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Financial Reports &
Governance HENGYUAN REFINING COMPANY BERHAD l ANNUAL REPORT 2023 109
Other Information

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

2 SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.8 FINANCIAL ASSETS (continued)

(d) Impairment of financial assets (continued)
Write off
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan
with the Company.
Impairment losses on trade receivables are presented as net impairment losses within administrative expenses in
the profit or loss. Subsequent recoveries of amounts previously written off are credited against the same line as
applicable.
The Company writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts
and has concluded there is no reasonable expectation of recovery. The assessment of no reasonable expectation of
recovery is based on unavailability of debtor’s sources of income or assets to generate sufficient future cash flows
to repay the amount. The Company may write off financial assets that are still subject to enforcement activity.
Subsequent recoveries of amounts previously written off will result in reversal of the amount previously written off
in profit or loss.
(e) Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the
consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is
recognised in profit or loss.
2.9 DERIVATIVES AND HEDGING ACTIVITIES

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting period.
The accounting for subsequent changes in fair value depends on whether the derivative is designated as hedging
instrument, and if so, the nature of the item being hedged. The Company designates its derivatives as hedges of a
particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions
(cash flow hedges).
The Company documents at the inception of the hedge relationship, the economic relationship between hedging
instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected to
offset changes in the cash flows of the hedged items. The Company documents its risk management objective and strategy
for undertaking its hedge transactions.

The fair values of various derivative financial instruments used for hedging purposes are disclosed in Note 19. Movements
in the hedging reserve in shareholders’ equity are shown in Note 23(a). The full fair value of a hedging derivative is
classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months;
it is classified as current asset or liability when the remaining maturity of the hedged item is less than 12 months.
Trading derivatives are classified as a current asset or liability.