Based on the information above and the right of use assets (vehicles)

1. write the justification of lease classification (for the lessee and lessor)

2. The lease amortization schedule (for the lessee and lessor)

3. Recording the entries relating to the lease agreement for the first

two years of the lease (for the lessee and lessor)

(Dont forget to mention the dates)

4. The section relating to the lease transactions (in the balance sheet)

at the end of the second year (for the lessee and the lessor)

what information is missed ?

i do not understant your reply !

Statement of financial position (All amounts in thousands of Saudi Riyals unless otherwise stated) As at December 31, 2019 2018 Notes Assets Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Long-term loans Investment Deferred tax asset 46,110,807 12,039,098 494,307 3,449,675 16,412 399,086 62,509,385 44,628,314 393.774 111.443 3,861,749 16,412 445,882 49,457,574 Current assets Inventories Trade receivables Current portion of long-term loans Prepayments and other receivables Time deposits Cash and cash equivalents 3,406,225 5,364,086 450,318 1,983,548 3,207,445 6,004,714 420,428 2,084.488 1,655,605 1.263,713 14,636,393 64,093,967 316,086 11,520,263 74,029,648 Total assets Equity and liabilities Equity Share capital Statutory reserve Employees' share ownership plan Retained earnings Total equity 8,760,000 252,134 (4,813) 1,034,086 10,041,407 8,760,000 249.465 (6.241) 1,538,796 10,542,020 Non-current liabilities Loans, borrowings and other long-term liability Lease liabilities Employees' benefits 23,638,023 11,750,600 653,504 36,042,127 27,688,017 463,576 510,501 28,662,094 Current liabilities Short-term borrowings Current maturity of lease liabilities Trade and other payables Accrued expenses and other liabilities Zakat and Tax payable 16,816,897 555,352 9,401,638 1,157,008 15,219 27,946,114 63,988,241 74,029,648 13,007,494 19,540 10,163,333 1.425,990 273,496 24,889,853 53,551,947 64,093,967 Total liabilities Total equity and liabilities Statement of changes in equity (All amounts in thousands of Saudi Riyals unless otherwise stated) Employees' share ownership plan Share Statutory capital reserve Notes Retained earnings Total 8,760,000 249,465 (6,241) Balance as at January 1, 2019 Net loss after Zakat and Tax Other comprehensive loss Total comprehensive loss Transfer to statutory reserve Vesting of shares under employees share ownership plan Zakat and Tax reimbursements Balance as at December 31, 2019 21 . 2,669 1,538,796 10,542,020 (544,151) (544,151) (58,809) (58,809) (602,960) (602,960) (2,669) 1,428 100,919 100,919 1,034,086 10,041,407 1,428 8,760,000 252,134 (4,813) 8,760,000 183,745 7,098) Balance as at January 1, 2018 Net profit after Zakat and Tax Other comprehensive loss Total comprehensive income Transfer to statutory reserve Vesting of shares under employees' share ownership plan Dividend Tax reimbursements Balance as at December 31, 2018 1,149,160 10,085,807 668,560 668,560 (11,362) (11,362) 657,198 657,198 (65,720) 21 - 65,720 857 857 (438,000) (438,000) 236,158 236,158 1,538,796 10,542,020 8,760,000 249.465 (6.241) Statement of cash flows (All amounts in thousands of Saudi Riyals unless otherwise stated) Notes For the year ended December 31, 2019 2018 Cash flows from operating activities (Loss) profit before Zakat and Tax (319,016) 853,074 12,13 10 Adjustments for non-cash items Depreciation Financial charges Financial income Amortization Provision for slow moving inventories Impairment loss on receivables Loss on disposal of property and equipment 2,369,411 1,022,440 (264,095) 22,976 8,477 2,581 672 2,843,446 2,419,861 465,765 (302,832) 13,234 22.491 9,26 73 21,769 3,493,435 Changes in working capital Trade receivables Inventories Prepayments and other receivables Trade and other payables Accrued expenses and other liabilities Employees' benefits 840,628 (207,257) 198,983 (320,464) (372,373) 75,245 2,858,208 (426,238) 233,354 (836,560) 1,828,764 (263,426) (207,615) (905,986) 1,349,559 667,816 77,284 4,211,067 (314,845) 281,916 (234,664) 3,943.474 Zakat and income tax paid Interest received Interest paid Net cash generated from operating activities (3,439,330) Cash flows from investing activities Purchase of property, plant and equipment Addition to intangible assets Net movement in time deposits Disbursements of long-term loan Net cash used in investing activities 1,655,605 (31,624) (1,815,349) (2,927,816) (1,164) (176,531) (219,613) (3,325,124) Cash flows from financing activities Proceeds from loans and borrowings Repayments of loans and borrowings Repayment of finance leases Dividend paid Net cash used in financing activities 15,438,750 (15,861,608) (538, 119) (65) (961,042) 3,287,625 (3,316,332) (46,921) (437 272) (512.900) Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year (947,627) 1,263,713 316,086 105,450 1,158,263 1,263,713 100,919 103,455 Supplemental schedule of non-cash information Zakat and tax reimbursable from shareholders Addition to property, plant and equipment through accrued expenses and other liabilities Long-term loan repayments settled against capacity payments Addition to intangible assets through property, plant and equipment Addition to right-to-use assets 236,158 147,055 388,009 410,195 14 13 405,840 12,360,955 2.1 New standards, interpretations and amendments Standards, interpretations and amendments adopted IFRS 16-Leases IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease. SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model. The Company adopted IFRS 16 using the simple modified method of adoption with the date of initial application of January 1, 2019 and therefore comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. Under this method, the lease liability is measured based on the remaining lease payments discounted using the incremental borrowing rate as of the date of initial application, and the carrying amount of the right-of-use asset is an amount equal to the carrying amount of the lease liability on the date of initial application. Any prepayments, accruals or lease incentives relating to previous operating lease are adjusted against the right of use asset at the initial application date. The Company elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as looses applying IAS 17 and IFRIC 4 at the date of initial application. The Company also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or loss and do not contain a purchase option (short-term