Page 67 - Suncor AR English

Critical judgments are those judgments made by success, or changes to project economics, resource

management in the process of applying the company’s quantities, expected production techniques, production
accounting policies and that have the most significant costs and required capital expenditures are important

impact on the amounts recognized in the Consolidated judgments when making this determination.
Financial Statements.

Critical accounting estimates and judgments are reviewed Development Costs
Management uses judgment to determine when
annually by the Audit Committee of the Board of Directors.
The following are the critical accounting estimates used in exploration and evaluation assets are reclassified to
Property, Plant and Equipment. This decision considers
the preparation of Suncor’s December 31, 2013 audited
Consolidated Financial Statements.
several factors, including the existence of reserves,
appropriate approvals from regulatory bodies and the

Oil and Gas Reserves and Resources
company’s internal project approval processes.

Measurements of depletion, depreciation, impairment, and
decommissioning and restoration obligations are Determination of Cash Generating Units (CGU)
A CGU is defined as the lowest grouping of integrated
determined in part based on the company’s estimate of oil
and gas reserves and resources. The estimation of reserves assets that generate identifiable cash inflows that are
largely independent of the cash inflows of other assets or
and resources is an inherently complex process and involves
the exercise of professional judgment. The reserves and groups of assets. The allocation of assets into CGUs
requires significant judgment and interpretations with
resources estimates are based on the definitions and
guidelines contained in the Canadian Oil and Gas respect to the integration between assets, the existence of
Evaluation Handbook and are reviewed on an annual basis active markets, similar exposure to market risks, shared

by qualified reserves evaluators in accordance with National infrastructures, and the way in which management
Instrument 51-101 Standards of Disclosure for Oil and Gas monitors the operations.

Activities.
Asset Impairment and Reversals
Oil and gas reserves and resources estimates are based on
a range of geological, technical and economic factors, Management applies judgment in assessing the existence
of impairment and impairment reversal indicators based on
including projected future rates of production, projected
future commodity prices, engineering data, and the timing various internal and external factors.

and amount of future expenditures, all of which are subject The recoverable amount of CGUs and individual assets is
to uncertainty. Estimates reflect market and regulatory determined based on the higher of fair value less costs of
disposal or value-in-use calculations. The key estimates the
conditions existing at December 31, 2013, which could
differ significantly from other points in time throughout the company applies in determining the recoverable amount
normally include estimated future commodity prices,
year, or future periods. Changes in market and regulatory
conditions and assumptions can materially impact the expected production volumes, future operating and
development costs, discount rates, tax rates, and refining
estimation of net reserves.
margins. In determining the recoverable amount,
management may also be required to make judgments
Oil and Gas Activities
The company is required to apply judgment when regarding the likelihood of occurrence of a future event.
Changes to these estimates and judgments will affect the
designating the nature of oil and gas activities as
exploration, evaluation, development or production, and recoverable amounts of CGUs and individual assets and
may then require a material adjustment to their related
when determining whether the initial costs of these
activities are capitalized.
carrying value.

Regardless of any indication of impairment, the company
Exploration and Evaluation Costs
must complete an annual impairment assessment for any

Certain exploration and evaluation costs are initially CGU, or group of CGUs, whose net carrying value includes
capitalized with the intent to establish commercially viable indefinite-life intangible assets or an allocation of goodwill.

reserves. The company is required to make judgments For Suncor, this includes impairment assessments of the Oil
about future events and circumstances and applies Sands segment and the Refining and Marketing segment.

estimates to assess the economic viability of extracting the For 2013, the company completed this review as at
underlying resources. The costs are subject to technical, October 31, 2013, and determined that the underlying

commercial and management review to confirm the CGUs were not impaired.
continued intent to develop the project. Level of drilling

SUNCOR ENERGY INC. ANNUAL REPORT 2013 63