Page 97 - HRC_AR2020

HENGYUAN REFINING COMPANY BERHAD I 95

2 sUMMarY of siGnificant accoUntinG policies (continued)
2.16 offsettinG financial instrUMents
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when
there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or
realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future
events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy.
2.17 reVenUe
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.
Revenue from contracts with customers
(a) sale of oil products, partially refined oil products and feedstocks
The Company refines and sells oil products, partially refined oil products and feedstocks to customers. Sales are
recognised upon transfer of control of the goods to the customer. This is when products are delivered to the
customer, the customer has full discretion over the channel and price to sell the products and there is no unfulfilled
obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products
have been shipped to the specific location, the risk of loss has been transferred to the customer, and either the
customer has accepted the products in accordance with the sales contract or the Company has objective evidence
that all criteria for acceptance have been satisfied.

No element of financing is deemed present as the sales are made with a credit term of 30 days, which is
consistent with market practice.
A receivable is recognised when the products are delivered as this is the point in time that the consideration
is unconditional because only the passage of time is required before the payment is due.
(b) procurement of oil products
The Company has contracts with its related companies to acquire, on their behalf, oil products produced by
customers. The Company is acting as an agent in these arrangements.
When another party is involved in providing goods or services to its related companies, the Company determines
whether it is a principal or an agent in these transactions by evaluating the nature of its promise to related
companies. The Company is a principal and records revenue on a gross basis if it controls the promised goods
before transferring them to related companies. However, if the Company’s role is only to arrange for another
entity to provide the goods, then the Company is an agent and will need to record revenue at the net amount
that it retains for its agency services.
Revenue from other sources – interest income

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset
except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets, the effective
interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).
2.18 pUrcHases
Purchases reflect all costs related to acquisition of inventories and supplies used for conversion into finished products,
including the effects of the changes therein (cost of inventories), foreign exchange gains and losses.