Annual Financial Report-2

China Petroleum & Chemical Corp

Mar 28 2022 08:00 BSTSource: RNS

RNS Number : 1489G

China Petroleum & Chemical Corp

28 March 2022

REPORT OF THE PRC AUDITOR

KPMG Huazhen LLP

8th Floor, KPMG Tower

Oriental Plaza

1 East Chang An Avenue

Beijing 100738

China

Telephone +86 (10) 8508 5000

Fax +86 (10) 8518 5111

Internet kpmg.com/cn

畢馬威華振會計師事務所

（特殊普通合夥）

中國北京

東長安街1號

東方廣場畢馬威大樓8層

郵政編碼：100738

電話 +86 (10) 8508 5000

傳真 +86 (10) 8518 5111

網址 kpmg.com/cn

AUDITOR'S REPORT

畢馬威華振審字第2202273號

The Shareholders of China Petroleum & Chemical Corporation:

Opinion

We have audited the accompanying financial statements of China Petroleum & Chemical Corporation ("the Company"), which comprise the consolidated and company balance sheets as at 31 December 2021, the consolidated and company income statements, the consolidated and company cash flow statements, the consolidated and company statements of changes in shareholders' equity for the year then ended, and notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company financial position of the Company as at 31 December 2021, and the consolidated and company financial performance and cash flows of the Company for the year then ended in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People's Republic of China.

Basis for Opinion

We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants ("CSAs"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Assessment of impairment of fixed assets relating to oil and gas producing activities

Refer to Note 3 (8) Oil and gas properties, (12) Impairment of other non-financial long-term assets, Note 13 Fixed assets, and Note 58 Principal accounting estimates and judgements to the financial statements

The Key Audit Matter	How the matter was addressed in our audit

The Company reported fixed assets of Renminbi ("RMB") 598,932 million as at 31 December 2021, a portion of which related to oil and gas producing activities. The Company reported impairment losses of RMB2,467 million for the fixed assets relating to oil and gas producing activities for the year ended 31 December 2021. The Company groups fixed assets relating to oil and gas producing activities into cash-generating units ("CGUs") for impairment assessment. The Company compares the carrying amount of individual CGU with its value in use, using a discounted cash flow forecast, which was prepared based on the future production profiles included in the oil and gas reserves reports, to determine the impairment loss to be recognised. We identified assessment of impairment of fixed assets relating to oil and gas producing activities as a key audit matter. The value in use amounts of these CGUs are sensitive to the changes to future selling prices and production costs for crude oil and natural gas, future production profiles, and discount rates. Therefore a higher degree of subjective auditor judgment was required to evaluate the Company's impairment assessment of fixed assets relating to oil and gas producing activities.	The following are the primary procedures we performed to address this key audit matter: ‧ we evaluated the design and tested the operating effectiveness of certain internal controls related to the process for impairment assessment of fixed assets relating to oil and gas producing activities; ‧ we assessed the competence, capabilities and objectivity of the Company's reserves specialists and evaluated the methodology adopted by them in estimating the oil and gas reserves against the recognised industry standards; ‧ we compared future selling prices for crude oil and natural gas used in the discounted cash flow forecasts with the Company's business plans and forecasts by external analysts; ‧ we compared future production costs and future production profiles used in the discounted cash flow forecasts with oil and gas reserves reports issued by the reserves specialists; and

	‧ we involved valuation professionals with specialised skills and knowledge, who assisted in assessing the discount rates applied in the discounted cash flow forecasts against a discount rate range that was independently developed using publicly available market data for comparable companies in the same industry.

Other Information

The Company's management is responsible for the other information. The other information comprises all the information included in 2021 annual report of the Company, other than the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation and maintenance of such internal control necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with CSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

‧ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

‧ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

‧ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

‧ Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

‧ Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

‧ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Auditor's Responsibilities for the Audit of the Financial Statements (Continued)

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

KPMG Huazhen LLP	Certified Public Accountants
Beijing, China	Registered in the People's
	Republic of China

	Yang Jie (Engagement Partner)

	He Shu

25 March 2022

(A) FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES CONSOLIDATED BALANCE SHEET

As at 31 December 2021

	Notes	At 31 December 2021	At 31 December 2020
		RMB million	RMB million
Assets
Current assets
Cash at bank and on hand	5	221,989	184,412
Financial assets held for trading		-	1
Derivative financial assets	6	18,371	12,528
Accounts receivable	7	34,861	35,439
Receivables financing	8	5,939	8,735
Prepayments	9	9,267	4,857
Other receivables	10	35,664	33,724
Inventories	11	207,433	152,191
Other current assets		24,500	23,773
Total current assets		558,024	455,660
Non-current assets
Long-term equity investments	12	209,179	188,342
Other equity instrument investments		767	1,525
Fixed assets	13	598,932	593,653
Construction in progress	14	155,939	125,525
Right-of-use assets	15	184,974	189,018
Intangible assets	16	119,210	114,280
Goodwill	17	8,594	8,620
Long-term deferred expenses	18	10,007	9,584
Deferred tax assets	19	19,389	25,054
Other non-current assets	20	24,240	27,635
Total non-current assets		1,331,231	1,283,236

Total assets		1,889,255	1,738,896
Liabilities and shareholders' equity
Current liabilities
Short-term loans	22	27,366	20,756
Derivative financial liabilities	6	3,223	4,826
Bills payable	23	11,721	10,394
Accounts payable	24	203,919	151,514
Contract liabilities	25	124,622	126,241
Employee benefits payable	26	14,048	7,129
Taxes payable	27	81,267	76,848
Other payables	28	114,701	85,012
Non-current liabilities due within one year	29	28,651	22,494
Other current liabilities	30	31,762	17,781
Total current liabilities		641,280	522,995
Non-current liabilities
Long-term loans	31	49,341	45,459
Debentures payable	32	42,649	38,356
Lease liabilities	33	170,233	171,740
Provisions	34	43,525	45,552
Deferred tax liabilities	19	7,910	8,124
Other non-current liabilities	35	18,276	17,950
Total non-current liabilities		331,934	327,181

Total liabilities		973,214	850,176
Shareholders' equity
Share capital	36	121,071	121,071
Capital reserve	37	120,188	127,389
Other comprehensive income	38	(690)	1,038
Specific reserve		2,664	1,941
Surplus reserves	39	213,224	209,280
Retained earnings		318,645	286,575
Total equity attributable to shareholders of the Company		775,102	747,294
Minority interests		140,939	141,426
Total shareholders' equity		916,041	888,720

Total liabilities and shareholders' equity		1,889,255	1,738,896

These financial statements have been approved for issue by the board of directors on 25 March 2022.

Ma Yongsheng	Yu Baocai	Shou Donghua
Chairman	President	Chief Financial Officer
(Legal representative)

The accompanying notes form part of these financial statements.

BALANCE SHEET

As at 31 December 2021

	Notes	At 31 December	At 31 December
		2021	2020
		RMB million	RMB million
Assets
Current assets
Cash at bank and on hand		110,691	99,188
Derivative financial assets		4,503	7,776
Accounts receivable	7	21,146	21,763
Receivables financing		227	707
Prepayments	9	4,540	2,626
Other receivables	10	46,929	37,938
Inventories		63,661	39,034
Other current assets		23,408	14,048
Total current assets		275,105	223,080
Non-current assets
Long-term equity investments	12	360,847	343,356
Other equity instrument investments		201	428
Fixed assets	13	284,622	283,695
Construction in progress	14	66,146	59,880
Right-of-use assets	15	105,712	108,737
Intangible assets		9,334	8,779
Long-term deferred expenses		2,875	2,499
Deferred tax assets		8,715	12,661
Other non-current assets		34,227	26,828
Total non-current assets		872,679	846,863

Total assets		1,147,784	1,069,943
Liabilities and shareholders' equity
Current liabilities
Short-term loans		16,550	20,669
Derivative financial liabilities		1,121	362
Bills payable		6,058	6,061
Accounts payable		85,307	65,779
Contract liabilities		7,505	5,840
Employee benefits payable		8,398	1,673
Taxes payable		46,333	43,500
Other payables		211,179	188,568
Non-current liabilities due within one year		16,737	12,026
Other current liabilities		13,702	439
Total current liabilities		412,890	344,917
Non-current liabilities
Long-term loans		34,258	30,413
Debentures payable		31,522	26,977
Lease liabilities		104,426	105,691
Provisions		35,271	36,089
Other non-current liabilities		3,103	3,581
Total non-current liabilities		208,580	202,751

Total liabilities		621,470	547,668
Shareholders' equity
Share capital		121,071	121,071
Capital reserve		67,897	68,976
Other comprehensive income		6,024	5,910
Specific reserve		1,658	1,189
Surplus reserves		213,224	209,280
Retained earnings		116,440	115,849
Total shareholders' equity		526,314	522,275

Total liabilities and shareholders' equity		1,147,784	1,069,943

These financial statements have been approved for issue by the board of directors on 25 March 2022.