leases), and lease contracts for which the underlying asset is of low value ('low-value assets). In addition, the Company has also used practical expedients to apply a single discount rate to a portfolio of leases with similar characteristics and excluded initial direct costs from measuring the right-of-use asset at the date of initial application. Notes to the financial statements for the year ended December 31, 2019 (All amounts in thousands of Saudi Riyals unless otherwise stated) Basis of preparation (continued) Reconciliation of lease liability At the date of initial application, the Company recognizes additional right-of-use asset and lease liability of SAR 12,345 million. The weighted average rate applied is 3.28% 17,763,867 The following table represent the lease reconciliation as at January 1, 2019 Minimum loose payments Recognition exemptions Short-term leases Leases of low value assets Effect of discounting using the incremental borrowing rate Liabilities additionally recognizes based on application of IFRS 16 Liabilities for leased assets acquired under finance lease Total lease liabilities (1,604) (5.616) 15,411,833) 12,344,814 483, 116 12,827,930 Impact on comprehensive income During the year ended December 31, 2019, due to the adoption of IFRS 16-leases, the Company's operating profit has improved by Saudi Riyals 220 million, by way of decrease in operating lease rentals by Saudi Riyals 912 million and increase in depreciation expense by Saudi Riyals 692 million, whereas interest expense has increased by Saudi Riyals 404 million Standards, interpretations and amendments issued but not yet effective The standards, interpretations and amendments issued, but not yet effective up to the date of issuance of the financial statements are disclosed below. The Company intends to adopt these standards, where applicable, when they become effective Effective from periods Standard / beginning on or after Interpretation Description the following date Conceptual Amendments to References to Conceptual Framework in Framework IFRS Standards January 1, 2020 IFRS 3 Definition of a Business (amendments to IFRS 3) January 1, 2020 IAS 1 and IAS 8 Definition of Material (amendments to IAS 1 and IAS 8) January 1, 2020 IFRS 17 Insurance contracts January 1, 2021 IFRS 10 and IAS 28 Sale or contribution of assets between investor and its Available for optional associate or joint venture (amendments to IFRS 10 and IAS adoption effective date 28) deferred indefinitely The standards, interpretations and amendments with effective date of January 1, 2020 will not have any material impact on the Company's financial statements, whereas for other above mentioned standards, interpretations and amendments, the Company is currently assessing the implications on the Company's financial statements on adoption 2.2 Critical accounting estimates and judgments The preparation of Company's financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date. that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur Basis of preparation (continued) Business model for managing financial assets In making an assessment whether its business model for managing financial assets is to hold assets in order to collect contractual cash flows, the Company considers the following: Management's stated policies and objectives for the asset and the operation of those policies in practice; how management evaluates the performance of the asset: whether management's strategy focuses on earning contractual income; the degree of frequency of any expected asset sales; the reason for any asset sales, and whether assets that are sold are held for an extended period of time relative to their contractual maturity or are sold shortly after acquisition or an extended time before maturity. Generally, a business model is a matter of fact which can be evidenced by the way the business is managed and the information provided to management. Contractual cash flows of financial assets The Company exercises judgment in determining whether the contractual terms of financial assets it originates or acquires give rise on specific dates to cash flows that are solely payments of principal and interest income on the principal outstanding and so may qualify for amortised cost measurement. In making the assessment, the Company considers all contractual terms, including any prepayment terms or provisions to extend the maturity of the assets that change the amount and timing of cash flows and whether the contractual terms contain leverage. Defined benefit plan The cost of post-employment defined benefits are the present value of the related obligation, as determined using actuarial valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the future. These include the determination of the discount rate, future salary increases withdrawal before normal retirement age, mortality rates, etc. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. With respect to determining the appropriate discount rate, yield and duration of high quality bonds obligation, as designated by an interationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation Useful lives of property, plant and equipment The Company exercises judgement in determining the estimated useful lives of property, plant and equipment for calculating depreciation. This estimate is determined after considering expected usage of the assets or physical wear and tear. The Company reviews the residual value and useful lives annually and future depreciation charges are adjusted where the Company believes the useful lives differ from previous estimates During the year ended December 31, 2019, the Company reviewed the estimated useful lives of property, plant and equipment. Based on an independent technical assessment, advice from the Company's technical teams and comparable market practices, the estimated useful lives of property, plant and equipment have been revised by the Company as follows: Upto December 31, Effective January 1, 2018 2019 Number of years 8-25 2-23 Buildings and infrastructure Plant, machinery and operating equipment Vehicle and related equipment Furniture and IT equipment 12-50 2-40 6-25 5-14 3-14 The change in estimated useful lives has resulted in decrease in depreciation and increase in operating profit for the year ended December 31, 2019 by Saudi Riyals 827 million. Basis of preparation (continued) Extension options for leases In case of lease contracts where extension options are also available to the Company, judgement is applied in evaluating whether it is reasonably certain to exercise the option. The Company reassesses whether it is reasonably certain to exercise the extension options, upon the occurrence of either a significant event or significant change in circumstances that are within the control of the Company. Going concern As at December 31, 2019, the Company's current liabilities exceed the current assets by Saudi Riyals 16,426 million, primarily due to the equity bridge loan amounting to Saudi Riyals 11.250 million, falling due on July 1. 