Page 99 - HRC_AR2020

HENGYUAN REFINING COMPANY BERHAD I 97

2 sUMMarY of siGnificant accoUntinG policies (continued)
2.19 leases (continued)
company as lessee (continued)
Lease liabilities (continued)
(a) initial measurement of lease liabilities (continued)

The lease payments include the following:
• Fixed payments (including in-substance fixed payments), less any lease incentive receivable;
• Variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;
• Amounts expected to be payable by the Company under residual value guarantees;
• The exercise price of a purchase and extension options if the Company is reasonably certain to exercise that
option; and
• Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
Lease payments are allocated between principal and finance costs. The finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period.
The Company presents the lease liabilities as a separate line item in the statement of financial position.
Interest expense on the lease liability is presented within the finance cost in profit or loss in the statement of
comprehensive income.
(b) subsequent measurement of lease liabilities

After the commencement date, a lessee shall measure the lease liability by:
i) increase the carrying amount to reflect interest on the lease liability;
ii) reduce the carrying amount to reflect the lease payments made; and
iii) remeasure the carrying amount to reflect any reassessment or lease modifications specified or to reflect
in-substance fixed lease payments.
(c) reassessment of lease liabilities
After the commencement date, a lessee shall remeasure the lease liability to reflect changes to the lease payments
by using a revised discount rate if either:
i) a change in lease term due to the lessee exercises an option (purchase/termination/extension) in a different
way than the Company has previously determined was reasonably certain; or
ii) a change in lease term due to an event occurs that contractually obliged/prohibits the lessee from exercise
the option.
In contrast, a lessee shall use an unchanged discount rate to remeasure lease liability to reflect changes to lease
payments if either:
i) a change in the amounts expected to be payable under a residual value guarantee; or
ii) a change in future lease payments resulting from a change in an index or rate used to determine those
payments.
A lessee shall recognise the amount of the remeasurement of the lease liability as an adjustment to the ROU.
However, if the carrying amount of the ROU is reduced to zero and there is a further reduction in the measurement
of the lease liability, a lessee shall recognise any remaining amount of the remeasurement in profit or loss.