Ma Yongsheng	Yu Baocai	Shou Donghua
Chairman	President	Chief Financial Officer
(Legal representative)

The accompanying notes form part of these financial statements.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2021

	Notes	2021	2020
		RMB million	RMB million
Operating income	40	2,740,884	2,104,724
Less: Operating costs	40	2,216,551	1,685,674
Taxes and surcharges	41	259,032	235,018
Selling and distribution expenses	44	57,891	64,495
General and administrative expenses	45	62,535	67,082
Research and development expenses	46	11,481	10,087
Financial expenses	42	9,010	9,510
Including: Interest expenses		15,018	15,198
Interest income		5,732	4,803
Exploration expenses, including dry holes	47	12,382	9,716
Add: Other income	48	5,850	7,514
Investment income	49	6,032	47,486
Including: Income from investment in associates and joint ventures		23,253	6,712
Losses from changes in fair value	50	3,341	(1,253)
Credit impairment losses		(2,311)	(2,066)
Impairment losses	51	(13,165)	(26,087)
Asset disposal gains		665	2,067
Operating profit		112,414	50,803
Add: Non-operating income	52	3,516	2,370
Less: Non-operating expenses	53	7,582	4,732
Profit before taxation		108,348	48,441
Less: Income tax expense	54	23,318	6,344
Net profit		85,030	42,097
Including: Net (loss)/profit of acquiree before business combination under common control		(200)	347
Classification by going concern:
Continuous operating net profit		85,030	42,097
Termination of net profit		-	-
Classification by ownership:
Equity shareholders of the Company		71,208	33,271
Minority interests		13,822	8,826
Basic earnings per share	65	0.588	0.275
Diluted earnings per share	65	0.588	0.275
Other comprehensive income	38
Items that may not be reclassified subsequently to profit or loss		(4)	(22)
Changes in fair value of other equity instrument investments		(4)	(22)
Items that may be reclassified subsequently to profit or loss		17,511	337
Other comprehensive income that can be converted into profit under the equity method		441	(2,441)
Cost of hedging reserve		(220)	162
Cash flow hedges		19,018	7,073
Foreign currency translation differences		(1,728)	(4,457)
Total other comprehensive income		17,507	315

Total comprehensive income		102,537	42,412
Attributable to:
Equity shareholders of the Company		88,782	34,665
Minority interests		13,755	7,747

These financial statements have been approved for issue by the board of directors on 25 March 2022.

Ma Yongsheng	Yu Baocai	Shou Donghua
Chairman	President	Chief Financial Officer
(Legal representative)

The accompanying notes form part of these financial statements.

INCOME STATEMENT

For the year ended 31 December 2021

	Notes	2021	2020
		RMB million	RMB million
Operating income	40	1,045,000	770,321
Less: Operating costs	40	808,540	584,315
Taxes and surcharges		156,174	148,350
Selling and distribution expenses		1,774	3,256
General and administrative expenses		30,551	29,868
Research and development expenses		10,102	9,098
Financial expenses		10,644	8,749
Including: Interest expenses		13,602	11,892
Interest income		2,953	3,181
Exploration expenses, including dry holes		10,502	8,297
Add: Other income		4,045	4,922
Investment income	49	30,881	43,356
Including: Income from investment in associates and joint ventures		8,151	3,637
Gains from changes in fair value		644	350
Credit impairment reversal		1	71
Impairment losses		(7,192)	(16,374)
Asset disposal gains		58	261
Operating profit		45,150	10,974
Add: Non-operating income		776	900
Less: Non-operating expenses		2,209	1,319
Profit before taxation		43,717	10,555
Less: Income tax expense		4,273	(8,017)
Net profit		39,444	18,572
Classification by going concern:
Continuous operating net profit		39,444	18,572
Termination of net profit		-	-
Other comprehensive income
Items that may be reclassified subsequently to profit or loss		13,612	4,766
Other comprehensive income that can be converted into profit or loss under the equity method		12	(182)
Cash flow hedges reserve		13,600	4,948
Total other comprehensive income		13,612	4,766

Total comprehensive income		53,056	23,338

These financial statements have been approved for issue by the board of directors on 25 March 2022.

Ma Yongsheng	Yu Baocai	Shou Donghua
Chairman	President	Chief Financial Officer
(Legal representative)

The accompanying notes form part of these financial statements.

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2021

	Notes	2021	2020
		RMB million	RMB million
Cash flows from operating activities:
Cash received from sale of goods and rendering of services		2,980,918	2,295,665
Refund of taxes and levies		4,641	2,985
Other cash received relating to operating activities		158,049	212,918
Sub-total of cash inflows		3,143,608	2,511,568
Cash paid for goods and services		(2,317,629)	(1,749,873)
Cash paid to and for employees		(95,778)	(85,481)
Payments of taxes and levies		(325,348)	(282,390)
Other cash paid relating to operating activities		(179,679)	(225,304)
Sub-total of cash outflows		(2,918,434)	(2,343,048)

Net cash flow from operating activities	56(a)	225,174	168,520
Cash flows from investing activities:
Cash received from disposal of investments		9,812	11,651
Cash received from returns on investments		10,134	11,510
Net cash received from disposal of fixed assets, intangible assets and other long-term assets		1,478	2,656
Net cash received from disposal of subsidiaries and other business entities	56(d)	5,205	49,869
Other cash received relating to investing activities		38,208	58,669
Sub-total of cash inflows		64,837	134,355
Cash paid for acquisition of fixed assets, intangible assets and other long-term assets		(144,921)	(131,636)
Cash paid for acquisition of investments		(13,085)	(12,740)
Net cash paid for the acquisition of subsidiaries and other business entities		(1,106)	(340)
Other cash paid relating to investing activities		(50,923)	(92,289)
Sub-total of cash outflows		(210,035)	(237,005)

Net cash flow from investing activities		(145,198)	(102,650)
Cash flows from financing activities:
Cash received from capital contributions		1,001	4,219
Including: Cash received from minority shareholders' capital contributions to subsidiaries		1,001	4,219
Cash received from borrowings		356,459	558,680
Other cash received relating to financing activities		133	700
Sub-total of cash inflows		357,593	563,599
Cash repayments of borrowings		(338,232)	(540,015)
Cash paid for dividends, profits distribution or interest		(49,027)	(43,812)
Including: Subsidiaries' cash payments for distribution of dividends or profits to minority shareholders		(8,068)	(4,821)
Other cash paid relating to financing activities	56(e)	(28,276)	(17,282)
Sub-total of cash outflows		(415,535)	(601,109)

Net cash flow from financing activities		(57,942)	(37,510)
Effects of changes in foreign exchange rate		(1,003)	(1,239)

Net increase in cash and cash equivalents	56(b)	21,031	27,121
Add: Cash and cash equivalents at the beginning of the year		87,559	60,438
Cash and cash equivalents at the end of the period		108,590	87,559

These financial statements have been approved for issue by the board of directors on 25 March 2022.

Ma Yongsheng	Yu Baocai	Shou Donghua
Chairman	President	Chief Financial Officer
(Legal representative)

The accompanying notes form part of these financial statements.

CASH FLOW STATEMENT

For the year ended 31 December 2021

	Notes	2021	2020
		RMB million	RMB million
Cash flows from operating activities:
Cash received from sale of goods and rendering of services		1,155,516	862,093
Refund of taxes and levies		2,959	2,796
Other cash received relating to operating activities		13,868	9,407
Sub-total of cash inflows		1,172,343	874,296
Cash paid for goods and services		(823,402)	(606,295)
Cash paid to and for employees		(49,784)	(44,139)
Payments of taxes and levies		(181,187)	(164,635)
Other cash paid relating to operating activities		(25,895)	(19,239)
Sub-total of cash outflows		(1,080,268)	(834,308)

Net cash flow from operating activities		92,075	39,988
Cash flows from investing activities:
Cash received from disposal of investments		32,738	12,157
Cash received from returns on investments		22,712	18,805
Net cash received from disposal of fixed assets, intangible assets and other long-term assets		72	6,579
Other cash received relating to investing activities		136,276	78,751
Sub-total of cash inflows		191,798	116,292
Cash paid for acquisition of fixed assets, intangible assets and other long-term assets		(70,578)	(59,216)
Cash paid for acquisition of investments		(52,212)	(41,066)
Other cash paid relating to investing activities		(134,009)	(66,408)
Sub-total of cash outflows		(256,799)	(166,690)

Net cash flow from investing activities		(65,001)	(50,398)
Cash flows from financing activities:
Cash received from borrowings		159,879	195,770
Other cash received relating to financing activities		298,755	70,516
Sub-total of cash inflows		458,634	266,286
Cash repayments of borrowings		(151,310)	(199,727)
Cash paid for dividends or interest		(42,933)	(36,973)
Other cash paid relating to financing activities		(284,979)	(7,074)
Sub-total of cash outflows		(479,222)	(243,774)

Net cash flow from financing activities		(20,588)	22,512
Effects of changes in foreign exchange rate		8	(5)

Net increase in cash and cash equivalents		6,494	12,097
Add: Cash and cash equivalents at the beginning of the year		28,081	15,984
Cash and cash equivalents at the end of the period		34,575	28,081

These financial statements have been approved for issue by the board of directors on 25 March 2022.

Ma Yongsheng	Yu Baocai	Shou Donghua
Chairman	President	Chief Financial Officer
(Legal representative)

The accompanying notes form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021

	Share capital	Capital reserve	Other comprehensive income	Specific reserve	Surplus reserves	Retained earnings	Total shareholders' equity attributable to equity shareholders of the Company	Minority interests	Total shareholders' equity
	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
Balance at 31 December 2019	121,071	122,864	(321)	1,741	207,423	287,187	739,965	138,409	878,374
Adjustment for business combination of entities under common control (Note 60)	-	4,773	-	-	-	-	4,773	1	4,774
Balance at 1 January 2020	121,071	127,637	(321)	1,741	207,423	287,187	744,738	138,410	883,148
Change for the year
1. Net profit	-	-	-	-	-	33,271	33,271	8,826	42,097
2. Other comprehensive income (Note 38)	-	-	1,406	-	-	(12)	1,394	(1,079)	315
Total comprehensive income	-	-	1,406	-	-	33,259	34,665	7,747	42,412
Amounts transferred to initial carrying amount of hedged items	-	-	(47)	-	-	-	(47)	48	1
Transactions with owners, recorded directly in shareholders' equity:
3. Appropriations of profits:
- Appropriations for surplus reserves	-	-	-	-	1,857	(1,857)	-	-	-
- Distributions to shareholders (Note 55)	-	-	-	-	-	(31,479)	(31,479)	-	(31,479)
4. Contributions to subsidiaries from minority interests	-	-	-	-	-	-	-	3,325	3,325
5. Transaction with minority interests	-	(138)	-	-	-	-	(138)	13	(125)
6. Distributions to minority interests	-	-	-	-	-	-	-	(6,726)	(6,726)
7. Adjustment for business combination of entities under common control	-	(972)	-	-	-	-	(972)	972	-
Total transactions with owners, recorded directly in shareholders' equity	-	(1,110)	-	-	1,857	(33,336)	(32,589)	(2,416)	(35,005)
8. Net increase in specific reserve for the year	-	-	-	200	-	-	200	37	237
9. Others	-	862	-	-	-	(535)	327	(2,400)	(2,073)

