that are determined to be unsuccessful subsequent to the statement of financial position date are treated as non-adjusting events, meaning that the costs incurred for such exploratory wells remain capitalized in the financial statements of the reporting period under review and will be expensed in the subsequent period.

License acquisition costs and capitalized exploration and appraisal activities are not amortized as long as they are related to unproved reserves, but tested for impairment when there is an indication of potential impairment.

When the decision to develop a particular asset is made, the related intangible exploration and evaluation assets are reclassified to Property, plant and equipment.

Significant estimates: recoverability of unproved oil and gas assets

There may be cases when costs related to unproved oil and gas properties remain capitalized over longer periods while various appraisal and seismic activities continue in order to assess the size of the reservoir and its commerciality. Further decisions on the optimum timing of such developments are made from a resource and portfolio point of view. As soon as there is no further intention to develop a discovery, the assets are immediately impaired.