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118 About HRC Value Creation Management Discussion Leadership
& Analysis

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

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amount of
assets within the next financial year is:

(a) Recoverability of the carrying amount of refinery assets
The Company reviews the carrying amount of its property, plant and equipment, intangible assets and ROU assets
(collectively the refinery assets cash-generating-units (“CGU”)) in accordance with its accounting policy 2.7 on impairment
of non-financial assets. The Company’s results from operations in any given period are principally driven by the demand
for and price of petroleum products relative to the supply and cost of crude oil.
Assumptions considered in the FVLCTS calculations include projected refining margins adjusted for planned turnaround
activities, margin uplift initiatives from crude optimisation and estimated production volume based on existing production
capacity and forecast demand. The FVLCTS calculations also took into account the planned capital expenditure and
incremental operating costs anticipated to ensure compliance with product specification regulations. The assessment
was based on management’s assessment adjusted for market conditions to reflect market participants’ perspective
(level three (3) in fair value hierarchy) and extrapolating the cash flows over a 20-year period, which reflects the remaining
useful life of the refinery assets.
The following key assumptions were made in determination of the recoverable amount:
(i) Refining margins per barrel: Between USD3.81 to USD4.57 (2022: USD3.29 to USD6.44)
(ii) Post-tax discount rate: 9.8% (2022: 11.5%)
(iii) Production volume: Based on existing production capacity and forecast demand, considering the impact from
climate-related risk
Sensitivity analysis:
The key estimation uncertainty over the assumptions used by management in the FVLCTS is the refining margins,
production volume and discount rate. The sensitivity of these assumptions to the recoverable amount and impairment
loss is as follows:
• 4.02% (2022: 4.29%) decrease over the 20-year period in refinery margin will result in the recoverable amount being
equal to the carrying amount of the refinery assets.
• 3.22% (2022: 3.49%) increase over the 20-year period in the discount rate will result in the recoverable amount being
equal to the carrying amount of the refinery assets.
• 11.49% (2022: 6.62%) decrease over the 20-year period in the production volume will result in the recoverable amount
being equal to the carrying amount of the refinery assets.
The cash flows forecast is dependent on the achievability of the refinery margins, production volume and assumptions
and the corresponding sensitivities as indicated above.
Refinery margins are subject to cyclical fluctuations resulting from an over-supply and supply tightness in various global
and regional markets. Fluctuations in the short term may result in significant changes in profit or loss.
The Directors have considered the impact of climate-related risks in the assumptions, especially on the production
volume used to determine the FVLCTS and do not expect the impact to the recoverable amount of the refinery assets to
be material at this juncture.