Balance at 31 December 2020	121,071	127,389	1,038	1,941	209,280	286,575	747,294	141,426	888,720
Balance at 1 January 2021	121,071	127,389	1,038	1,941	209,280	286,575	747,294	141,426	888,720
Change for the year
1. Net profit	-	-	-	-	-	71,208	71,208	13,822	85,030
2. Other comprehensive income (Note 38)	-	-	17,574	-	-	-	17,574	(67)	17,507
Total comprehensive income	-	-	17,574	-	-	71,208	88,782	13,755	102,537
Amounts transferred to initial carrying amount of hedged items	-	-	(19,302)	-	-	-	(19,302)	(648)	(19,950)
Transactions with owners, recorded directly in shareholders' equity:
3. Appropriations of profits:
- Appropriations for surplus reserves (Note 39)	-	-	-	-	3,944	(3,944)	-	-	-
- Distributions to shareholders (Note 55)	-	-	-	-	-	(35,110)	(35,110)	-	(35,110)
4. Contributions to subsidiaries from minority interests	-	-	-	-	-	-	-	1,973	1,973
5. Transaction with minority interests	-	(1,396)	-	-	-	-	(1,396)	(6,796)	(8,192)
6. Distributions to minority interests	-	-	-	-	-	-	-	(8,982)	(8,982)
7. Adjustment for business combination of entities under common control (Note 60)	-	(6,124)	-	-	-	-	(6,124)	-	(6,124)
Total transactions with owners, recorded directly in shareholders' equity	-	(7,520)	-	-	3,944	(39,054)	(42,630)	(13,805)	(56,435)
8. Net increase in specific reserve for the year	-	-	-	723	-	-	723	52	775
9. Others	-	319	-	-	-	(84)	235	159	394

Balance at 31 December 2021	121,071	120,188	(690)	2,664	213,224	318,645	775,102	140,939	916,041

These financial statements have been approved for issue by the board of directors on 25 March 2022.

Ma Yongsheng	Yu Baocai	Shou Donghua
Chairman	President	Chief Financial Officer
(Legal representative)

The accompanying notes form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021

	Share capital	Capital reserve	Other comprehensive income	Specific reserve	Surplus reserves	Retained earnings	Total shareholders' equity
	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
Balance at 1 January 2020	121,071	68,841	1,181	949	207,423	130,645	530,110
Change for the year
1. Net profit	-	-	-	-	-	18,572	18,572
2. Other comprehensive income	-	-	4,766	-	-	-	4,766
Total comprehensive income	-	-	4,766	-	-	18,572	23,338
Amounts transferred to initial carrying amount of hedged items	-	-	(37)	-	-	-	(37)
Transactions with owners, recorded directly in shareholders' equity:
3. Appropriations of profits:
－Appropriations for surplus reserves	-	-	-	-	1,857	(1,857)	-
－Distributions to shareholders (Note 55)	-	-	-	-	-	(31,479)	(31,479)
Total transactions with owners, recorded directly in shareholders' equity	-	-	-	-	1,857	(33,336)	(31,479)
4. Net increase in specific reserve for the year	-	-	-	240	-	-	240
5. Others	-	135	-	-	-	(32)	103

Balance at 31 December 2020	121,071	68,976	5,910	1,189	209,280	115,849	522,275
Balance at 1 January 2021	121,071	68,976	5,910	1,189	209,280	115,849	522,275
Change for the year
1. Net profit	-	-	-	-	-	39,444	39,444
2. Other comprehensive income	-	-	13,612	-	-	-	13,612
Total comprehensive income	-	-	13,612	-	-	39,444	53,056
Amounts transferred to initial carrying amount of hedged items	-	-	(13,498)	-	-	-	(13,498)
Transactions with owners, recorded directly in shareholders' equity:
3. Appropriations of profits:	-	-	-	-	-	-	-
－Appropriations for surplus reserves (Note 39)	-	-	-	-	3,944	(3,944)	-
－Distributions to shareholders (Note 55)	-	-	-	-	-	(35,110)	(35,110)
Total transactions with owners, recorded directly in shareholders' equity	-	-	-	-	3,944	(39,054)	(35,110)
4. Net increase in specific reserve for the year	-	-	-	469	-	-	469
5. Others	-	(1,079)	-	-	-	201	(878)

Balance at 31 December 2021	121,071	67,897	6,024	1,658	213,224	116,440	526,314

These financial statements have been approved for issue by the board of directors on 25 March 2022.

Ma Yongsheng	Yu Baocai	Shou Donghua
Chairman	President	Chief Financial Officer
(Legal representative)

The accompanying notes form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2021

1 STATUS OF THE COMPANY

China Petroleum & Chemical Corporation (the "Company") was established on 25 February 2000 as a joint stock limited company. The company is registered in Beijing, the People's Republic of China, and the headquarter is located in Beijing, the People's Republic of China. The approval date of the financial report is 25 March 2022.

According to the State Council's approval to the "Preliminary Plan for the Reorganisation of China Petrochemical Corporation" (the "Reorganisation"), the Company was established by China Petrochemical Corporation, which transferred its core businesses together with the related assets and liabilities at 30 September 1999 to the Company. Such assets and liabilities had been valued jointly by China United Assets Appraisal Corporation, Beijing Zhong Zheng Appraisal Company, CIECC Assets Appraisal Corporation and Zhong Fa International Properties Valuation Corporation. The net asset value was determined at RMB98,249,084,000. The valuation was reviewed and approved by the Ministry of Finance (the "MOF") (Cai Ping Zi [2000] No. 20 "Comments on the Review of the Valuation Regarding the Formation of a Joint Stock Limited Company by China Petrochemical Corporation").

In addition, pursuant to the notice Cai Guan Zi [2000] No. 34 "Reply to the Issue Regarding Management of State-Owned Equity by China Petroleum and Chemical Corporation" issued by the MOF, 68.8 billion domestic state-owned shares with a par value of RMB1.00 each were issued to Sinopec Group Company, the amount of which is equivalent to 70% of the above net asset value transferred from Sinopec Group Company to the Company in connection with the Reorganisation.

Pursuant to the notice Guo Jing Mao Qi Gai [2000] No. 154 "Reply on the Formation of China Petroleum and Chemical Corporation", the Company obtained the approval from the State Economic and Trade Commission on 21 February 2000 for the formation of a joint stock limited company.

The Company took over the exploration, development and production of crude oil and natural gas, refining, chemicals and related sales and marketing business of Sinopec Group Company after the establishment of the Company.

The Company and its subsidiaries (the "Group") engage in the oil and gas and chemical operations and businesses, including:

(1) the exploration, development and production of crude oil and natural gas;

(2) the refining, transportation, storage and marketing of crude oil and petroleum product; and

(3) the production and sale of chemical.

Details of the Company's principal subsidiaries are set out in Note 59.

2 BASIS OF PREPARATION

(1) Statement of compliance of China Accounting Standards for Business Enterprises ("CASs")

The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises - Basic Standards, specific standards and relevant regulations (hereafter referred as CASs collectively) issued by the MOF on or after 15 February 2006. These financial statements also comply with the disclosure requirements of "Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No.15: General Requirements for Financial Reports" issued by the China Securities Regulatory Commission ("CSRC"). These financial statements present truly and completely the consolidated and company financial position as at 31 December 2021, and the consolidated and company financial performance and the consolidated and company cash flows for the year ended 31 December 2021.

These financial statements are prepared on a basis of going concern.

(2) Accounting period

The accounting year of the Group is from 1 January to 31 December.

(3) Measurement basis

The financial statements of the Group have been prepared under the historical cost convention, except for the assets and liabilities set out below:

- Financial assets held for trading (see Note 3(11))

- Other equity instrument investments (see Note 3(11))

- Derivative financial instruments (see Note 3(11))

- Receivables financing (see Note 3(11))

(4) Functional currency and presentation currency

The functional currency of the Company's and most of its subsidiaries are Renminbi. The Company and its subsidiaries determine their functional currency according to the main economic environment in where they operate. The Group's consolidated financial statements are presented in Renminbi. Some of subsidiaries use other currency as the functional currency. The Company translates the financial statements of subsidiaries from their respective functional currencies into Renminbi (see Note 3(2)) if the subsidiaries' functional currencies are not Renminbi.

3 SIGNIFICANT ACCOUNTING POLICIES

The Group determines specific accounting policies and accounting estimates based on the characteristics of production and operational activities, mainly reflected in the accounting for allowance for financial assets (Note 3(11)), valuation of inventories (Note 3(4)), depreciation of fixed assets and depletion of oil and gas properties (Note 3(7), (8)), measurement of provisions (Note 3(16)), etc.

Principal accounting estimates and judgements of the Group are set out in Note 58.

(1) Accounting treatment of business combination involving entities under common control and not under common control

(a) Business combination involving entities under common control

A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. The assets and liabilities that the acquirer receives in the acquisition are accounted for at the acquiree's carrying amount on the acquisition date. The difference between the carrying amount of the acquired net assets and the carrying amount of the consideration paid for the acquisition (or the total nominal value of shares issued) is recognised in the share premium of capital reserve, or the retained earnings in case of any shortfall in the share premium of capital reserve. Any costs directly attributable to the combination shall be recognised in profit or loss for the current period when occurred. The expense incurred for equity securities and debt securities issued as the consideration of the combination is recognised in the initial cost of the securities. The combination date is the date on which the acquirer effectively obtains control of the acquiree.

