164 Leveraging HR to Achieve Excellence Notes to and Forming Part of the Consolidated Financial Statements For the year ended June 30, 2018 1. LEGAL STATUS AND OPERATIONS Attock Refinery Limited (the Company) was incorporated in Pakistan on November 8, 1978 as a private limited company and was converted into a public company on June 26, 1979. The registered office of ARL is situated at Morgah, Rawalpindi. Its shares are quoted on the Pakistan Stock Exchange. It is principally engaged in the refining of crude oil. The Company is subsidiary of the Attock Oil Company Limited, UK and its ultimate parent is Bay View International Group S.A. Attock Hospital (Private) Limited (AHL) was incorporated in Pakistan on August 24, 1998 as a private limited company and commenced its operations from September 1, 1998. AHL is engaged in providing medical services. AHL is a wholly owned subsidiary of ARL. For the purpose of these financial statements, the Company and its above referred wholly owned subsidiary AHL is referred to as the Group. 2. SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING THE COMPANY’S FINANCIAL POSITION AND PERFORMANCE The financial position and performance of the Company was affected by the following events and transactions during the year: i) The Company has suffered a net exchange loss of Rs 1,396.03 million in respect of its purchases and liabilities denominated in US Dollars and as also referred to in note 31. ii) Consequent to the decision of government to shut-down furnace fueled power plants in country there was a reduction in capacity utilization of the refinery during the month of November 2017. In view of the foregoing, the Company was compelled to operate the refinery at lower throughput to deal with the problem of increasing stock of furnace fuel and the declining ullage. iii) Other significant transactions and events have been adequately described in these financial statements. For detail performance review of the Company, refer Directors’ Report. 3. STATEMENT OF COMPLIANCE These are consolidated financial statements of the Group and consolidated financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of: - International Financial Reporting Standards (IFRS Standards) issued by the International Accounting Standards Board (IASB) as notified under the Companies Act, 2017; and - Provisions of and directives issued under the Companies Act, 2017. Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRS Standards, the provisions of and directives issued under the Companies Act, 2017 have been followed. 4. NEW AND REVISED STANDARDS AND INTERPRETATIONS 4.1 The fourth schedule to the Companies Act, 2017 (the Act) became applicable to the Group for the first time for the preparation of these consolidated financial statements. The Act (including its fourth schedule) forms an integral part of the statutory financial reporting framework applicable to the Group and amongst other, prescribes the nature and content of disclosures in relation to various elements of the consolidated financial statements. The Act has also brought certain changes with regard to preparation and presentation of annual and interim consolidated financial statements of the Group. These changes include change in nomenclature of primary consolidated financial statements. Further, the disclosure requirements contained in the Fourth schedule to the Act have been revised, resulting in the: - elimination of duplicative disclosures with the IFRS disclosure requirements; and - incorporation of significant additional disclosures. - Specific additional disclosures and changes to the existing disclosures as a result of this change are stated in notes 2, 5.8, 6, 9, 11, 12, 13.2, 13.3, 16, 20.2, 21.2, 27.2, 32.4, 37, 39.2, 39.3, 40, 45, 46.1, 46.2 and 46.4 Annual Report 2018 165 4.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group: Effective date (annual reporting periods beginning on or after) IAS 19 Employee benefits (Amendments) January 1, 2019 IAS 28 Investment in Associates and Joint Ventures (Amendments) January 1, 2019 IAS 40 Investment property (Amendments) January 1, 2018 IFRS 2 Share-based Payment (Amendments) January 1, 2018 IFRS 4 Insurance contracts (Amendments) January 1, 2018 IFRS 16 Leases January 1, 2019 IFRIC 22 Foreign Currency Transactions and Advance Consideration January 1, 2018 IFRIC 23 Uncertainty Over Income Tax January 1, 2019 The management anticipates that the adoption of the above standards, amendments and interpretations in future periods, will have no material impact on the consolidated financial statements other than the impact on presentation/disclosures. The management is in the process of assessing the impact of changes laid down by the IFRS 9, 15 and 16 on its financial statements. Further, the following new standards and interpretations have been issued by the International Accounting Standards Board (IASB), which are yet to be notified by the Securities and Exchange Commission of Pakistan (SECP), for the purpose of their applicability in Pakistan: IFRS 1 First-time Adoption of International Financial Reporting Standards IFRS 14 Regulatory Deferral Accounts IFRS 17 Insurance Contracts The following interpretations issued by the IASB have been waived of by SECP: IFRIC 4 Determining whether an arrangement contains lease IFRIC 12 Service concession arrangements 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 5.1 Basis of measurement These consolidated financial statements have been prepared under the historical cost convention modified by revaluation of freehold land referred to in note 5.8, certain financial instruments which are carried at their fair values and staff retirement gratuity and pension plans which are carried at present value of defined benefit obligation net of fair value of plan assets. 5.2 Basis of consolidation a) Subsidiary The consolidated financial statements include the financial statements of Attock Refinery Limited (ARL) and its wholly owned subsidiary, Attock Hospital (Private) Limited. Subsidiary is an entity over which ARL has the control and power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights or otherwise has power to elect and appoint more than one half of its directors. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The assets and liabilities of subsidiary company have been consolidated on a line by line basis and the carrying value of investments held by the parent company is eliminated against the subsidiary shareholders’ equity in the consolidated financial statements. Material intra-company balances and transactions have been eliminated for consolidated purposes. 166 Leveraging HR to Achieve Excellence Notes to and Forming Part of the Consolidated Financial Statements For the year ended June 30, 2018 b) Associates Associates are all entities over which the Company has significant influence but not control. Investment in associated companies is accounted for using the equity method. Under this method the investments are stated at cost plus the Company’s share in undistributed earnings and losses after acquisition, less any impairment in the value of individual investments. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to statement of profit or loss where applicable. The Company’s share of post-acquisition profit is recognised in the consolidated statement of profit or loss, and its share of post-acquisition movements in consolidated statement of other comprehensive income is recognised in other comprehensive income with the corresponding adjustment to the carrying amount of the investment. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Company determines at each reporting date whether there is any objective evidence in the associate is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying amount and recognises the amount adjacent to share of profit/ (loss) of associates in the consolidated statement of profit or loss. 5.3 Dividend and revenue reserves appropriation Dividend and movement in revenue reserves are recognised in the consolidated financial statements in the period in which these are approved. 5.4 Employee retirement benefits The main features of the retirement benefit schemes operated by the Group for its employees are as follows: i) Defined benefit plans The Group operates approved pension fund for its management staff and approved gratuity fund for its management and non-management staff. The investments of Pension and gratuity funds are made through approved trust funds. Gratuity is deductible from pension. Management staff hired after January 1, 2012 are only entitled to benefits under gratuity fund. Contributions are made in accordance with