2020, backed by the founding shareholders' guarantees (see Note 15,3). The Board of Directors of the Company has assessed the ability of the Company to continue as a going concem and is not aware of any material uncertainties that may cast significant doubt and is satisfied that it has the resources to continue in business for the foreseeable future. Therefore, the financial statements of the Company continue to be prepared on going concern basis. Impairment of non-financial assets The Company assesses, at each reporting date or more frequently if events or changes in circumstances indicate, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less cost to sell, and its value in use, and is determined for the individual asset, unless the asset does not generate cash inflows which are largely independent from other assets or groups. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining the fair value less costs to sell, an appropriate source is used, such as observable market prices or, if no observable market prices exist, estimated prices for similar assets or if no estimated prices for similar assets exist, it is based on discounted future cash flow calculations. Summary of significant accounting policies Current versus non-current classification The Company presents assets and liabilities in the statement of financial position based on current non-current classification. An asset is current when it is: Expected to be realised or intended to be sold or consumed in the normal operating cycle It is held primarily for the purpose of trading: . Expected to be realised within twelve months after the reporting period; or - Cash or cash equivalent. All other assets are classified as non-current. A liability is current when: - It is expected to be settled in the normal operating cycle; - It is held primarily for the purpose of trading . It is due to be settled within twelve months after the reporting period; or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current (b) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: - In the principal market for the asset or liability, or In the absence of a principal market in the most advantageous market for the asset or liability. Summary of significant accounting policies (continued) Depreciation is calculated on a straight-line basis to write off the cost of property, plant and equipment over their estimated useful lives which are as follows (see Note 2.2): Number of years Buildings and infrastructure Plant, machinery and operating equipment Vehicle and related equipment Furniture and IT equipment 12-50 2-40 6-25 5-14 An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when the asset is derecognized. in Leases At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease (... the date the underlying asset is available for uso). The right-of-use asset is initially measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, any initial direct costs incurred and an estimate of costs to dismantle, less any lease incentive received. The estimated useful life of right-of-use assets are determined on the same basis as those of property, plant and equipment, except for leasehold land for which the estimated useful life is considered to be the lease term. The lease liability is initially measured at the present value of the lease payments to be made over the lease form, discounted using the Company's incremental borrowing rate (if the interest rate implicit in the lease is not available). Lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase extension or termination option. Any such re-measurement in the lease liability is adjusted against the carrying value of the right-of-use asset or charged to profit or loss if carrying value of the related asset is zero. Short-term leases and leases of low-value assets The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less, and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (g) Intangible assets Intangible assets, having no physical existence however separately identifiable and providing future economic benefits, are initially recognized at purchase price and directly attributable costs. Intangible assets are stated at cost less accumulated amortization and impairment loss, if any. Software and licenses Software and licenses procured for various business use and having finite useful lives are presented as intangible assets. Software and licenses are amortized on a straight-line basis over their estimated useful lives of 5 years and 12-22 years, respectively. Amortization methods and useful lives are reviewed at each financial year end and adjusted if appropriate Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised. (h) Borrowing costs Borrowing costs attributable to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the rospective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Summary of significant accounting policies (continued) (1) Financial instruments The Company applied the following classification and measurement requirements for financial instruments Recognition and derecognition of financial instruments A financial asset or financial liability is recognised when the Company becomes a party to the contractual provisions of the instrument, which is generally on trade date. The Company derecognizes a financial asset when the contractual cash flows from the asset expire or it transfers its rights to receive contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership are transferred. Any Interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability A financial liability is derecognized from the statement of financial position when the Company has discharged its obligation or the contract is cancelled or expires. Classification of financial instruments The Company classified its financial assets into the following measurement categories: (1) Those to be measured subsequently at amortised cost; or (i) Fair value through