Page 77 - HRC_AR2020

HENGYUAN REFINING COMPANY BERHAD I 75

report on tHe aUDit of tHe financial stateMents (continued)
Key audit matters (continued)

Key audit matters How our audit addressed the key audit matters

recoverability of the carrying amount of refinery assets
and deferred tax asset (continued)
Based on the FVLCTS computed, the Directors have concluded We performed the following audit procedures on the
that there is no further impairment in the carrying amount projections of taxable profits:
of refinery assets and recognition of deferred tax assets on - Checked that the projections of taxable profits are
the remaining unutilised tax losses is appropriate.
determined based on the same assumptions used in the
FVLCTS calculation; and

- Checked the amount of tax losses estimated to be
utilised in YA2021 to YA2025 are included in the
computation of deferred tax asset recognised as at
31 December 2020.
We did not find any material exceptions in the procedures
performed.

net realisable value (“nrV”) of the hydrocarbon
inventories
Refer to Note 2 Significant accounting policies: Note 2.11 We performed the following audit procedures:
– Inventories, Note 3 Critical accounting estimates and - Agreed the quantity of both the crude and product
judgements: (c) Net realisable value of the hydrocarbon inventories to supporting documents;
inventories, Note 16 – Inventories.
- Observed the tank dipping process during the annual
As at 31 December 2020, the Company’s hydrocarbon physical inventory observation and performed roll-forward
inventories amounted to RM1,015.3 million. Management testing on a sampling basis to reconcile the tank dipping
has performed an assessment to determine the NRV of the results to the inventory system;
hydrocarbon inventories. The NRV was determined based on
selling prices less costs to sell after the financial year end. - Corroborated the selling prices of the hydrocarbon
inventories to the supporting documents after the
We focused on this area given the significance of the financial year end;
hydrocarbon inventory balances and the volatility of the crude
prices which may result in costs being higher than selling - Checked selling costs to the supporting documents;
prices less costs to sell. - Computed the differences between inventory costs and
the NRV to ascertain the NRV adjustments as at
Based on the assessment performed, the Directors have
provided RM28.1 million for inventories write down. 31 December 2020.
We did not find any material exceptions in the procedures
performed.