Page 125 - HRC_AR2020

HENGYUAN REFINING COMPANY BERHAD I 123

19 DeriVatiVe financial assets/(liaBilities) (continued)
Derivatives designated as hedging instrument (continued)
(b) interest rate swap contracts (continued)
The effects of the interest rate swap contracts on the Company’s financial position and performance are as follows:

2020 2019
Carrying amount (liability) (RM’000) (15,886) (12,759)
Notional amount (USD’000) 88,750 115,000
Maturity date february 2023 February 2023
Hedge ratio (%) 100 100
Change in fair value of outstanding hedging instruments (RM’000) (15,955) (12,902)
Change in value of hedged item used to determine
hedge effectiveness (RM’000) 15,955 12,902
Weighted average hedged rate for the year (%) 2.98 2.97

Refer to Note 23 for impact of hedging on cash flow hedge reserve and cost of hedging reserve.
Derivatives not designated as hedging instrument

(a) forward foreign exchange contracts
The Company enters into forward foreign currency contracts to protect the Company from movements in exchange
rates by establishing the rate at which foreign currency asset or liability will be settled. Forward currency contracts are
mainly used to hedge cash receipts and cash payments denominated in currency other than the functional currency of
the Company.
(b) forward priced commodity contracts
The Company entered into crude purchase contracts with variability in the payables. The delivery and control of the
crude is transferred at delivery date. The Company recognised the purchase of the crude as inventory on delivery date
based on the forward priced of the crude. The variability in the payable associated with the crude price gives rise to
an embedded derivative which is not closely related to the purchase contract. The embedded derivative is separated
from the payables relating to the purchase of inventory. The Company has elected to adjust and reflect subsequent
changes in the fair value of the embedded derivative as part of the cost of inventory.
(c) commodity options, commodity swap contracts and refining margin swap contracts
The Company also uses commodity options, commodity swap contracts and refining margin swap contracts to
manage its commodity price risk and inventory holding cost. The Company does not designate these derivatives as
hedging instrument.

20 casH anD casH eQUiValents
2020 2019
rM’000 rM’000

Bank balances 737,198 1,135,366
Less: Restricted cash (53,355) (98,578)
683,843 1,036,788

Restricted cash comprise of amounts held in a debt service accrual account associated with the term loan facilities.
The Company’s factoring bank account is charged in respect of the additional accounts receivable factoring facility obtained
during the financial year.