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92 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)
2.9 traDe anD otHer receiVaBles
Trade receivables are amounts due from customers for oil products sold in the ordinary course of business. Other
receivables generally arise from transactions outside the usual operating activities of the Company. If collection is
expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain
significant financing components, where they are recognised at fair value plus transaction costs. Other receivables are
recognised initially at fair value plus transaction costs. Transaction costs include transfer taxes and duties.
The Company holds trade and other receivables with the objective of collecting the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective interest rate method, less allowance for impairment.
Details about the Company’s impairment policies and the calculation of ECL are provided in the accounting policy
Note 2.7.

2.10 casH anD casH eQUiValents
For the purpose of the statement of cash flows, cash equivalents are held for the purpose of meeting short-term
cash commitments rather than for investment or other purposes. Cash and cash equivalents comprise cash, bank
balances, deposits with licensed banks and other short-term and highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value.
Bank overdrafts which are repayable on demand and form an integral part of the Company’s cash management are
included as a component of cash and cash equivalents in the statement of cash flows. In the statement of financial
position, banks overdrafts are shown within borrowings in current liabilities.
2.11 inVentories

Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct purchase costs (including transportation, insurance and premium) and is determined using the
first in, first out method. The cost of finished goods and work in progress comprises design costs, raw materials,
direct labour, other direct costs and an appropriate proportion of variable and fixed overhead expenditure, the
latter being allocated on the basis of normal operating capacity and gains/losses on qualifying cash flow hedges for
purchase of raw materials. It excludes borrowing costs. The cost of finished products includes the cost of crude oil,
direct materials, labour and an appropriate proportion of fixed and variable manufacturing overheads.
Net realisable value is the estimate of selling price in the ordinary course of business, less any cost of completion
and selling expenses.