ADNOC Distribution Q4 2024 Financial Statements – English – 11 February 2025

Directors' report

1

Independent auditors' report

2-10

Consolidated statement of financial position

11

Consolidated statement of profit or loss

12

Consolidated statement of comprehensive income

13

Consolidated statement of changes in equity

14

Consolidated statement of cash flows

15

Notes to the consolidated financial statements

16-60

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Key Audit Matter

How our audit addressed the key audit matter

1- Impairment assessment of intangible

assets including goodwill

As at 31 December 2024, the Group has

Our audit approach included the following:

recognised goodwill and other intangible assets

with indefinite useful lives amounting to AED

•

we

obtained

an

understanding

of

and

228.46 million and AED 84.45 million, aggregating

evaluated

management's process

including

to 1.72 percent of the Group's total assets.

key controls over impairment assessment;

Goodwill and intangible assets with indefinite

• we obtained management's future cash flow

forecasts and tested the mathematical

useful lives are required to be tested for

impairment, at least on an annual basis. For this

accuracy of the underlying value-in-use

purpose, goodwill and other intangible assets with

calculations;

indefinite useful lives are allocated to the Retail,

•

we

involved

our

valuations specialists

to

Corporate and Aviation CGUs, the recoverable

evaluate

the

appropriateness

of

the

amount of which is supported by value-in-use

methodology used by the management, and

calculations based on future discounted cash flows.

to

assess

the

reasonableness

of

key

Based on the assessment, management concluded

assumptions used in the calculations. When

that the intangible assets including goodwill were

assessing these key assumptions, we discussed

not impaired as of 31 December 2024.

them with management to understand and

We identified the impairment of goodwill and

evaluate management's basis for determining

the assumptions; and

other intangible assets as a key audit matter due to

the use of complex and subjective management

• we assessed the appropriateness of the related

estimates based on management's judgement of

disclosures included in note 6 to the

key variables and market conditions.

consolidated financial statements.

We refer to Note 3 and 6 to these consolidated

financial statements for the accounting policy and

related disclosures respectively.

Key Audit Matter

How our audit addressed the key audit matter

2- Revenue recognised from retail sales

and related IT systems

Revenue from retail sales amounted to AED

Our audit approach included the following:

23,798.66 million for the year ended 31 December

•

2024.

we

obtained

an

understanding

of

the

There

are complex IT systems in

use which

significant revenue processes

and

identified

key relevant controls and IT systems;

comprise multiple IT applications which are used

•

we involved our IT Specialists to obtain an

to process large volumes of data pertaining to retail

understanding

of

the control

environment

sales transactions that occur throughout the year.

and to test General IT controls over IT

Given the complexity of the IT systems involved

systems and

applications involved in

the

revenue recording process;

there is an inherent risk around accuracy and

completeness of revenue recognized and therefore

• we evaluated the design and implementation

we considered this area to be a key audit matter.

of controls and tested the operating

The

Group's accounting policies

relating to

effectiveness of automated controls residing

in the IT systems and applications involved in

revenue recognition are presented in note 3 to the

the revenue recording process;

consolidated financial statements and details about

•

we assessed the Group's accounting policy

the Group's revenue are disclosed in note 19 to the

for

revenue

recognition

against

the

consolidated financial statements.

requirements of IFRS Accounting Standards;

• we performed a test of details on a sample

basis to test the reconciliation of daily retail

sales to cash collections and subsequent bank

deposits;

•

we

performed

substantive

analytical

procedures over retail sales revenue by

building an expectation on the basis of

quantities sold and regulated prices; and

• we assessed the adequacy of disclosures in the

consolidated financial statements relating to

revenue.

Key Audit Matter

How our audit addressed the key audit matter

3- Right-of-use assets

As part of the Group's plans to expand its

Our audit approach included the following:

distribution network in the United Arab

Emirates, Kingdom of Saudi Arabia and Egypt

• We obtained an understanding of the Group's

during the current year, the Group has entered

process for identifying the agreements related

into multiple leasing arrangements. During the

to the right-of-use assets and lease liabilities;

year, the Group has recorded additional right-of-

•

we obtained an understanding of the system

use assets and related lease liabilities amounting

generated lease assessment and recomputed the

to AED 158.43 million.

amount based on the inputs from the contract

Determining the present value of the lease

to ensure accuracy of the results;

payments requires management to apply

• we assessed the validity and completeness of

significant judgments and estimates to determine

the list of service stations and other assets used

the discount rate and lease term, which has been

for the underlying calculation;

disclosed in note 4 of the consolidated financial

• we performed test of details by inspecting the

statements.

lease agreements, on a sample basis to

Additionally, due to number of service stations

determine the existence of the lease;

• we recalculated interest on the lease liabilities

and other assets added every year, management

encounter certain delays in the finalization of the

and depreciation of the right-of-use assets and

agreements on account of certain approvals and

agreed these to the consolidated financial

communication from the relevant departments

statements;

which affects the process of collating a complete

•

we performed detailed analysis and made

set of lease contracts.

enquiries of management related to the

Given the complexity and judgments involved

incremental borrowing rates used on the lease

assessment; and

there is an inherent risk around accuracy and

• we assessed the adequacy of disclosures in the

completeness of assets and liabilities recognized

consolidated financial statements.

as at year end and therefore we considered this

area to be a key audit matter.

The Group's accounting policies are presented in

note 3 and details about the Group's right-of-use

assets are disclosed in note 10 to the consolidated

financial statements.

Key Audit Matter

How our audit addressed the key audit matter

4- Decommissioning obligation related

to assets constructed on leased land

The Group has recorded a provision for

Our audit approach included the following:

decommissioning of AED 162.28 million. These

provisions relate to an obligation to dismantle

• we obtained an understanding of the Group's

service stations constructed on leased land, at a

process for identifying the agreements

for

future date.

which a provision needs to be raised and testing

The Group operates a comprehensive network

the adequacy of controls over this process;

•

we

evaluated

the approach adopted

by

of fuel stations in Dubai and Northern emirates

management in determining the expected costs

in the United Arab Emirates on land leased from

third parties. The Group has contractual

of decommissioning and whether the

obligations to restore the land to its original

significant judgements applied and estimates

condition at the end of the lease period in respect

made are reasonable;

of these lands.

• we

obtained

an understanding of the cost

The provision

is

based

upon current

cost

assumptions used that have the most significant

impact on the provisions and whether these

estimates and

has

been

determined

on a

assumptions are appropriate and discussed the

discounted basis with reference to current legal

estimates used by the management;

requirements and available technology.

• we reviewed the discount rates and inflation

At each reporting date the decommissioning

rates used in the estimation to determine if they

liability is reviewed for remeasurement in line

are appropriate;

with changes in observable assumptions, timing

•

we evaluated the skills, objectivity

and

and the latest estimates of the costs to be

competence of the management expert; and

incurred at reporting date.

• we assessed the adequacy of disclosures in the

The Group's accounting policies relating to the

consolidated financial statements.

dismantling obligations are presented in note 3,

the critical accounting estimates made, and

judgements applied by management are disclosed

in note 4 to the consolidated financial statements

and details about the decommissioning

obligations are disclosed in note 18 to the

consolidated financial statements.