Notes to and Forming Part of the Financial Statements For the year ended June 30, 2021 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 the Company is situated at Morgah, Rawalpindi. Its shares are quoted on Pakistan Stock Exchange Limited. It is principally engaged in the refining of crude oil. The Company is subsidiary of The Attock Oil Company Limited, England and its ultimate parent is Coral Holding Limited (a private limited company incorporated in Malta). 2. STATEMENT OF COMPLIANCE These are separate financial statements of the Company and have been prepared in accordance with the accounting and reporting 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. 3. NEW AND REVISED STANDARDS AND INTERPETATIONS 3.1 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company: Effective date (annual reporting periods beginning on or after) IAS 1 Presentation of Financial Statements (Amendments) January 1, 2023 IAS 8 Changes in Accounting Estimates and Errors (Amendments) January 1, 2023 IAS 12 Income Taxes (Amendments) January 1, 2023 IAS 16 Property, plant and equipment (Amendments) January 1, 2022 IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendments) January 1, 2022 IFRS 3 Business combinations (Amendments) January 1, 2022 IFRS 7 Financial instruments: Disclosures (Amendments) January 1, 2021 IFRS 9 Financial instruments (Amendments) January 1, 2021 IFRS 16 Leases (Amendments) January 1, 2021 The management anticipates that the adoption of the above standards, amendments and interpretations in future periods, will have no material impact on the financial statements other than the impact on presentation/ disclosures. 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 17 Insurance Contracts The following interpretation issued by the IASB has been waived off by SECP: IFRIC 12 Service concession arrangements 110 Attock Refinery Limited 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4.1 Basis of measurement These financial statements have been prepared under the historical cost convention modified by revaluation of freehold land referred to in note 4.7, 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. 4.2 Dividend and revenue reserves appropriation Dividend and movement in revenue reserves are recognised in the financial statements in the period in which these are approved. 4.3 Employees retirement benefits The main features of the retirement benefit schemes operated by the Company for its employees are as follows: (i) Defined benefit plans The Company 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 actuarial recommendations. Actuarial valuations are conducted by an independent actuary, annually using projected unit credit method related details of which are given in note 34 to the financial statements. The obligation at the date of statement of financial position is measured at the present value of the estimated future cash outflows. All contributions are charged to statement of profit or loss for the year. Actuarial gains and losses (remeasurement gains/losses) on employees’ retirement benefit plans are recognised immediately in other comprehensive income and past service cost is recognized in statement of profit or loss when they occur. Calculation of gratuity and pension obligations require assumptions to be made of future outcomes which mainly includes increase in remuneration, expected long-term return on plan assets and the discount rate used to convert future cash flows to current values. Calculations are sensitive to changes in the underlying assumptions. (ii) Defined contribution plans The Company operates an approved contributory provident fund for all employees. Equal monthly contribution is made both by the Company and the employee to the fund at the rate of 10% of basic salary. 4.4 Employee compensated absences The Company also provides for compensated absences for all employees in accordance with the rules of the Company. 4.5 Taxation Income tax expense comprises of current and deferred tax. Current tax Provision for current taxation is based on taxable income at the applicable rates of taxation after taking into account tax credits and tax rebates, if any. Income tax expense is recognised in statement of profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Deferred tax Deferred income tax is accounted for using the statement of financial position liability method in respect of all temporary differences arising between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised Annual Report 2021 111 Notes to and Forming Part of the Financial Statements For the year ended June 30, 2021 for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, un-used tax losses and tax credits can be utilized. Deferred tax is calculated at the rates that are substantially expected to apply to the period when the differences reverse based on the tax rates that have been enacted. Deferred tax is charged or credited to income except in the case of items credited or charged to equity in which case it is included in equity. The Company takes into account the current income tax law and decisions taken by the taxation authorities. Instances where the Company’s views differ from the income tax department at the assessment stage and where the Company considers that its view on items of material nature is in accordance with law, the amounts are shown as contingent liabilities. Investment tax credits are considered not substantially different from other tax credits. Accordingly in such situations tax credits are deducted from current tax amount to the extent of tax credit availed while recognising deferred tax credit for the unused investment tax credit. 4.6 Provisions Provisions are recognised when the Company has a legal or constructive obligation as a result of past events, when it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation and a reliable estimate of the amount can be made. 4.7 Property, plant and equipment and capital work-in-progress a) Cost Operating fixed assets except freehold land are stated at cost less accumulated depreciation and impairment losses. Freehold land is stated at revalued amount. Capital work-in-progress and major spare parts and stand-by equipment are stated at cost. Cost in relation to certain plant and machinery items include borrowing cost related to the financing of major projects during construction phase. b) Revaluation Increase in the carrying amount arising on revaluation of freehold land are recognised in other comprehensive income and accumulated in shareholders’ equity under the heading surplus on revaluation of freehold land. To the extent that the increase reverses a decrease previously recognised in statement of profit or loss, the increase is first recognised in statement of profit or loss. Decreases that reverse previous increases of the same asset are first recognised in other comprehensive income to the extent of the remaining surplus attributable to the asset; all other decreases are charged to statement of profit or loss. c) Depreciation Depreciation on operating assets is calculated using the straight-line method to allocate their cost over their estimated useful life at the rates specified in note 13.1. d) Repairs and maintenance Maintenance and normal repairs, including minor alterations, are charged to income as and when incurred. Renewals and improvements are capitalised and the assets so replaced, if any, are retired. e) Gains and losses on disposal Gains and losses arising on disposal of assets are included in income currently. 4.8 Impairment of non-financial assets Assets that have an indefinite useful life, for example