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100 I 2020 ANNUAL REPORT I financial reports

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020 (CONTINuED)

2 sUMMarY of siGnificant accoUntinG policies (continued)
2.24 continGent liaBilities anD continGent assets
The Company does not recognise contingent liability but discloses its existence in the financial statements. A contingent
liability is a possible obligation that arises from past event whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation
that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation.
A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because
it cannot be measured reliably.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence
or non-occurrence of one or more uncertain future events beyond the control of the Company. The Company does
not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not
virtually certain.

2.25 seGMent reportinG
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors.
No segmental information is considered necessary for analysis by business or by geographical segments. This is
because the Company is principally engaged in the business of refining and manufacturing of petroleum products in
Malaysia, which is a single business segment. Also, the Company’s primary segment operations are also concentrated
within Malaysia, hence operating within a single geographical segment.
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 to its accounting policy stated in
Note 2.6. 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.
Key assumptions considered in the FVLCTS calculations include projected refining margins adjusted for planned
turnaround activities as well as margin uplift initiatives from crude optimisation. 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.