Page 139 - HRC_Annual_Report_2023

Financial Reports &
Governance HENGYUAN REFINING COMPANY BERHAD l ANNUAL REPORT 2023 137
Other Information

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

19 DERIVATIVE FINANCIAL ASSETS/(LIABILITIES)
The Company has the following derivative financial instruments:
2023 2022
RM’000 RM’000
Current assets
Refining margin swap contracts – cash flow hedges - 1,968
Refining margin swap contracts – held for trading 5,913 114,562
Commodity swap contracts – held for trading 11,679 -
Forward priced commodity contracts – held for trading 3,424 -
21,016 116,530

Current liabilities
Refining margin swap contracts – cash flow hedges 149,887 717,282
Refining margin swap contracts – held for trading - 7,237
Commodity swap contracts – held for trading 10,712 40,158
Forward foreign currency contracts – held for trading 10,068 12,659
170,667 777,336

Non-current liabilities
Refining margin swap contracts – cash flow hedges - 115,282
- 115,282

Derivatives designated as hedging instrument

(a) Refining margin swap contracts
The Company purchases crude on an ongoing basis as the Company requires continuous supply of crude to produce
petroleum products. As a result of the volatility in crude price, the Company held refining margin swaps designated as
hedge of highly probable forecast crude purchases or firm commitments and sales of petroleum products to reduce the
volatility of cash flows.
The contracts are intended to hedge the volatility of the refining margin (differences between purchase price of crude oil
and sales price of petroleum products) for a period between 1 to 9 months (2022: 1 to 21 months). There were no forecast
transactions for which hedge accounting had previously been used, but is no longer expected to occur.
The cash flow hedges of the highly probable forecast crude purchases or firm purchase commitments and sales of
petroleum products were assessed to be highly effective. The net unrealised loss of RM149,887,000 (2022: unrealised
loss of RM830,596,000), with a related deferred tax asset of RM35,973,000 (2022: deferred tax asset of RM199,343,000)
was included in other comprehensive income in respect of these contracts for the financial year.