profit or loss. The classification depends on the Company's business model for managing financial assets and the contractual terms of the financial assets cash flows. The Company classifies its financial liabilities as those measured at amortized cost. The classification of financial assets is defined in Note 15. Measurement Financial instruments at fair value through profit or loss are recognised initially at fair value with transaction costs recognised in the statement of profit or loss as incurred. All other financial instruments are recognised Initially at fair value plus directly attributable transaction costs. The Company initially measures the trade receivable at the transaction price as the trade receivable do not contain a significant financing component. Financial instruments measured at amortized cost A financial asset is measured at amortized cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows and the contractual terms represent contractual cash flows that are solely payments of principal and interest. Financial instruments measured at fair value through profit or loss Financial assets measured at fair value through profit or loss comprise items specifically designated as fair value through profit or loss on initial recognition and financial assets held within a business model whose objective is to hold assets in order to collect contractual cash flows and the contractual terms represent contractual cash flows that are not solely payments of principal and interest. Where a financialiability is designated at fair value through profit or loss, the movement in fair value attributable to changes in the Company's own credit quality is calculated by determining the changes in credit spreads above observable market interest rates and is presented separately in other comprehensive income. Upon initial recognition, financial instruments may be designated as fair value through profit or loss. Restrictions are placed on the use of the designated fair value option and the classification can only be used: . In respect of an entire contract if a host contract contains one or more embedded derivatives; If designating the financial instruments eliminates or significantly reduces measurement or recognition inconsistencies (l.e. eliminates an accounting mismatch) that would otherwise arise from measuring financial assets or liabilities on a different basis If financial assets and liabilities are both managed and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy On initial recognition, for a financial asset the fair value option is only applied If it oliminates an accounting mismatch that would otherwise arise from measuring items on a different basis. The above fair value option criteria remains unchanged for a financial liability Summary of significant accounting policies (continued) Offsetting Financial assets and liabilities are offset and the net amount is presented in the statement of financial position when the Company has a legal right to offset the amounts and intends to settle on a net basis or to realize the asset and settle the liability simultaneously. 6) Impairment Financial assets At each reporting date, the Company applies a three-stage approach to measuring expected credit losses (ECL) on financial assets accounted for at amortized cost. Assets migrate through the following three stages based on the change in credit quality since initial recognition: () Stage 1: 12-months ECL For exposures where there has not been a significant increase in credit risk since initial recognition and that are not credit impaired upon origination, the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months is recognized. (W) Stage 2. Lifetime ECL - not credit impaired For credit exposures where there has been a significant increase in credit risk since initial recognition but that are not credit impaired, a lifetime ECL is recognized. (W) Stage 3: Lifetime ECL - Credit Impaired Financial assets are assessed as credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of that asset have occurred. For financial assets that have become credit impaired, a lifetime ECL is recognized and interest revenue is calculated by applying the effective interest rate to the amortized cost (net of provision) rather than the gross carrying amount. Objective evidence that financial assets are impaired can include significant financial difficulty of the borrower, default or delinquency by a borrower, restructuring of a loan or advance by the entity on terms that the entity would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a Company such as adverse changes in the payment status of borrowers or issuers in the Company, or economic conditions that correlate with defaults in the Company. The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward-looking information. The Company considers evidence of impairment at both a specific asset and collective level. All individually significant financial instruments found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Impairment losses for a financial instrument are recognised in the statement of profit or loss and reflected in impairment for credit losses. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through the statement of profit or loss. When an asset is uncollectible, it is written off against the related provision. Such assets are written off after al the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off reduce the amount of the expense in the statement of profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the provision. The amount of the reversalis recognised in the statement of profit or loss. The Company has adopted the simplified approach as allowed by IFRS 9 and measures the loss allowance at an amount equal to lifetime expected credit losses for all trade receivables. Segment information (continued) The Company's operating segments comprise of refined products and petrochemicals. Information as of and for the year ended December 31, is summarized below. 