(b) Business combination involving entities not under common control

A business combination involving entities or businesses not under common control is a business combination in which all of the combining entities or businesses are not ultimately controlled by the same party or parties both before and after the business combination. Difference between the consideration paid by the Group as the acquirer, comprises of the aggregate of the fair value at the acquisition date of assets given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquiree, and the Group's interest in the fair value of the identifiable net assets of the acquiree, is recognised as goodwill (Note 3(10)) if it is an excess, otherwise in the profit or loss. The expense incurred for equity securities and debt securities issued as the consideration of the combination is recognised in the initial cost of the securities. Any other expense directly attributable to the business combination is recognised in the profit or loss for the year. The difference between the fair value and the book value of the assets given is recognised in profit or loss. The acquiree's identifiable assets, liabilities and contingent liabilities, if satisfying the recognition criteria, are recognised by the Group at their fair value at the acquisition date. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.

The scope of consolidated financial statements is based on control and the consolidated financial statements comprise the Company and its subsidiaries. Control means an entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Where the Company combines a subsidiary during the reporting period through a business combination involving entities under common control, the financial statements of the subsidiary are included in the consolidated financial statements as if the combination had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established. Therefore the opening balances and the comparative figures of the consolidated financial statements are restated. In the preparation of the consolidated financial statements, the subsidiary's assets, liabilities and results of operations are included in the consolidated balance sheet and the consolidated income statement, respectively, based on their carrying amounts in the subsidiary's financial statements, from the date that common control was established.

Where the Company acquires a subsidiary during the reporting year through a business combination involving entities not under common control, the identifiable assets, liabilities and results of operations of the subsidiaries are consolidated into consolidated financial statements from the date that control commences, based on the fair value of those identifiable assets and liabilities at the acquisition date.

Where the Company acquired a minority interest from a subsidiary's minority shareholders, the difference between the investment cost and the newly acquired interest into the subsidiary's identifiable net assets at the acquisition date is adjusted to the capital reserve (capital surplus) in the consolidated balance sheet. Where the Company partially disposed an investment of a subsidiary that do not result in a loss of control, the difference between the proceeds and the corresponding share of the interest into the subsidiary is adjusted to the capital reserve (capital surplus) in the consolidated balance sheet. If the credit balance of capital reserve (capital surplus) is insufficient, any excess is adjusted to retained profits.

In a business combination involving entities not under common control achieved in stages, the Group remeasures its previously held equity interest in the acquiree on the acquisition date. The difference between the fair value and the net book value is recognised as investment income for the year. If other comprehensive income was recognised regarding the equity interest previously held in the acquiree before the acquisition date, the relevant other comprehensive income is transferred to investment income in the period in which the acquisition occurs.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(1) Accounting treatment of business combination involving entities under common control and not under common control (Continued)

Where control of a subsidiary is lost due to partial disposal of the equity investment held in a subsidiary, or any other reasons, the Group derecognises assets, liabilities, minority interests and other equity items related to the subsidiary. The remaining equity investment is remeasured to fair value at the date in which control is lost. The sum of consideration received from disposal of equity investment and the fair value of the remaining equity investment, net of the fair value of the Group's previous share of the subsidiary's identifiable net assets recorded from the acquisition date, is recognised in investment income in the period in which control is lost. Other comprehensive income related to the previous equity investment in the subsidiary, is transferred to investment income when control is lost. Other comprehensive income related to the equity investment of the original subsidiary shall be converted into the current investment income in the event of loss of control.

Minority interest is presented separately in the consolidated balance sheet within shareholders' equity. Net profit or loss attributable to minority shareholders is presented separately in the consolidated income statement below the net profit line item.

The excess of the loss attributable to the minority interests during the period over the minority interests' share of the equity at the beginning of the reporting period is deducted from minority interests.

Where the accounting policies and accounting period adopted by the subsidiaries are different from those adopted by the Company, adjustments are made to the subsidiaries' financial statements according to the Company's accounting policies and accounting period. Intra-group balances and transactions, and any unrealised profit or loss arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

The unrealised profit or loss arising from the sale of assets by the Company to its subsidiaries is eliminated in full against the net profit attributed to shareholders; the unrealised profit or loss from the sale of assets by subsidiaries to the Company is eliminated according to the distribution ratio between shareholders of the parent company and minority interests. For sale of assets that occurred between subsidiaries, the unrealised gains and losses is eliminated according to the distribution ratio for its subsidiaries seller between net profit attributable to shareholders of the parent company and minority interests.

(2) Transactions in foreign currencies and translation of financial statements in foreign currencies

Foreign currency transactions are, on initial recognition, translated into Renminbi at the spot exchange rates quoted by the People's Bank of China ("PBOC rates") at the transaction dates.

Foreign currency monetary items are translated at the PBOC rates at the balance sheet date. Exchange differences, except for those directly related to the acquisition, construction or production of qualified assets, are recognised as income or expenses in the income statement. Non-monetary items denominated in foreign currency measured at historical cost are not translated. Non-monetary items denominated in foreign currency that are measured at fair value are translated using the exchange rates at the date when the fair value was determined. The difference between the translated amount and the original currency amount is recognised as other comprehensive income, if it is classified as other equity instrument investments; or charged to the income statement if it is measured at fair value through profit or loss.

The assets and liabilities of foreign operation are translated into Renminbi at the spot exchange rates at the balance sheet date. The equity items, excluding "Retained earnings", are translated into Renminbi at the spot exchange rates at the transaction dates. The income and expenses of foreign operation are translated into Renminbi at the spot exchange rates or an exchange rate that approximates the spot exchange rates on the transaction dates. The resulting exchange differences are separately presented as other comprehensive income in the balance sheet within equity. Upon disposal of a foreign operation, the cumulative amount of the exchange differences recognised in which relate to that foreign operation is transferred to profit or loss in the year in which the disposal occurs.

(3) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, short-term and highly liquid investments which are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value.

(4) Inventories

Inventories are initially measured at cost. Cost includes the cost of purchase and processing, and other expenditures incurred in bringing the inventories to their present location and condition. The cost of inventories is mainly calculated using the weighted average method. In addition to the cost of purchase of raw material, work in progress and finished goods include direct labour and an appropriate allocation of manufacturing overhead costs.

At the balance sheet date, inventories are stated at the lower of cost and net realisable value.

Any excess of the cost over the net realisable value of each item of inventories is recognised as a provision for diminution in the value of inventories. Net realisable value is the estimated selling price in the normal course of business less the estimated costs of completion and the estimated costs necessary to make the sale and relevant taxes. The net realisable value of materials held for use in the production is measured based on the net realisable value of the finished goods in which they will be incorporated. The net realisable value of the quantity of inventory held to satisfy sales or service contracts is measured based on the contract price. If the quantities held by the Group are more than the quantities of inventories specified in sales contracts, the net realisable value of the excess portion of inventories is measured based on general selling prices.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(4) Inventories (Continued)

Inventories include raw materials, work in progress, semi-finished goods, finished goods and reusable materials. Reusable materials include low-value consumables, packaging materials and other materials, which can be used repeatedly but do not meet the definition of fixed assets. Reusable materials are amortised in full when received for use. The amounts of the amortisation are included in the cost of the related assets or profit or loss.

Inventories are recorded by perpetual method.

(5) Long-term equity investments

(a) Investment in subsidiaries

In the Company's separate financial statements, long-term equity investments in subsidiaries are accounted for using the cost method. Except for cash dividends or profits distributions declared but not yet distributed that have been included in the price or consideration paid in obtaining the investments, the Company recognises its share of the cash dividends or profit distributions declared by the investee as investment income irrespective of whether these represent the net profit realised by the investee before or after the investment. Investments in subsidiaries are stated at cost less impairment losses (see Note 3(12)) in the balance sheet. At initial recognition, such investments are measured as follows:

The initial investment cost of a long-term equity investment obtained through a business combination involving entities under common control is the Company's share of the carrying amount of the subsidiary's equity at the combination date. The difference between the initial investment cost and the carrying amounts of the consideration given is adjusted to share premium in capital reserve. If the balance of the share premium is insufficient, any excess is adjusted to retained earnings.

For a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial investment cost comprises the aggregate of the fair values of assets transferred, liabilities incurred or assumed, and equity securities issued by the Company, in exchange for control of the acquiree. For a long-term equity investment obtained through a business combination not involving enterprises under common control, if it is achieved in stages, the initial cost comprises the carrying value of previously-held equity investment in the acquiree immediately before the acquisition date, and the additional investment cost at the acquisition date.

An investment in a subsidiary acquired otherwise than through a business combination is initially recognised at actual purchase cost if the Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities, or at the value stipulated in the investment contract or agreement if an investment is contributed by investors.

(b) Investment in joint ventures and associates

A joint venture is an incorporated entity over which the Group, based on legal form, contractual terms and other facts and circumstances, has joint control with the other parties to the joint venture and rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the Group and the parties sharing control.

An associate is the investee that the Group has significant influence on their financial and operating policies. Significant influence represents the right to participate in the financial and operating policy decisions of the investee but is not control or joint control over the establishment of these policies. The Group generally considers the following circumstances in determining whether it can exercise significant influence over the investee: whether there is representative appointed to the board of directors or equivalent governing body of the investee; whether to participate in the investee's policy-making process; whether there are significant transactions with the investees; whether there is management personnel sent to the investee; whether to provide critical technical information to the investee.

An investment in a joint ventures or an associate is accounted for using the equity method, unless the investment is classified as held for sale.

The initial cost of investment in joint ventures and associates is stated at the consideration paid except for cash dividends or profits distributions declared but unpaid at the time of acquisition and therefore included in the consideration paid should be deducted if the investment is made in cash. Under the circumstances that the long-term investment is obtained through non-monetary asset exchange, the initial cost of the investment is stated at the fair value of the assets exchanged if the transaction has commercial substance, the difference between the fair value of the assets exchanged and its carrying amount is charged to profit or loss; or stated at the carrying amount of the assets exchanged if the transaction lacks commercial substance.

