Property, Plant and Equipment Accounting Policy
Property, plant and equipment are recorded at cost.
The costs to acquire developed or producing oil and gas properties and to develop oil and gas properties, including completing geological and geophysical surveys and drilling development wells, and the costs to construct and install dedicated infrastructure, such as wellhead equipment and supporting assets, mine development, offshore platforms and subsea structures, are capitalized as oil and gas properties within Property, Plant and Equipment.
The costs to construct, install and commission, or acquire, oil and gas production equipment, including oil sands upgraders, extraction plants, mine equipment, in situ processing facilities, power generation, utility plants, and natural gas processing plants, and all renewable energy, refining, distribution, marketing assets and related decommissioning and restoration obligations, are capitalized as Property, Plant and Equipment. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the item will flow to Suncor, the expenditure is capitalized and the carrying amount of the replaced asset is derecognized.
Stripping activity required to access oil sands mining resources incurred in the initial development phase is capitalized as part of the investment in the construction cost of the mine. Stripping costs incurred in the production phase are charged to expense as they normally relate to production for the period.
The costs of planned major inspection, overhaul and turnaround activities that maintain property, plant and equipment and benefit future years of operations are capitalized. Recurring planned maintenance activities performed on shorter intervals are expensed as operating costs. Replacements outside of a major inspection, overhaul or turnaround are capitalized when it is probable that future economic benefits will flow to Suncor and the associated carrying amount of the replaced asset is derecognized.
Leases that transfer substantially all the benefits and risks of ownership to Suncor are recorded as finance lease assets within Property, Plant and Equipment. Costs for all other leases are recorded as operating expense as incurred.
Borrowing costs relating to assets that take a substantial period of time to construct for their intended use are capitalized as part of Property, Plant and Equipment. Capitalization of borrowing costs ceases when the asset is in the location and condition necessary for it to be capable of operating as intended. Capitalization of borrowing costs is suspended when construction of an asset is ceased for extended periods.
Source: Suncor Energy Inc., Annual Report
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