2019 Refined products Petrochemicals Total Sales-external customers Depreciation and amortization Operating (loss) profit 25,876,797 513,893 (116,890) 8,185,178 1,878,494 556,219 34,061,975 2,392,387 439,329 2018 Refined products Petrochemicals Total Salos - extemal customers Depreciation and amortization Operating (loss) profit 31,447,298 754,260 (904,240) 9,550,893 1,678.835 1,920,247 40,998,191 2,433,095 1,016,007 2019 Refined products Petrochemicals Unallocated Total Total assets Total liabilities Capital expenditure 23,160,458 17,379,094 606,719 49,961,151 45,300,223 3,341,906 908,039 1,308,924 74,029,648 63,988,241 3,948,625 2018 Refined products Petrochemicals Unallocated Total Total assets Total liabilities Capital expenditure 22,552,249 13,059,778 323.631 37,705,403 40,218,677 2.752,404 3,836,315 273,492 64,093,967 53,551,947 3,076,035 The Company's revenue from external customers involve Saudi Riyals 33.873 million (December 31, 2018: Saudi Riyals 39,920 million) of revenue generated from 5 customers in the year ended December 31, 2019 (December 31, 2018: 3 customers). Geographical information for the year ended December 31, is as follows: 2019 Middle East Asia Pacific Others Total Sales Refined products 25,876,797 25,876,797 Petrochemicals 2,232,593 5,886,818 65,767 8,185,178 Total 28,109,390 5,886,818 65,767 34,061,975 Middle East Asia Pacific Others Total 2018 Sales Refined products Petrochemicals Total 31,447,298 2,946,866 34,394,164 6,284,635 6,284,635 319,392 319,392 31,447,298 9,550,893 40,998,191 Middle East market, primarily includes Kingdom of Saudi Arabia whereas Asia Pacific primarily includes Singapore and China. 5.2 Adjustments Financial charges, financial income, Zakat and Tax, cash and cash equivalents, time deposits and certain assets and liabilities are not allocated to operating segments as they are managed on a Company-wide basis Capital expenditure consists of additions to property, plant and equipment and intangible assets. 12 Property, plant and equipment (continued) Depreciation for the year has been allocated as follows: Notes 2019 2018 Cost of sales 1,588,100 2,315,340 General and administrative expenses 65,680 80,935 1,653,780 2,396,275 12.1 Capitalization of borrowing costs During the year ended December 31, 2019, upto the date of commencement of commercial operations of Phase Il Expansion Project (see Note 1), the Company had capitalized borrowing costs amounting to Saudi Riyals 976 million (2018: Saudi Riyals 927.3 million) as part of Phase II Expansion Project 12.2 Pre-commissioning (loss) income During the year ended December 31, 2019, upto the date of commencement of commercial operations of Phase Il Expansion Project (see Note 1), pre-commissioning loss amounting to Saudi Riyals 514.8 million (2018: pre- commissioning income amounting to Saudi Riyals 961.6 million) was included as part of Phasell Expansion Project. Leases 13.1 Right-of-use assets Land, buildings and Plant and machinery Infrastructure Vehicles Total Cost December 31, 2018 and January 1, 2019 Additions (see Note 2.1) December 31, 2019 514.535 719,910 1,234,445 106,015 11,554,823 11,660,838 86.222 86,222 620.550 12,360,955 12,981,505 Accumulated depreciation January 1, 2018 Charge for the year December 31, 2018 Charge for the year December 31, 2019 145,498 17,350 162,848 35,032 197,880 57,692 6,236 63,928 662,980 716,908 203,190 23,586 226,778 715,631 942,407 27,619 27,619 Carrying value At December 31, 2019 At December 31, 2018 1,036,565 351,687 10.943.930 42,087 58,603 - 12,039,098 393,774 Depreciation for the year has been allocated as follows: Notes 2019 2018 Cost of sales General and administrative expenses 658,380 57,251 715,631 6.237 17,349 23,586 13.2 Lease liabilities Lease liabilities at December 31 are as follows: 2019 Minimum lease payments Present value of minimum Interest lease payments 2018 Present value of minimum lease payments Land, buildings and infrastructure Plant and machinery Vehicles 2,791,802 14,752,436 64,144 17,608,382 1,663,215 3,634,822 4,393 5,302,430 1.128.587 11,117,614 59,751 12,305,952 428,704 54412 483,116 13 Leases (continued) At December 31, the lease liabilities are presented in the statement of financial position as follows: 2019 2018 Current portion Non-current portion 555,352 11,750,600 12,305,952 19,540 463,576 483,116 The minimum lease payments together with the present value of minimum lease payments as of December 31 are as follows: 2019 2018 Present Present value of value of Minimum Minimum minimum lease lease lease lease payments payments payments payments Within twelve months 969,018 555,352 46,997 19,540 One to five years 3,826,524 2,340,082 188.016 83,739 More than five years 12,812,840 9 ,410,518 571,503 379,837 Total minimum lease payments 17,608,382 12,305,952 806,516 483,116 Less: finance charges (5,302,430) . (323.400) Present value of minimum lease payments 12,305,952 12,305,952 483,116 483,116 Details of major classes of leases is as follows: (a) Land, building and infrastructure Community. The land and facilities lease for community is with Saudi Aramco for a period of 25 years (see Note 4.17). As at December 31, 2019, the undiscounted minimum lease payments for land and facilities are Saudi Riyals 326.5 million and Saudi Riyals 345.1 million respectively. Marine Terminal: The land and facilities lease for marine terminal is with Saudi Aramco for a period of 30 years (see Note 4.16). As at December 31, 2019, the undiscounted minimum lease payments for land and facilities are Saudi Riyals 15.2 million and Saudi Riyals 358.6 million respectively. Complex Land: The Complex land lease is with Saudi Aramco for a period of 99 years (see Note 4.14). As at December 31, 2019, the undiscounted minimum lease payments are Saudi Riyals 1,719.4 million. Rabigh Plus Tech Park Land: The Rabigh Plus Tech Park land lease is with Saudi Aramco and Rabigh Conversion Industry Management Company (RCIMS) for a period of 30 years (see Note 4.15). As at December 31, 2019, the undiscounted minimum lease payments are Saudi Riyals 27 million. Plant and machinery Power, steam and water: The lease is with Rabigh Arabian Water and Electricity Company (RAWEC) for a period of 25 years. As at December 31, 2019, the undiscounted minimum loase payments are Saudi Rivals 14,696.6 million. Desalination plant: The Company has taken over the interest and obligations of Saudi Aramco in respect of the Desalination plant for the Refinery Complex, with a remaining term of 17 years. As at December 31, 2019, the undiscounted minimum lease payments are Saudi Riyals 55.9 milion Vehicles The Company has leases with Eradat Transport LLC and Al Jomaih Automotive Company for leases of buses and vehicles for a period of 5 years. As at December 31, 2019, the undiscounted minimum lease payments are Saudi Riyals 64.1 million. 