The Group's accounting treatments when adopting the equity method include:

Where the initial investment cost of a long-term equity investment exceeds the Group's interest in the fair value of the investee's identifiable net assets at the date of acquisition, the investment is initially recognised at the initial investment cost. Where the initial investment cost is less than the Group's interest in the fair value of the investee's identifiable net assets at the time of acquisition, the investment is initially recognised at the investor's share of the fair value of the investee's identifiable net assets, and the difference is charged to profit or loss.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(5) Long-term equity investments (Continued)

(b) Investment in joint ventures and associates (Continued)

After the acquisition of the investment, the Group recognises its share of the investee's net profits or losses and other comprehensive income as investment income or losses and other comprehensive income, and adjusts the carrying amount of the investment accordingly. Once the investee declares any cash dividends or profits distributions, the carrying amount of the investment is reduced by that attributable to the Group.

The Group recognises its share of the investee's net profits or losses after making appropriate adjustments to align the accounting policies or accounting periods with those of the Group based on the fair values of the investee's net identifiable assets at the time of acquisition. Under the equity accounting method, unrealised profits and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group's interest in the associates or joint ventures. Unrealised losses resulting from transactions between the Group and its associates or joint ventures are fully recognised in the event that there is an evidence of impairment.

The Group discontinues recognising its share of net losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that is in substance forms part of the Group's net investment in the associate or the joint venture is reduced to zero, except to the extent that the Group has an obligation to assume additional losses. However, if the Group has incurred obligations for additional losses and the conditions on recognition of provision are satisfied in accordance with the accounting standard on contingencies, the Group continues recognising the investment losses and the provision. Where net profits are subsequently made by the associate or joint venture, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

The Group adjusts the carrying amount of the long-term equity investment for changes in owners' equity of the investee other than those arising from net profits or losses and other comprehensive income, and recognises the corresponding adjustment in capital reserve.

The impairment assessment and provision accrual on investments in subsidiaries, associates and joint ventures are stated in Note 3(12).

(6) Leases

A lease is a contract that a lessor transfers the right to use an identified asset for a period of time to a lessee in exchange for consideration.

(a) As Lessee

The Group recognises a right-of-use asset at the commencement date, and recognises the lease liability at the present value of the lease payments that are not paid at that date. The lease payments include fixed payments, the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and payments of penalties for terminating the lease if the lease term reflects the Group exercising that option, etc. Variable payments that are based on a percentage of sales are not included in the lease payments, and should be recognised in profit or loss when incurred. Lease liabilities to be paid within one year (including one year) from balance sheet date is presented in non-current liabilities due within one year.

Right-of-use assets of the Group mainly comprise land. Right-of-use assets are measured at cost which comprises the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred by the lessee, less any lease incentives received. The Group depreciates the right-of-use assets over the shorter of the asset's useful life and the lease term on a straight-line basis. When the recoverable amount of a right-of-use asset is less than its carrying amount, the carrying amount is reduced to the recoverable amount.

Payments associated with short-term leases with lease terms within 12 months and leases for which the underlying assets are individually of low value when it is new are recognised on a straight-line basis over the lease term as an expense in profit or loss or as cost of relevant assets, instead of recognising right-of-use assets and lease liabilities.

(b) As Lessor

A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a lease other than a finance lease.

When the Group leases self-owned plants and buildings, equipment and machinery, lease income from an operating lease is recognised on a straight-line basis over the period of the lease. The Group recognises variable lease income which is based on a certain percentage of sales as rental income when occurred.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(7) Fixed assets and construction in progress

Fixed assets represent the tangible assets held by the Group using in the production of goods, rendering of services and for operation and administrative purposes with useful life over one year.

Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see Note 3(12)). Construction in progress is stated in the balance sheet at cost less impairment losses (see Note 3(12)).

The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing costs (see Note 3(19)), and any other costs directly attributable to bringing the asset to working condition for its intended use. According to legal or contractual obligations, costs of dismantling and removing the items and restoring the site on which the related assets located are included in the initial cost.

Construction in progress is transferred to fixed assets when the asset is ready for its intended use. No depreciation is provided against construction in progress.

Where the individual component parts of an item of fixed asset have different useful lives or provide benefits to the Group in different patterns thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset.

The subsequent costs including the cost of replacing part of an item of fixed assets are recognised in the carrying amount of the item if the recognition criteria are satisfied, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fixed assets are recognised in profit or loss as incurred.

The Group terminates the recognition of an item of fixed asset when it is in a state of disposal or it is estimated that it is unable to generate any economic benefits through use or disposal. Gains or losses arising from the retirement or disposal of an item of fixed asset are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

Other than oil and gas properties, the cost of fixed assets less residual value and accumulated impairment losses is depreciated using the straight-line method over their estimated useful lives, unless the fixed asset is classified as held for sale. The estimated useful lives and the estimated rate of residual values adopted for respective classes of fixed assets are as follows:

	Estimated	Estimated rate
	useful life	of residual value
Plants and buildings	12-50 years	3%
Equipment, machinery and others	4-30 years	3%

Useful lives, residual values and depreciation methods are reviewed at least each year end.

(8) Oil and gas properties

Oil and gas properties include the mineral interests in properties, wells and related support equipment arising from oil and gas exploration and production activities.

The acquisition cost of mineral interest is capitalised as oil and gas properties. Costs of development wells and related support equipment are capitalised. The cost of exploratory wells is initially capitalised as construction in progress pending determination of whether the well has found proved reserves. Exploratory well costs are charged to expenses upon the determination that the well has not found proved reserves. However, in the absence of a determination of the discovery of proved reserves, exploratory well costs are not carried as an asset for more than one year following completion of drilling. If, after one year has passed, a determination of the discovery of proved reserves cannot be made, the exploratory well costs are impaired and charged to expense. All other exploration costs, including geological and geophysical costs, are charged to profit or loss in the year as incurred.

The Group estimates future dismantlement costs for oil and gas properties with reference to engineering estimates after taking into consideration the anticipated method of dismantlement required in accordance with the industry practices. These estimated future dismantlement costs are discounted at credit-adjusted risk-free rate and are capitalised as oil and gas properties, which are subsequently amortised as part of the costs of the oil and gas properties.

Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based on volumes produced and reserves.

(9) Intangible assets

Intangible assets, where the estimated useful life is finite, are stated in the balance sheet at cost less accumulated amortisation and provision for impairment losses (see Note 3(12)). For an intangible asset with finite useful life, its cost less estimated residual value and accumulated impairment losses is amortised on a straight-line basis over the expected useful lives, unless the intangible assets are classified as held for sale.

An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foreseeable limit to the year over which the asset is expected to generate economic benefits for the Group.

Useful lives and amortisation methods are reviewed at least each year end.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(10) Goodwill

The initial cost of goodwill represents the excess of cost of acquisition over the acquirer's interest in the fair value of the identifiable net assets of the acquiree under the business combination involving entities not under common control.

Goodwill is not amortised and is stated at cost less accumulated impairment losses (see Note 3(12)). On disposal of an asset group or a set of asset groups, any attributable amount of purchased goodwill is written off and included in the calculation of the profit or loss on disposal.

(11) Financial Instruments

Financial instruments, refer to the contracts that form one party's financial assets and form the financial liabilities or equity instruments of the other party. The Group recognises a financial asset or a financial liability when the Group enters into and becomes a party to the underlining contract of the financial instrument.

(a) Financial assets

(i) Classification and measurement

The Group classifies financial assets into different categories depending on the business model for managing the financial assets and the contractual terms of cash flows of the financial assets: (1) financial assets measured at amortised cost, (2) financial assets measured at fair value through other comprehensive income, (3) financial assets measured at fair value through profit or loss. A contractual cash flow characteristic which could have only a de minimis effect, or could have an effect that is more than de minimis but is not genuine, does not affect the classification of the financial asset.

Financial assets are initially recognised at fair value. For financial assets measured at fair value through profit or loss, the relevant transaction costs are recognised in profit or loss. The transaction costs for other financial assets are included in the initially recognised amount. However, accounts receivable arising from sales of goods or rendering services, without significant financing component, are initially recognised based on the transaction price expected to be entitled by the Group.

Debt instruments

The debt instruments held by the Group refer to the instruments that meet the definition of financial liabilities from the perspective of the issuer, and are measured in the following ways:

- Measured at amortised cost:

The business model for managing such financial assets by the Group are held for collection of contractual cash flows. The contractual cash flow characteristics are to give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income from these financial assets is recognised using the effective interest rate method. The financial assets include cash at bank and on hand and receivables.

- Measured at fair value through other comprehensive income:

The business model for managing such financial assets by the Group are held for collection of contractual cash flows and for selling the financial assets, the contractual cash flow characteristics of such financial assets are consistent with the basic lending arrangements. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment gains or losses, foreign exchange gains and losses and interest income calculated using the effective interest rate method, which are recognised in profit or loss. The financial assets include receivables financing.

Equity instruments

Equity instruments that the Group has no power to control, jointly control or exercise significant influence over, are measured at fair value through profit or loss and presented as financial assets held for trading.

In addition, the Group designates some equity instruments that are not held for trading as financial assets at fair value through other comprehensive income, and presented in other equity instrument investments. The relevant dividends of these financial assets are recognised in profit or loss. When derecognised, the cumulative gain or loss previously recognised in other comprehensive income is transferred to retained earnings.

(ii) Impairment

The Group recognises a loss allowance for expected credit losses on financial assets measured at amortised cost and receivables financing measured at fair value through other comprehensive income.

The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past events, current conditions and forecasts of future economic conditions.

The Group measures the expected credit losses of financial instruments on different stages at each balance sheet date. For financial instruments that have no significant increase in credit risk since the initial recognition, on first stage, the Group measures the loss allowance at an amount equal to 12-month expected credit losses. If there has been a significant increase in credit risk since the initial recognition of a financial instrument but credit impairment has not occurred, on second stage, the Group recognises a loss allowance at an amount equal to lifetime expected credit losses. If credit impairment has occurred since the initial recognition of a financial instrument, on third stage, the Group recognises a loss allowance at an amount equal to lifetime expected credit losses.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(11) Financial Instruments (Continued)

(a) Financial assets (Continued)

(ii) Impairment (Continued)

For financial instruments that have low credit risk at the balance sheet date, the Group assumes that there is no significant increase in credit risk since the initial recognition, and measures the loss allowance at an amount equal to 12-month expected credit losses.

