Page 101 - Suncor AR English

and judgments are subject to change based on experience and new information. The financial statement areas that

require significant estimates and judgments are as follows:

Oil and Gas Reserves and Resources
Measurements of depletion, depreciation, impairment and decommissioning and restoration obligations are determined in

part based on the company’s estimate of oil and gas reserves and resources. The estimation of reserves and resources is
an inherently complex process and involves the exercise of professional judgment. All reserves and certain resources have

been evaluated at December 31, 2013 by independent qualified reserves evaluators. Oil and gas reserves and resources
estimates are based on a range of geological, technical and economic factors, including projected future rates of

production, projected future commodity prices, engineering data, and the timing and amount of future expenditures, all
of which are subject to uncertainty. Estimates reflect market and regulatory conditions existing at December 31, 2013,

which could differ significantly from other points in time throughout the year, or future periods. Changes in market and
regulatory conditions and assumptions can materially impact the estimation of net reserves.

Oil and Gas Activities

The company is required to apply judgment when designating the nature of oil and gas activities as exploration,
evaluation, development or production, and when determining whether the initial costs of these activities are capitalized.

Exploration and Evaluation Costs

Certain exploration and evaluation costs are initially capitalized with the intent to establish commercially viable reserves.
The company is required to make judgments about future events and circumstances and applies estimates to assess the

economic viability of extracting the underlying resources. The costs are subject to technical, commercial and management
review to confirm the continued intent to develop the project. Level of drilling success, or changes to project economics,

resource quantities, expected production techniques, production costs and required capital expenditures are important
judgments when making this determination.

Development Costs

Management uses judgment to determine when exploration and evaluation assets are reclassified to Property, Plant and
Equipment. This decision considers several factors, including the existence of reserves, appropriate approvals from

regulatory bodies and the company’s internal project approval processes.

Determination of Cash Generating Units
A CGU is defined as the lowest grouping of integrated assets that generate identifiable cash inflows that are largely

independent of the cash inflows of other assets or groups of assets. The allocation of assets into CGUs requires significant
judgment and interpretations with respect to the integration between assets, the existence of active markets, similar

exposure to market risks, shared infrastructures, and the way in which management monitors the operations.

Asset Impairment and Reversals
Management applies judgment in assessing the existence of impairment and impairment reversal indicators based on

various internal and external factors.

The recoverable amount of CGUs and individual assets is determined based on the higher of fair value less costs of
disposal or value-in-use calculations. The key estimates the company applies in determining the recoverable amount
normally include estimated future commodity prices, expected production volumes, future operating and development

costs, discount rates, tax rates, and refining margins. In determining the recoverable amount, management may also be
required to make judgments regarding the likelihood of occurrence of a future event. Changes to these estimates and

judgments will affect the recoverable amounts of CGUs and individual assets and may then require a material adjustment
to their related carrying value.

Decommissioning and Restoration Costs

The company recognizes liabilities for the future decommissioning and restoration of Exploration and Evaluation assets
and Property, Plant and Equipment. Management applies judgment in assessing the existence and extent as well as the

expected method of reclamation of the company’s decommissioning and restoration obligations at the end of each
reporting period. Management also uses judgment to determine whether the nature of the activities performed are

related to decommissioning and restoration activities or normal operating activities.

SUNCOR ENERGY INC. ANNUAL REPORT 2013 97