Page 87 - HRC_AR2020

HENGYUAN REFINING COMPANY BERHAD I 85

2 sUMMarY of siGnificant accoUntinG policies (continued)
2.2 foreiGn cUrrencies (continued)
The basis of accounting for foreign currency transactions is as follows: (continued)
(b) transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions or valuation where items are remeasured. Monetary assets and liabilities denominated
in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items
denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as
at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair
value are translated using the exchange rates at the date when the fair value was determined. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
2.3 propertY, plant anD eQUipMent
Property, plant and equipment are stated at cost or valuation deemed as cost. The cost of an item of property, plant and
equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item
will flow to the Company and the cost of the item can be measured reliably. The cost of an item of property, plant and
equipment initially recognised includes its purchase price, import duties, non-refundable purchase taxes and any cost
that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating
in the intended manner. Cost also includes borrowing costs that are directly attributable to the acquisition, construction
or production of a qualifying asset (refer to accounting policy Note 2.15 on borrowing costs).
Subsequent to initial recognition, property, plant and equipment are measured at cost less accumulated depreciation
and accumulated impairment losses. When significant parts of property, plant and equipment are required to be
replaced in intervals, the Company recognises such parts as individual assets with specific useful lives. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced.
Freehold land is not depreciated as it has an infinite life.

All property, plant and equipment are depreciated on a straight-line basis to allocate the cost, or the revalued amounts
deemed as cost, to their residual values, over their estimated useful lives at the following annual rates:
Land improvements and buildings 2.5% - 10.0%
Plant, machinery and equipment 2.5% - 33.3%
Motor vehicles 20%

Depreciation on work-in-progress commences when the assets are ready for their intended use.
Plant, machinery and equipment comprise components of the refinery which are subject to different refurbishment
cycles. Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at the end of each
reporting period.
At the end of each reporting period, the Company assesses whether there is any indication of impairment. If such
indicators exist, the carrying amount of the asset is assessed and written down immediately to its recoverable amount.
Refer to accounting policy Note 2.6 on impairment of non-financial assets. An item of property, plant and equipment
is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains and
losses on derecognition of the asset are included in the profit or loss in the year the asset is derecognised.