BOGOTA, Colombia, June 7, 2016 /CNW/ -- Ecopetrol S.A. (BVC:
ECOPETROL; NYSE: EC) hereby announces that its Board of Directors,
in a session held on June 6, 2016,
approved the implementation of "Hedge of a net investment in a
foreign operation" accounting as established under the
International Accounting Standard IAS 39 (paragraph 102) and
Decrees 2420 and 2496 of 2015 regarding International
Financial Reporting Standards (IFRS). The decision seeks to reduce
the volatility within the non-operational results of the Company
due to the effects of fluctuations in foreign exchange rates.
The net investment hedge will apply to a portion of the foreign
currency investments that the Company owns and whose functional
currency is the U.S. dollar, with the hedging instrument being the
portion of our dollar-denominated debt that generated a net
liability position by the end of May.
As from the adoption of net investment hedge accounting, the
effect of fluctuations in the foreign exchange rate on the hedged
instrument will be recognized as Other Comprehensive Income (OCI)
in Equity, where currently the foreign exchange effect on
subsidiaries which have the U.S. dollar as their functional
currency is recorded when accounted under the equity method. This
policy is subject to a test of effectiveness and the ineffective
portion will be recognized in profit or loss.
The amounts recognized in OCI will be taken into profit and loss
only if and at such time the investments designated for purposes of
the net investment hedge are sold. In the meantime such
fluctuations will remain in Equity, even after debt payments are
made.
The net investment hedge will be applied prospectively from
June 7, 2016. This accounting change
will be treated alike for both Colombian IFRS and IFRS as issued by
the IASB.
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Ecopetrol is the largest company in Colombia and is an integrated oil & gas
company; it is among the top 50 oil companies in the world and
among the four top ones in Latin
America. Besides Colombia -
where it generates over 60% of the national production - it has
exploration and production activities in Brazil, Peru
& the US (Gulf of Mexico).
Ecopetrol owns the largest refinery in Colombia and most of the pipeline and
multi-product pipeline network in the country, and is significantly
increasing its participation in bio-fuels.
This release contains statements that may be considered
forward looking statements within the meaning of Section 27A of the
U.S. Securities Act of 1933 and Section 21E of the U.S. Securities
Exchange Act of 1934. All forward-looking statements, whether made
in this release or in future filings or press releases or orally,
address matters that involve risks and uncertainties, including in
respect of the Company's prospects for growth and its ongoing
access to capital to fund the Company's business plan, among
others. Consequently, changes in the following factors, among
others, could cause actual results to differ materially from those
included in the forward-looking statements: market prices of oil
& gas, our exploration and production activities, market
conditions, applicable regulations, the exchange rate, the
Company's competitiveness and the performance of Colombia's economy and industry, to mention a
few. We do not intend, and do not assume any obligation to update
these forward-looking statements.
For further information, please
contact:
Head of Corporate Finance and Investor Relations (A)
Lina María Contreras Mora
Phone: (+571) 234 5190
E-mail: investors@ecopetrol.com.co
Media Relations (Colombia)
Jorge Mauricio
Tellez
Phone: +571-234-4329
e-mail: mauricio.tellez@ecopetrol.com.co
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SOURCE Ecopetrol S.A.