13.3 During the year ended December 31, 2019, the Company's expenses relating to short-term leases and low value assets are Saudi Riyals 954 thousands and Saudi Riyals 3,166 thousands respectively. Statement of financial position (All amounts in thousands of Saudi Riyals unless otherwise stated) As at December 31, 2019 2018 Notes Assets Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Long-term loans Investment Deferred tax asset 46,110,807 12,039,098 494,307 3,449,675 16,412 399,086 62,509,385 44,628,314 393.774 111.443 3,861,749 16,412 445,882 49,457,574 Current assets Inventories Trade receivables Current portion of long-term loans Prepayments and other receivables Time deposits Cash and cash equivalents 3,406,225 5,364,086 450,318 1,983,548 3,207,445 6,004,714 420,428 2,084.488 1,655,605 1.263,713 14,636,393 64,093,967 316,086 11,520,263 74,029,648 Total assets Equity and liabilities Equity Share capital Statutory reserve Employees' share ownership plan Retained earnings Total equity 8,760,000 252,134 (4,813) 1,034,086 10,041,407 8,760,000 249.465 (6.241) 1,538,796 10,542,020 Non-current liabilities Loans, borrowings and other long-term liability Lease liabilities Employees' benefits 23,638,023 11,750,600 653,504 36,042,127 27,688,017 463,576 510,501 28,662,094 Current liabilities Short-term borrowings Current maturity of lease liabilities Trade and other payables Accrued expenses and other liabilities Zakat and Tax payable 16,816,897 555,352 9,401,638 1,157,008 15,219 27,946,114 63,988,241 74,029,648 13,007,494 19,540 10,163,333 1.425,990 273,496 24,889,853 53,551,947 64,093,967 Total liabilities Total equity and liabilities Statement of changes in equity (All amounts in thousands of Saudi Riyals unless otherwise stated) Employees' share ownership plan Share Statutory capital reserve Notes Retained earnings Total 8,760,000 249,465 (6,241) Balance as at January 1, 2019 Net loss after Zakat and Tax Other comprehensive loss Total comprehensive loss Transfer to statutory reserve Vesting of shares under employees share ownership plan Zakat and Tax reimbursements Balance as at December 31, 2019 21 . 2,669 1,538,796 10,542,020 (544,151) (544,151) (58,809) (58,809) (602,960) (602,960) (2,669) 1,428 100,919 100,919 1,034,086 10,041,407 1,428 8,760,000 252,134 (4,813) 8,760,000 183,745 7,098) Balance as at January 1, 2018 Net profit after Zakat and Tax Other comprehensive loss Total comprehensive income Transfer to statutory reserve Vesting of shares under employees' share ownership plan Dividend Tax reimbursements Balance as at December 31, 2018 1,149,160 10,085,807 668,560 668,560 (11,362) (11,362) 657,198 657,198 (65,720) 21 - 65,720 857 857 (438,000) (438,000) 236,158 236,158 1,538,796 10,542,020 8,760,000 249.465 (6.241) Statement of cash flows (All amounts in thousands of Saudi Riyals unless otherwise stated) Notes For the year ended December 31, 2019 2018 Cash flows from operating activities (Loss) profit before Zakat and Tax (319,016) 853,074 12,13 10 Adjustments for non-cash items Depreciation Financial charges Financial income Amortization Provision for slow moving inventories Impairment loss on receivables Loss on disposal of property and equipment 2,369,411 1,022,440 (264,095) 22,976 8,477 2,581 672 2,843,446 2,419,861 465,765 (302,832) 13,234 22.491 9,26 73 21,769 3,493,435 Changes in working capital Trade receivables Inventories Prepayments and other receivables Trade and other payables Accrued expenses and other liabilities Employees' benefits 840,628 (207,257) 198,983 (320,464) (372,373) 75,245 2,858,208 (426,238) 233,354 (836,560) 1,828,764 (263,426) (207,615) (905,986) 1,349,559 667,816 77,284 4,211,067 (314,845) 281,916 (234,664) 3,943.474 Zakat and income tax paid Interest received Interest paid Net cash generated from operating activities (3,439,330) Cash flows from investing activities Purchase of property, plant and equipment Addition to intangible assets Net movement in time deposits Disbursements of long-term loan Net cash used in investing activities 1,655,605 (31,624) (1,815,349) (2,927,816) (1,164) (176,531) (219,613) (3,325,124) Cash flows from financing activities Proceeds from loans and borrowings Repayments of loans and borrowings Repayment of finance leases Dividend paid Net cash used in financing activities 15,438,750 (15,861,608) (538, 119) (65) (961,042) 3,287,625 (3,316,332) (46,921) (437 272) (512.900) Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year (947,627) 1,263,713 316,086 105,450 1,158,263 1,263,713 100,919 103,455 Supplemental schedule of non-cash information Zakat and tax reimbursable from shareholders Addition to property, plant and equipment through accrued expenses and other liabilities Long-term loan repayments settled against capacity payments Addition to intangible assets through property, plant and equipment Addition to right-to-use assets 236,158 147,055 388,009 410,195 14 13 405,840 12,360,955 2.1 New standards, interpretations and amendments Standards, interpretations and amendments adopted IFRS 16-Leases IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease. SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model. The Company adopted IFRS 16 using the simple modified method of adoption with the date of initial application of January 1, 2019 and therefore comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. Under this method, the lease liability is measured based on the remaining lease payments discounted using the incremental borrowing rate as of the date of initial application, and the carrying amount of the right-of-use asset is an amount equal to the carrying amount of the lease liability on the date of initial application. Any prepayments, accruals or lease incentives relating to previous operating lease are adjusted against the right of use asset at the initial application date. The Company elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as looses applying IAS 17 and IFRIC 4 at the date of initial application. The Company also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or loss and do not contain a purchase option (short-term leases), and lease contracts for which the underlying asset is of low value ('low-value assets). In addition, the Company has also used practical expedients to apply a single discount rate to a portfolio of leases with similar characteristics and excluded initial direct costs from measuring the right-of-use asset at the date of initial application. Notes to the financial statements for the year ended December 31, 2019 (All amounts in thousands of Saudi Riyals unless otherwise stated) Basis of