Page 114 - HRC_Annual_Report_2023

112 About HRC Value Creation Management Discussion Leadership
& Analysis

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

2 SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.11 CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash equivalents are held for the purpose of meeting short-term cash
commitments rather than for investment or other purposes. Cash and cash equivalents comprise cash, bank balances,
deposits with licensed banks and other short-term and highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes
in value.
2.12 INVENTORIES

Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct purchase costs (including transportation, insurance and premium) and is determined using the first
in, first out method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour,
other direct costs and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on
the basis of normal operating capacity and gains/losses on embedded derivatives for purchase of raw materials. It excludes
borrowing costs. The cost of finished products includes the cost of crude oil, direct materials, labour and an appropriate
proportion of fixed and variable manufacturing overheads.

Net realisable value is the estimate of selling price in the ordinary course of business, less any cost of completion and
selling expenses.
2.13 FINANCIAL LIABILITIES

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the
definitions of a financial liability.
(a) Classification
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial
liabilities.
(i) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities held
for trading include derivatives entered into by the Company that do not meet the hedge accounting criteria.
Liabilities in this category are classified within current liabilities if they are either held for trading or are expected
to be settled within 12 months after the reporting date. Otherwise, they are classified as non-current.

(ii) Other financial liabilities
The Company’s other financial liabilities include trade payables, other payables, intercompany payables,
lease liabilities and borrowings. Lease liabilities and borrowings are classified as current liabilities unless the
Company has an unconditional right to defer settlement of the liability for at least 12 months after the
reporting date.

(b) Recognition and initial measurement
Derivative liabilities are initially measured at fair value. Trade and other payables are recognised initially at fair value
plus directly attributable transaction costs. Borrowings are recognised initially at fair value, net of transaction costs
incurred. Lease liabilities are recognised initially at the present value of the lease payments not paid at that date.