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Financial Reports &
Governance HENGYUAN REFINING COMPANY BERHAD l ANNUAL REPORT 2023 113
Other Information

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

2 SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION (continued)
2.13 FINANCIAL LIABILITIES (continued)
(c) Subsequent measurement – gains and losses
Derivative liabilities are subsequently stated at fair value, with any resultant gains or losses recognised in profit or
loss. Net gains or losses on derivatives include exchange differences. Trade and other payables and borrowings
are subsequently measured at amortised cost using the effective interest method. Lease liabilities are subsequently
measured by increasing the carrying amount to reflect the unwinding of interest, and to reduce the carrying amount
to reflect the lease payments made. For other financial liabilities, gains and losses are recognised in the profit or
loss when the financial liabilities are derecognised, as well as through the amortisation process using the effective
interest method.
(d) Derecognition
A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in
profit or loss.
2.14 TRADE PAYABLES
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if payment is due within one year after the reporting period
(or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value net of transaction costs incurred, which include transfer taxes and
duties and subsequently measured at amortised cost using the effective interest method. See accounting policy 2.13 on
financial liabilities.
2.15 PROVISIONS
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events,
when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of
the amount can be made. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expected expenditures required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.
The increase in the provision due to passage of time is recognised as interest expense.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable
that an outflow of economic resources will be required to settle the obligation, the provision is reversed.
2.16 BORROWINGS AND BORROWING COSTS
(a) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost; any difference between the fair value (net of transaction costs) and the redemption value
is recognised in profit or loss over the period of the borrowings using the effective interest method, except for
borrowing costs incurred for the construction of any qualifying asset.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it
is probable that some or all of the facilities will be drawn down. In this case, the fee is deferred until the drawdown
occurs. To the extent there is no evidence that it is probable that some or all of the facilities will be drawn down,
the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facilities to which
it relates.