preparation (continued) Reconciliation of lease liability At the date of initial application, the Company recognizes additional right-of-use asset and lease liability of SAR 12,345 million. The weighted average rate applied is 3.28% 17,763,867 The following table represent the lease reconciliation as at January 1, 2019 Minimum loose payments Recognition exemptions Short-term leases Leases of low value assets Effect of discounting using the incremental borrowing rate Liabilities additionally recognizes based on application of IFRS 16 Liabilities for leased assets acquired under finance lease Total lease liabilities (1,604) (5.616) 15,411,833) 12,344,814 483, 116 12,827,930 Impact on comprehensive income During the year ended December 31, 2019, due to the adoption of IFRS 16-leases, the Company's operating profit has improved by Saudi Riyals 220 million, by way of decrease in operating lease rentals by Saudi Riyals 912 million and increase in depreciation expense by Saudi Riyals 692 million, whereas interest expense has increased by Saudi Riyals 404 million Standards, interpretations and amendments issued but not yet effective The standards, interpretations and amendments issued, but not yet effective up to the date of issuance of the financial statements are disclosed below. The Company intends to adopt these standards, where applicable, when they become effective Effective from periods Standard / beginning on or after Interpretation Description the following date Conceptual Amendments to References to Conceptual Framework in Framework IFRS Standards January 1, 2020 IFRS 3 Definition of a Business (amendments to IFRS 3) January 1, 2020 IAS 1 and IAS 8 Definition of Material (amendments to IAS 1 and IAS 8) January 1, 2020 IFRS 17 Insurance contracts January 1, 2021 IFRS 10 and IAS 28 Sale or contribution of assets between investor and its Available for optional associate or joint venture (amendments to IFRS 10 and IAS adoption effective date 28) deferred indefinitely The standards, interpretations and amendments with effective date of January 1, 2020 will not have any material impact on the Company's financial statements, whereas for other above mentioned standards, interpretations and amendments, the Company is currently assessing the implications on the Company's financial statements on adoption 2.2 Critical accounting estimates and judgments The preparation of Company's financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date. that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur Basis of preparation (continued) Business model for managing financial assets In making an assessment whether its business model for managing financial assets is to hold assets in order to collect contractual cash flows, the Company considers the following: Management's stated policies and objectives for the asset and the operation of those policies in practice; how management evaluates the performance of the asset: whether management's strategy focuses on earning contractual income; the degree of frequency of any expected asset sales; the reason for any asset sales, and whether assets that are sold are held for an extended period of time relative to their contractual maturity or are sold shortly after acquisition or an extended time before maturity. Generally, a business model is a matter of fact which can be evidenced by the way the business is managed and the information provided to management. Contractual cash flows of financial assets The Company exercises judgment in determining whether the contractual terms of financial assets it originates or acquires give rise on specific dates to cash flows that are solely payments of principal and interest income on the principal outstanding and so may qualify for amortised cost measurement. In making the assessment, the Company considers all contractual terms, including any prepayment terms or provisions to extend the maturity of the assets that change the amount and timing of cash flows and whether the contractual terms contain leverage. Defined benefit plan The cost of post-employment defined benefits are the present value of the related obligation, as determined using actuarial valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the future. These include the determination of the discount rate, future salary increases withdrawal before normal retirement age, mortality rates, etc. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. With respect to determining the appropriate discount rate, yield and duration of high quality bonds obligation, as designated by an interationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation Useful lives of property, plant and equipment The Company exercises judgement in determining the estimated useful lives of property, plant and equipment for calculating depreciation. This estimate is determined after considering expected usage of the assets or physical wear and tear. The Company reviews the residual value and useful lives annually and future depreciation charges are adjusted where the Company believes the useful lives differ from previous estimates During the year ended December 31, 2019, the Company reviewed the estimated useful lives of property, plant and equipment. Based on an independent technical assessment, advice from the Company's technical teams and comparable market practices, the estimated useful lives of property, plant and equipment have been revised by the Company as follows: Upto December 31, Effective January 1, 2018 2019 Number of years 8-25 2-23 Buildings and infrastructure Plant, machinery and operating equipment Vehicle and related equipment Furniture and IT equipment 12-50 2-40 6-25 5-14 3-14 The change in estimated useful lives has resulted in decrease in depreciation and increase in operating profit for the year ended December 31, 2019 by Saudi Riyals 827 million. Basis of preparation (continued) Extension options for leases In case of lease contracts where extension options are also available to the Company, judgement is applied in evaluating whether it is reasonably certain to exercise the option. The Company reassesses whether it is reasonably certain to exercise the extension options, upon the occurrence of either a significant event or significant change in circumstances that are within the control of the Company. Going concern As at December 31, 2019, the Company's current liabilities exceed the current assets by Saudi Riyals 16,426 million, primarily due to the equity bridge loan amounting to Saudi Riyals 11.250 million, falling due on July 1. 