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ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

The following significant impairment assessments were based on the field development anticipated by Suncor’s

completed during 2013:
business plans, and a discount rate of 17% that
represented management’s best estimate of the ongoing

Syria
risk involved with operating in Libya.
Since December 2011, Suncor’s operations in Syria and its

contractual obligations have been suspended under a Fort Hills
period of force majeure due to political unrest and On October 30, 2013, the co-owners of Fort Hills

international sanctions. The company impaired the announced project sanction. As a result, the accumulated
remaining carrying value of its Syrian assets, resulting in an capital costs in Exploration and Evaluation were transferred

after-tax impairment charge of $422 million in the fourth to oil and gas properties in Property, Plant and Equipment
quarter of 2013, under management’s view that the and an impairment test was required in accordance with

ongoing political situation has led to increasing uncertainty IFRS 6 Exploration for and Evaluation of Mineral Resources.
with respect to the company’s return to operations in
A fair value less costs of disposal methodology was used to

the country.
determine the recoverable amount and, as it exceeded the
carrying amount, no impairment was recorded.
The company received risk mitigation proceeds in the
fourth quarter of 2012, at which time the proceeds were The significant estimates used in calculating the net

recorded as a non-current provision to reflect potential recoverable amounts included current forecasts for the
repayment if operations in Syria were to resume. Suncor price of bitumen, future capital costs and discount rate.

recognized the risk mitigation proceeds of $300 million The assumptions used by management to calculate the
($223 million after-tax) in net earnings in the fourth recoverable amount may change. Changes in these
quarter of 2013, as the likelihood of return in the assumptions will have an impact on the recoverable

foreseeable future is undeterminable.
amount and could result in impairment. Refer to note 17
of the Consolidated Financial Statements for further details.

Libya

Recent political unrest has resulted in the closure of export Decommissioning and Restoration Costs
terminal operations at eastern Libyan seaports, requiring The company recognizes liabilities for the future
the shut-in of production for the latter half of 2013. As the decommissioning and restoration of Exploration and

situation persisted at the end of 2013, management Evaluation assets and Property, Plant and Equipment.
performed an impairment test at December 31, 2013.
Management applies judgment in assessing the existence

The impairment test was performed based on an and extent, as well as the expected method of reclamation
of the company’s decommissioning and restoration
assessment of future net cash flows over a range of
possible outcomes, resulting in an after-tax impairment obligations at the end of each reporting period.
Management also uses judgment to determine whether the
charge of $101 million in the fourth quarter of 2013.
nature of the activities performed are related to
The carrying value of the company’s net assets in Libya as decommissioning and restoration activities or normal
at December 31, 2013 was approximately $570 million.
restoration, technological advances and the possible future
The carrying value as at December 31, 2013 was based on use of the site. Actual costs are uncertain and estimates

a net recoverable amount that was estimated under a can vary as a result of changes to relevant laws and
value-in-use methodology and determined using an regulations, the emergence of new technology, operating

expected cash flow approach, under probability weighted experience, prices and closure plans. The estimated timing
scenarios representing i) future cash flows assuming the of future decommissioning and restoration may change

development of the company’s proved plus probable due to certain factors, including reserve life. Changes to
reserves evaluated as at December 31, 2013, ii) future cash estimates related to future expected costs, discount rates

flows incorporating additional growth in accordance with and timing may have a material impact on the amounts
managements strategic growth plans, and iii) suspension of presented.

all activity at the end of 2014. The first two scenarios were Suncor’s provision for decommissioning and restoration
equally weighted at 45% each and the final scenario was
costs decreased by $450 million in 2013 to $4.238 billion.
assigned a weighting of 10% based on the company’s best The most significant change in the provision related to
estimates. All scenarios assumed the restart of production
decommissioning and restoration liabilities related to the
on April 1, 2014.
sale of the company’s natural gas business, which was

The estimates used in calculating the net recoverable partially offset by increased disturbance in other areas of
amounts were based on current forecasts for the price of the company’s operations and increase in certain cost

commodities, the company’s estimate of price realizations, estimates. The provision also decreased due to an increase
estimates of operating and development expenditures

64 SUNCOR ENERGY INC. ANNUAL REPORT 2013