CNOOC Ltd. (CEO) | Analysis of Goodwill and Intangible Assets

Goodwill

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of CNOOC's previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets of the subsidiary acquired, the difference is, after reassessment, recognised in profit or loss as a gain on bargain purchase.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. CNOOC performs its impairment test of goodwill at each reporting date. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of CNOOC's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of CNOOC are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognized. An impairment loss recognized for goodwill is not reversed in a subsequent period.

Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstance is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained.

Intangible assets (other than goodwill)

Intangible assets with finite lives are carried at cost, less accumulated amortisation and accumulated impairment losses. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition. Intangible assets with finite lives except for gas processing rights, are amortised on the straight-line basis over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

The intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding software have been amortised on the straight-line basis over three to five years.

Source: CNOOC Ltd., Annual Report

CNOOC Ltd., Statement of Financial Position, Goodwill and Intangible Assets

		Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
	Gas processing right under NWS Project
	Software
	Intangible assets, excluding goodwill, cost
	Accumulated amortization
	Intangible assets, excluding goodwill, net book value
	Goodwill
	Intangible assets

Source: Based on data from CNOOC Ltd. Annual Reports

CNOOC Ltd., adjustments to financial data

		Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Equity Attributable To Owners Of The Parent
	Equity attributable to owners of the parent (as reported)
	Less: Goodwill
	Equity attributable to owners of the parent (adjusted)

CNOOC Ltd., adjusted ratios

		Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE	%	%	%	%	%
	Adjusted ROE	%	%	%	%	%
	Return on Assets (ROA)
	Reported ROA	%	%	%	%	%
	Adjusted ROA	%	%	%	%	%

		Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
	As Reported
	Revenue (USD $ in millions, translated from CNY ¥)
	Total assets (USD $ in millions, translated from CNY ¥)
	Total asset turnover1
	Adjusted for Goodwill
	Revenue (USD $ in millions, translated from CNY ¥)
	Adjusted total assets (USD $ in millions, translated from CNY ¥)
	Adjusted total asset turnover2

2012 Calculations

		Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
	As Reported
	Total assets (USD $ in millions, translated from CNY ¥)
	Equity attributable to owners of the parent (USD $ in millions, translated from CNY ¥)
	Financial leverage1
	Adjusted for Goodwill
	Adjusted total assets (USD $ in millions, translated from CNY ¥)
	Adjusted equity attributable to owners of the parent (USD $ in millions, translated from CNY ¥)
	Adjusted financial leverage2

2012 Calculations

		Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
	As Reported
	Profit for the year attributable to owners of the parent (USD $ in millions, translated from CNY ¥)
	Equity attributable to owners of the parent (USD $ in millions, translated from CNY ¥)
	ROE1	%	%	%	%	%
	Adjusted for Goodwill
	Profit for the year attributable to owners of the parent (USD $ in millions, translated from CNY ¥)
	Adjusted equity attributable to owners of the parent (USD $ in millions, translated from CNY ¥)
	Adjusted ROE2	%	%	%	%	%

2012 Calculations

		Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
	As Reported
	Profit for the year attributable to owners of the parent (USD $ in millions, translated from CNY ¥)
	Total assets (USD $ in millions, translated from CNY ¥)
	ROA1	%	%	%	%	%
	Adjusted for Goodwill
	Profit for the year attributable to owners of the parent (USD $ in millions, translated from CNY ¥)
	Adjusted total assets (USD $ in millions, translated from CNY ¥)
	Adjusted ROA2	%	%	%	%	%

2012 Calculations