2020, backed by the founding shareholders' guarantees (see Note 15,3). The Board of Directors of the Company has assessed the ability of the Company to continue as a going concem and is not aware of any material uncertainties that may cast significant doubt and is satisfied that it has the resources to continue in business for the foreseeable future. Therefore, the financial statements of the Company continue to be prepared on going concern basis. Impairment of non-financial assets The Company assesses, at each reporting date or more frequently if events or changes in circumstances indicate, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less cost to sell, and its value in use, and is determined for the individual asset, unless the asset does not generate cash inflows which are largely independent from other assets or groups. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining the fair value less costs to sell, an appropriate source is used, such as observable market prices or, if no observable market prices exist, estimated prices for similar assets or if no estimated prices for similar assets exist, it is based on discounted future cash flow calculations. Summary of significant accounting policies Current versus non-current classification The Company presents assets and liabilities in the statement of financial position based on current non-current classification. An asset is current when it is: Expected to be realised or intended to be sold or consumed in the normal operating cycle It is held primarily for the purpose of trading: . Expected to be realised within twelve months after the reporting period; or - Cash or cash equivalent. All other assets are classified as non-current. A liability is current when: - It is expected to be settled in the normal operating cycle; - It is held primarily for the purpose of trading . It is due to be settled within twelve months after the reporting period; or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current (b) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: - In the principal market for the asset or liability, or In the absence of a principal market in the most advantageous market for the asset or liability. Summary of significant accounting policies (continued) Depreciation is calculated on a straight-line basis to write off the cost of property, plant and equipment over their estimated useful lives which are as follows (see Note 2.2): Number of years Buildings and infrastructure Plant, machinery and operating equipment Vehicle and related equipment Furniture and IT equipment 12-50 2-40 6-25 5-14 An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when the asset is derecognized. in Leases At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease (... the date the underlying asset is available for uso). The right-of-use asset is initially measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, any initial direct costs incurred and an estimate of costs to dismantle, less any lease incentive received. The estimated useful life of right-of-use assets are determined on the same basis as those of property, plant and equipment, except for leasehold land for which the estimated useful life is considered to be the lease term. The lease liability is initially measured at the present value of the lease payments to be made over the lease form, discounted using the Company's incremental borrowing rate (if the interest rate implicit in the lease is not available). Lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase extension or termination option. Any such re-measurement in the lease liability is adjusted against the carrying value of the right-of-use asset or charged to profit or loss if carrying value of the related asset is zero. Short-term leases and leases of low-value assets The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less, and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (g) Intangible assets Intangible assets, having no physical existence however separately identifiable and providing future economic benefits, are initially recognized at purchase price and directly attributable costs. Intangible assets are stated at cost less accumulated amortization and impairment loss, if any. Software and licenses Software and licenses procured for various business use and having finite useful lives are presented as intangible assets. Software and licenses are amortized on a straight-line basis over their estimated useful lives of 5 years and 12-22 years, respectively. Amortization methods and useful lives are reviewed at each financial year end and adjusted if appropriate Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised. (h) Borrowing costs Borrowing costs attributable to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the rospective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Summary of significant accounting policies (continued) (1) Financial instruments The Company applied the following classification and measurement requirements for financial instruments Recognition and derecognition of financial instruments A financial asset or financial liability is recognised when the Company becomes a party to the contractual provisions of the instrument, which is generally on trade date. The Company derecognizes a financial asset when the contractual cash flows from the asset expire or it transfers its rights to receive contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership are transferred. Any Interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability A financial liability is derecognized from the statement of financial position when the Company has discharged its obligation or the contract is cancelled or expires. Classification of financial instruments The Company classified its financial assets into the following measurement categories: (1) Those to be measured subsequently at amortised cost; or (i) Fair value through profit or loss. The classification depends on the Company's business model for managing financial assets and the contractual terms of the financial assets cash flows. The Company classifies its financial liabilities as those measured at amortized cost. The classification of financial assets is defined in Note 15. Measurement Financial instruments at fair value through profit or loss are recognised initially at fair value with transaction costs recognised in the statement of profit or loss as incurred.