Page 88 - HRC_AR2020

86 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)
2.4 Maintenance costs
Asset replacement costs incurred by the Company for major scheduled maintenance of the refinery are capitalised
as part of the refinery assets and depreciated on a straight-line basis over the period until the next major scheduled
maintenance. All other repairs and maintenance are charged to profit or loss in the financial period they are incurred.
2.5 intanGiBle assets

Intangible assets comprise software costs that are acquired by the Company, which have finite useful lives, and are
measured at cost less any accumulated amortisation and accumulated impairment losses.
Intangible assets are amortised from the date that they are available for use and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. Amortisation is based on the cost of an asset less its
residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of the
intangible assets.
The estimated useful lives of intangible assets are between 3 and 10 years. Amortisation methods, useful lives and
residual values are reviewed at the end of each reporting period and adjusted, if appropriate.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.
2.6 iMpairMent of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such
indication exists, the Company makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell (“FVLCTS”) and its value in use.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating-units (“CGU”)).

In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value and the risks
specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down
to its recoverable amount. Impairment losses are recognised in profit or loss.
An assessment is made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only
if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment
loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount.
That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognised previously. Such reversal is recognised in profit or loss.