For financial instruments on the first stage and the second stage, and that have low credit risk, the Group calculates interest income according to carrying amount without deducting the impairment allowance and effective interest rate. For financial instruments on the third stage, interest income is calculated according to the carrying amount minus amortised cost after the provision of impairment allowance and effective interest rate.

For accounts receivable and receivables financing related to revenue, the Group measures the loss allowance at an amount equal to lifetime expected credit losses.

The Group recognises the loss allowance accrued or written back in profit or loss.

(iii) Derecognition

The Group derecognises a financial asset when a) the contractual right to receive cash flows from the financial asset expires; b) the Group transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset; c) the financial assets have been transferred and the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but the Group has not retained control.

On derecognition of other equity instrument investments, the difference between the carrying amounts and the sum of the consideration received and any cumulative gain or loss previously recognised in other comprehensive income, is recognised in retained earnings. While on derecognition of other financial assets, this difference is recognised in profit or loss.

(b) Financial liabilities

The Group, at initial recognition, classifies financial liabilities as either financial liabilities subsequently measured at amortised cost or financial liabilities at fair value through profit or loss.

The Group's financial liabilities are mainly financial liabilities measured at amortised cost, including bills payable, accounts payable, other payables, loans and debentures payable, etc. These financial liabilities are initially measured at the amount of their fair value after deducting transaction costs and use the effective interest rate method for subsequent measurement.

Where the present obligations of financial liabilities are completely or partially discharged, the Group derecognises these financial liabilities or discharged parts of obligations. The differences between the carrying amounts and the consideration received are recognised in profit or loss.

Financial guarantee liabilities

Financial guarantees are contracts that requires the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantees issued are initially recognised at fair value, which is determined by reference to fees charged in an arm's length transaction for similar services, when such information is obtainable, or to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group's policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss.

Subsequent to initial recognition, the amount initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued.

If there is an active market for financial instruments, the quoted price in the active market is used to measure fair values of the financial instruments. If no active market exists for financial instruments, valuation techniques are used to measure fair values. In valuation, the Group adopts valuation techniques that are applicable in the current situation and have sufficient available data and other information to support it, and selects input values that are consistent with the asset or liability characteristics considered by market participants in the transaction of relevant assets or liabilities, and gives priority to relevant observable input values. Use of unobservable input values where relevant observable input values cannot be obtained or are not practicable.

(d) Derivative financial instruments and hedge accounting

Derivative financial instruments are recognised initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss, except where the derivatives qualify for hedge accounting.

Hedge accounting is a method which recognises the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged item in the same accounting period, to represent the effect of risk management activities.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(11) Financial Instruments (Continued)

(d) Derivative financial instruments and hedge accounting (Continued)

Hedged items are the items that expose the Group to risks of changes in future cash flows and that are designated as being hedged and that must be reliably measurable. The Group's hedged items include a forecast transaction that is settled with an undetermined future market price and exposes the Group to risk of variability in cash flows, etc.

A hedging instrument is a designated derivative whose changes in cash flows are expected to offset changes in the cash flows of the hedged item.

The hedging relationship meets all of the following hedge effectiveness requirements:

(1) There is an economic relationship between the hedged item and the hedging instrument, which share a risk and that gives rise to opposite changes in fair value that tend to offset each other.

(2) The effect of credit risk does not dominate the value changes that result from that economic relationship.

(3) The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item. However, that designation shall not reflect an imbalance between the weightings of the hedged item and the hedging instrument.

- Cash flow hedges

Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a component of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable forecast transaction, and could affect profit or loss. As long as a cash flow hedge meets the qualifying criteria for hedge accounting, the hedging relationship shall be accounted for as follows:

- The cumulative gain or loss on the hedging instrument from inception of the hedge;

- The cumulative change in present value of the expected future cash flows on the hedged item from inception of the hedge.

The gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income.

The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge is recognised in profit or loss.

If a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a hedged forecast transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the entity shall remove that amount from the cash flow hedge reserve and include it directly in the initial cost or other carrying amount of the asset or the liability. This is not a reclassification adjustment and hence it does not affect other comprehensive income.

For cash flow hedges, other than those covered by the preceding two policy statements, that amount shall be reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment in the same period or periods during which the hedged expected future cash flows affect profit or loss.

If the amount that has been accumulated in the cash flow hedge reserve is a loss and the Group expects that all or a portion of that loss will not be recovered in one or more future periods, the Group immediately reclassify the amount that is not expected to be recovered into profit or loss.

When the hedging relationship no longer meets the risk management objective on the basis of which it qualified for hedge accounting (i.e. the entity no longer pursues that risk management objective), or when a hedging instrument expires or is sold, terminated, exercised, or there is no longer an economic relationship between the hedged item and the hedging instrument or the effect of credit risk starts to dominate the value changes that result from that economic relationship or no longer meets the criteria for hedge accounting, the Group discontinues prospectively the hedge accounting treatments. If the hedged future cash flows are still expected to occur, that amount shall remain in the cash flow hedge reserve and shall be accounted for as cash flow hedges. If the hedged future cash flows are no longer expected to occur, that amount shall be immediately reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment. A hedged future cash flow that is no longer highly probable to occur may still be expected to occur, if the hedged future cash flows are still expected to occur, that amount shall remain in the cash flow hedge reserve and shall be accounted for as cash flow hedges.

- Fair value hedges

A fair value hedge is a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognised firm commitment, or a portion of such an asset, liability or firm commitment.

The gain or loss from remeasuring the hedging instrument is recognised in profit or loss. The gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the recognised hedged item not measured at fair value and is recognised in profit or loss.

Any adjustment to the carrying amount of a hedged item is amortised to profit or loss if the hedged item is a financial instrument (or a component thereof) measured at amortised cost.The amortisation is based on a recalculated effective interest rate at the date that amortisation begins.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(12) Impairment of other non-financial long-term assets

Internal and external sources of information are reviewed at each balance sheet date for indications that the following assets, including fixed assets, construction in progress, right-of-use assets, goodwill, intangible assets, long-term deferred expenses and investments in subsidiaries, associates and joint ventures may be impaired.

Assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The recoverable amounts of goodwill and intangible assets with uncertain useful lives are estimated annually no matter there are any indications of impairment. Goodwill is tested for impairment together with related asset units or groups of asset units.

An asset unit is the smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or groups of assets. An asset unit comprises related assets that generate associated cash inflows. In identifying an asset unit, the Group primarily considers whether the asset unit is able to generate cash inflows independently as well as the management style of production and operational activities, and the decision for the use or disposal of asset.

The recoverable amount is the greater of the fair value less costs to sell and the present value of expected future cash flows generated by the asset (or asset unit, set of asset units).

Fair value less costs to sell of an asset is based on its selling price in an arm's length transaction less any direct costs attributable to the disposal. Present value of expected future cash flows is the estimation of future cash flows to be generated from the use of and upon disposal of the asset, discounted at an appropriate pre-tax discount rate over the asset's remaining useful life.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount is reduced to the recoverable amount. The amount by which the carrying amount is reduced is recognised as an impairment loss in profit or loss. A provision for impairment loss of the asset is recognised accordingly. Impairment losses related to an asset unit or a set of asset units first reduce the carrying amount of any goodwill allocated to the asset unit or set of asset units, and then reduce the carrying amount of the other assets in the asset unit or set of asset units on a pro rata basis. However, the carrying amount of an impaired asset will not be reduced below the highest of its individual fair value less costs to sell (if determinable), the present value of expected future cash flows (if determinable) and zero.

Once an impairment loss is recognised, it is not reversed in a subsequent period.

(13) Long-term deferred expenses

Long-term deferred expenses are amortised on a straight-line basis over their beneficial periods

(14) Employee benefits

Employee benefits are all forms of considerations and compensation given in exchange for services rendered by employees, including short-term compensation, post-employment benefits, termination benefits and other long term employee benefits.

(a) Short-term compensation

Short term compensation includes salaries, bonuses, allowances and subsidies, employee benefits, medical insurance premiums, work-related injury insurance premium, maternity insurance premium, contributions to housing fund, unions and education fund and short-term absence with payment etc. When an employee has rendered service to the Group during an accounting period, the Group shall recognise the short-term compensation actually incurred as a liability and charge to the cost of an asset or to profit or loss in the same period, and non-monetary benefits are valued with the fair value.

(b) Post-employment benefits

The Group classifies post-employment benefits into either Defined Contribution Plan (DC plan) or Defined Benefit Plan (DB plan). DC plan means the Group only contributes a fixed amount to an independent fund and no longer bears other payment obligation; DB plan is post-employment benefits other than DC plan. In this reporting period, the post-employment benefits of the Group primarily comprise basic pension insurance and unemployment insurance and both of them are DC plans.

Basic pension insurance

Employees of the Group participate in the social insurance system established and managed by local labor and social security department. The Group makes basic pension insurance to the local social insurance agencies every month, at the applicable benchmarks and rates stipulated by the government for the benefits of its employees. After the employees retire, the local labor and social security department has obligations to pay them the basic pension. When an employee has rendered service to the Group during an accounting period, the Group shall recognise the accrued amount according to the above social security provisions as a liability and charge to the cost of an asset or to profit or loss in the same period.

When the Group terminates the employment relationship with employees before the employment contracts expire, or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision for the termination benefits provided is recognised in profit or loss under the conditions of both the Group has a formal plan for the termination of employment or has made an offer to employees for voluntary redundancy, which will be implemented shortly; and the Group is not allowed to withdraw from termination plan or redundancy offer unilaterally.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(15) Income tax

Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to business combinations and items recognised directly in equity (including other comprehensive income).

Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, plus any adjustment to tax payable in respect of previous years.

At the balance sheet date, current tax assets and liabilities are offset if the Group has a legally enforceable right to set them off and also intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Deferred tax assets and liabilities are recognised based on deductible temporary differences and taxable temporary differences respectively. Temporary difference is the difference between the carrying amounts of assets and liabilities and their tax bases. Unused tax losses and unused tax credits able to be utilised in subsequent years are treated as temporary differences. Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available to offset the deductible temporary differences.

Temporary differences arise in a transaction, which is not a business combination, and at the time of transaction, does not affect accounting profit or taxable profit (or unused tax losses), will not result in deferred tax. Temporary differences arising from the initial recognition of goodwill will not result in deferred tax.

At the balance sheet date, the amounts of deferred tax recognised is measured based on the expected manner of recovery or settlement of the carrying amount of the assets and liabilities, using tax rates that are expected to be applied in the period when the asset is recovered or the liability is settled in accordance with tax laws.

The carrying amount of deferred tax assets is reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset against the benefit of deferred tax asset, the carrying amount of the deferred tax assets is written down. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will be available.

At the balance sheet date, deferred tax assets and liabilities are offset if all the following conditions are met:

- the taxable entity has a legally enforceable right to offset current tax assets and current tax liabilities; and

- they relate to income taxes levied by the same tax authority on either:

- the same taxable entity; or

- different taxable entities which either to intend to settle the current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(16) Provisions

Provisions are recognised when the Group has a present obligation as a result of a contingent event, it is probable that an outflow of economic benefits will be required to settle the obligations and a reliable estimate can be made. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows.

Provisions for future dismantlement costs are initially recognised based on the present value of the future costs expected to be incurred in respect of the Group's expected dismantlement and abandonment costs at the end of related oil and gas exploration and development activities. Any subsequent change in the present value of the estimated costs, other than the change due to passage of time which is regarded as interest costs, is reflected as an adjustment to the provision of oil and gas properties.

(17) Revenue recognition

Revenue arises in the course of the Group's ordinary activities, and increases in economic benefits in the form of inflows that result in an increase in equity, other than those relating to contributions from equity participants.

The Group sells crude oil, natural gas, petroleum and chemical products, etc. Revenue is recognised according to the expected consideration amount, when a customer obtains control over the relevant goods or services. To determine whether a customer obtains control of a promised asset, the Group shall consider indicators of the transfer of control, which include, but are not limited to, the Group has a present right to payment for the asset; the Group has transferred physical possession of the asset to the customer; the customer has the significant risks and rewards of ownership of the asset; the customer has accepted the asset.

Sales of goods

Sales are recognised when control of the goods have transferred, being when the products are delivered to the customer. Advance from customers but goods not yet delivered is recorded as contract liabilities and is recognised as revenues when a customer obtains control over the relevant goods.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(18) Government grants

Government grants are the gratuitous monetary assets or non-monetary assets that the Group receives from the government, excluding capital injection by the government as an investor. Special funds such as investment grants allocated by the government, if clearly defined in official documents as part of "capital reserve" are dealt with as capital contributions, and not regarded as government grants.

Government grants are recognised when there is reasonable assurance that the grants will be received and the Group is able to comply with the conditions attaching to them. Government grants in the form of monetary assets are recorded based on the amount received or receivable, whereas non-monetary assets are measured at fair value.

Government grants received in relation to assets are recorded as deferred income, and recognised evenly in profit or loss over the assets' useful lives. Government grants received in relation to revenue are recorded as deferred income, and recognised as income in future periods as compensation when the associated future expenses or losses arise; or directly recognised as income in the current period as compensation for past expenses or losses.

(19) Borrowing costs

Borrowing costs incurred on borrowings for the acquisition, construction or production of qualified assets are capitalised into the cost of the related assets in the capitalisable period.

Except for the above, other borrowing costs are recognised as financial expenses in the income statement when incurred.

(20) Repairs and maintenance expenses

Repairs and maintenance (including overhauling expenses) expenses are recognised in profit or loss when incurred.

(21) Environmental expenditures

Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations is expensed as incurred. Liabilities related to future remediation costs are recorded when environmental assessments and/or cleanups are probable and the costs can be reliably estimated. As facts concerning environmental contingencies become known to the Group, the Group reassesses its position both with respect to accrued liabilities and other potential exposures.

(22) Research and development costs

Research costs and development costs that cannot meet the capitalisation criteria are recognised in profit or loss when incurred.

(23) Dividends

Dividends and distributions of profits proposed in the profit appropriation plan which will be authorised and declared after the balance sheet date, are not recognised as a liability at the balance sheet date and are separately disclosed in the notes to the financial statements. Dividends are recognised as a liability in the period in which they are declared.

(24) Related parties

If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two or more parties are subject to common control, joint control from another party, they are considered to be related parties, except for the two parties significantly influenced by a party. Related parties may be individuals or enterprises. Where enterprises are subject to state control but are otherwise unrelated, they are not related parties.

In addition to the related parties stated above, the Company determines related parties based on the disclosure requirements of Administrative Procedures on the Information Disclosures of Listed Companies issued by the CSRC.

(25) Segment reporting

Reportable segments are identified based on operating segments which are determined based on the structure of the Group's internal organisation, management requirements and internal reporting system. An operating segment is a component of the Group that meets the following respective conditions:

‧ engage in business activities from which it may earn revenues and incur expenses;

‧ whose operating results are regularly reviewed by the Group's management to make decisions about resource to be allocated to the segment and assess its performance; and

‧ for which financial information regarding financial position, results of operations and cash flows are available.

Inter-segment revenues are measured on the basis of actual transaction price for such transactions for segment reporting, and segment accounting policies are consistent with those for the consolidated financial statements.

3 SIGNIFICANT ACCOUNTING POLICIES (Continued)

(26) Changes in significant accounting policies

In 2021, the Group has adopted the following newly revised accounting standards and implementation guidance and illustrative examples issued by the MOF, mainly include:

- CAS Bulletin No.14 (Caikuai [2021] No.1) ("Bulletin No. 14")

- Notice of Extending the Applicable Period of 'Accounting Treatment of COVID-19 Related Rent Concessions' (Caikuai [2021] No.9)

(a) Bulletin No.14

Bulletin No.14 takes effect on 26 January 2021 (implementation date).

(i) "Public-private partnership" (PPP) arrangements

Bulletin No.14, implementation Q&As and illustrative examples clarify the features and conditions of PPP arrangements, sets out the accounting and disclosure requirements of a private entity in PPP arrangements. The adoption of Bulletin No.14 does not have significant effect on the financial position and financial performance of the Group.

(b) Caikuai [2021] No.9

The Accounting Treatment of COVID-19 Related Rent Concessions (Caikuai [2020] No.10) provides practical expedient under certain conditions for rent concessions occurring as a direct consequence of the COVID-19 pandemic, and combining the requirements of Caikuai [2021] No.9, such practical expedient is only applicable to any reduction in lease payments due before 30 June 2022. The adoption of the above regulations does not have significant effect on the financial position and financial performance of the Group.

4 TAXATION

Major types of tax applicable to the Group are value-added tax, resources tax, consumption tax, income tax, crude oil special gain levy, city construction tax, education surcharge and local education surcharge.

Tax rate of products is presented as below:

Type of taxes	Tax rate	Tax basis and method
Value Added Tax (the "VAT")	13%, 9%, 6%	Based on taxable value added amount. Tax payable is calculated using the taxable sales amount multiplied by the applicable tax rate less current period's deductible VAT input.
Resource Tax	6%	Based on the revenue from sales of crude oil and natural gas.
Consumption Tax	RMB2,109.76 per tonnage for Gasoline, RMB1,411.20 per tonnage for Diesel, RMB2,105.20 per tonnage for Naphtha, RMB1,948.64 per tonnage for Solvent oil, RMB1,711.52 per tonnage for Lubricant oil, RMB1,218.00 per tonnage for Fuel oil, and RMB1,495.20 per tonnage for Jet fuel oil.	Based on quantities
Corporate Income Tax	5% to 50%	Based on taxable income.
Crude Oil Special Gain Levy	20% to 40%	Based on the sales of domestic crude oil at prices higher than a specific level.
City Maintenance and Construction Tax	1%, 5% or 7%	Based on the actual paid VAT and consumption tax.
Education surcharges	3%	Based on the actual paid VAT and consumption tax.
Local Education surcharges	2%	Based on the actual paid VAT and consumption tax.

5 CASH AT BANK AND ON HAND

The Group

	At 31 December 2021			At 31 December 2020
	Original currency	Exchange	RMB	Original currency	Exchange	RMB
	million	rates	million	million	rates	million
Cash on hand
Renminbi			1			8
Cash at bank
Renminbi			144,294			120,542
US Dollar	2,027	6.3757	12,924	1,054	6.5249	6,875
Hong Kong Dollar	3,533	0.8176	2,888	1,377	0.8416	1,159
EUR	3	7.2197	20	1	8.0250	8
Others			180			2,403
			160,307			130,995
Deposits at related parities
Renminbi			15,758			23,737
US Dollar	6,943	6.3757	44,266	4,443	6.5249	28,993
EUR	67	7.2197	483	49	8.0250	394
Others			1,175			293
			61,682			53,417
Total			221,989			184,412

Deposits at related parties represent deposits placed at Sinopec Finance Company Limited and Sinopec Century Bright Capital Investment Limited. Deposits interest is calculated based on market rate.

At 31 December 2021, time deposits with financial institutions of the Group amounted to RMB113,399 million (2020: RMB96,853 million).

6 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES

Derivative financial assets and derivative financial liabilities of the Group are primarily commodity futures and swaps contracts. See Note 64.

7 ACCOUNTS RECEIVABLE

	The Group		The Company
	At 31 December	At 31 December	At 31 December	At 31 December
	2021	2020	2021	2020
	RMB million	RMB million	RMB million	RMB million
Accounts receivable	38,894	39,299	21,239	21,871
Less: Allowance for doubtful accounts	4,033	3,860	93	108
Total	34,861	35,439	21,146	21,763

Ageing analysis on accounts receivable is as follows:

	The Group
	At 31 December 2021				At 31 December 2020
	Amount	Percentage to total accounts receivable	Allowance	Percentage of allowance to accounts receivable balance	Amount	Percentage to total accounts receivable	Allowance	Percentage of allowance to accounts receivable balance
	RMB million	%	RMB million	%	RMB million	%	RMB million	%
Within one year	34,263	88.1	83	0.2	34,478	87.7	117	0.3
Between one and two years	623	1.6	181	29.0	4,062	10.3	3,131	77.1
Between two and three years	3,411	8.8	3,190	93.5	149	0.4	85	57.0
Over three years	597	1.5	579	97.0	610	1.6	527	86.4
Total	38,894	100.0	4,033		39,299	100.0	3,860

	The Company
	At 31 December 2021				At 31 December 2020
	Amount	Percentage to total accounts receivable	Allowance	Percentage of allowance to accounts receivable balance	Amount	Percentage to total accounts receivable	Allowance	Percentage of allowance to accounts receivable balance
	RMB million	%	RMB million	%	RMB million	%	RMB million	%
Within one year	20,196	95.1	9	0.1	21,647	99.0	1	-
Between one and two years	946	4.5	6	0.6	76	0.3	7	9.2
Between two and three years	20	0.1	2	10.0	49	0.2	13	26.5
Over three years	77	0.3	76	98.7	99	0.5	87	87.9
Total	21,239	100.0	93		21,871	100.0	108

At 31 December 2021 and 31 December 2020, the total amounts of the top five accounts receivable of the Group are set out below:

	At 31 December	At 31 December
	2021	2020
Total amount (RMB million)	10,444	15,628
Percentage to the total balance of accounts receivable	26.9%	39.8%
Allowance for doubtful accounts	2,062	2,057

Sales are generally on a cash term. Credit is generally only available for major customers with well-established trading records. Amounts due from China Petrochemical Corporation ("Sinopec Group Company") and fellow subsidiaries are repayable under the same terms.

Accounts receivable (net of allowance for doubtful accounts) primarily represent receivables that are neither past due nor impaired. These receivables relate to a wide range of customers for whom there is no recent history of default. Information about the impairment of accounts receivable and the Group exposure to credit risk can be found in Note 64.

During 2021 and 2020, the Group and the Company had no individually significant accounts receivable been fully or substantially provided allowance for doubtful accounts.

During 2021 and 2020, the Group and the Company had no individually significant write-off or recovery of doubtful debts which had been fully or substantially provided for in prior years.

7 ACCOUNTS RECEIVABLE (Continued)

Ageing started from the overdue date of accounts receivable. The Group always measured the provision for impairment of accounts receivable based on the amount equivalent to the expected credit loss during the entire duration. The ECLs were calculated based on historical actual credit loss experience. The rates were considered the differences between economic conditions during the period over which the historical data has been collected, current conditions and the Group's view of economic conditions over the expected lives of the receivables. The Group performed the calculation of ECL rates by the operating segment and geographical location.

		Impairment provision on individual basis		Impairment provision on provision matrix basis
31 December 2021	Gross carrying amount	Carrying amount	Impairment provision on individual basis	Weighted- average loss rate	Impairment provision	Loss allowance
	RMB million	RMB million	RMB million	%	RMB million	RMB million
Current and within 1 year past due	34,263	4,280	26	0.2%	57	83
1 to 2 years past due	623	500	137	35.8%	44	181
2 to 3 years past due	3,411	3,324	3,146	50.6%	44	3,190
Over 3 years past due	597	208	190	100.0%	389	579
Total	38,894	8,312	3,499		534	4,033

		Impairment provision on individual basis		Impairment provision on provision matrix basis
31 December 2020	Gross carrying amount	Carrying amount	Impairment provision on individual basis	Weighted- average loss rate	Impairment provision	Loss allowance
	RMB million	RMB million	RMB million	%	RMB million	RMB million
Current and within 1 year past due	34,478	5,023	117	0.0%	-	117
1 to 2 years past due	4,062	3,637	3,024	25.2%	107	3,131
2 to 3 years past due	149	27	18	54.9%	67	85
Over 3 years past due	610	218	182	88.0%	345	527
Total	39,299	8,905	3,341		519	3,860

8 RECEIVABLES FINANCING

Receivables financing represents mainly the bills of acceptance issued by banks for sales of goods and products and certain trade accounts receivable.The business model of financial assets is achieved both by collecting contractual cash flows and selling of these assets.

At 31 December 2021, the Group's derecognised but outstanding bills due to endorsement or discount amounted to RMB36,400 million (2020: RMB25,740 million).

At 31 December 2021, the Group considers that its bills of acceptance issued by banks do not pose a significant credit risk and will not cause any significant loss due to the default of drawers.

9 PREPAYMENTS

	The Group		The Company
	At 31 December	At 31 December	At 31 December	At 31 December
	2021	2020	2021	2020
	RMB million	RMB million	RMB million	RMB million
Prepayments	9,350	4,934	4,556	2,637
Less: Allowance for doubtful accounts	83	77	16	11
Total	9,267	4,857	4,540	2,626

Ageing analysis of prepayments is as follows:

	The Group
	At 31 December 2021				At 31 December 2020
	Amount	Percentage to total prepayments	Allowance	Percentage of allowance to prepayments balance	Amount	Percentage to total prepayments	Allowance	Percentage of allowance to prepayments balance
	RMB million	%	RMB million	%	RMB million	%	RMB million	%
Within one year	8,541	91.3	-	-	4,435	89.9	-	-
Between one and two years	444	4.8	7	1.6	267	5.4	20	7.5
Between two and three years	166	1.8	25	15.1	142	2.9	8	5.6
Over three years	199	2.1	51	25.8	90	1.8	49	54.4
Total	9,350	100.0	83		4,934	100.0	77

	The Company
	At 31 December 2021				At 31 December 2020
	Amount	Percentage to total prepayments	Allowance	Percentage of allowance to prepayments balance	Amount	Percentage to total prepayments	Allowance	Percentage of allowance to prepayments balance
	RMB million	%	RMB million	%	RMB million	%	RMB million	%
Within one year	3,965	87.0	-	-	2,337	88.6	-	-
Between one and two years	369	8.1	2	0.5	159	6.0	7	4.4
Between two and three years	99	2.2	10	10.1	39	1.5	-	-
Over three years	123	2.7	4	3.3	102	3.9	4	3.9
Total	4,556	100.0	16		2,637	100.0	11

At 31 December 2021 and 31 December 2020, the total amounts of the top five prepayments of the Group are set out below:

	At 31 December	At 31 December
	2021	2020
Total amount (RMB million)	2,939	1,131
Percentage to the total balance of prepayments	31.4%	22.9%

10 OTHER RECEIVABLES

	The Group		The Company
	At 31 December	At 31 December	At 31 December	At 31 December
	2021	2020	2021	2020
	RMB million	RMB million	RMB million	RMB million
Other receivables	37,254	35,255	47,827	38,835
Less: Allowance for doubtful accounts	1,590	1,531	898	897
Total	35,664	33,724	46,929	37,938

Ageing analysis of other receivables is as follows:

	The Group
	At 31 December 2021				At 31 December 2020
	Amount	Percentage to total other receivables	Allowance	Percentage of allowance to other receivables balance	Amount	Percentage to total other receivables	Allowance	Percentage of allowance to other receivables balance
	RMB million	%	RMB million	%	RMB million	%	RMB million	%
Within one year	26,579	71.3	35	0.1	24,010	68.1	51	0.2
Between one and two years	597	1.6	112	18.8	8,513	24.2	196	2.3
Between two and three years	7,661	20.6	165	2.2	1,169	3.3	84	7.2
Over three years	2,417	6.5	1,278	52.9	1,563	4.4	1,200	76.8
Total	37,254	100.0	1,590		35,255	100.0	1,531

	The Company
	At 31 December 2021				At 31 December 2020
	Amount	Percentage to total other receivables	Allowance	Percentage of allowance to other receivables balance	Amount	Percentage to total other receivables	Allowance	Percentage of allowance to other receivables balance
	RMB million	%	RMB million	%	RMB million	%	RMB million	%
Within one year	28,176	58.9	-	-	21,378	55.0	-	-
Between one and two years	3,740	7.8	2	0.1	2,123	5.5	1	-
Between two and three years	1,414	3.0	2	0.1	1,618	4.2	5	0.3
Over three years	14,497	30.3	894	6.2	13,716	35.3	891	6.5
Total	47,827	100.0	898		38,835	100.0	897

At 31 December 2021 and at 31 December 2020, the total amounts of the top five other receivables of the Group are set out below:

	At 31 December	At 31 December
	2021	2020
Total amount (RMB million)	19,056	22,581
Ageing	Within one year, one to two years, two to three years and over three years	Within one year, one to two years, two to three years and over three years
Percentage to the total balance of other receivables	51.2%	64.1%
Allowance for doubtful accounts	74.0	-

During the year ended 31 December 2021 and 2020, the Group and the Company had no individually significant other receivables been fully or substantially provided allowance for doubtful accounts.

During the year ended 31 December 2021 and 2020, the Group and the Company had no individually significant write-off or recovery of doubtful debts which had been fully or substantially provided for in prior years.

11 INVENTORIES

The Group

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Raw materials	109,940	60,379
Work in progress	15,701	13,066
Finished goods	84,174	78,481
Spare parts and consumables	2,515	3,372
	212,330	155,298
Less: Provision for diminution in value of inventories	4,897	3,107
Total	207,433	152,191

At 31 December 2021, the provision for diminution in value of inventories of the Group was primarily due to the costs of finished goods were higher than net realisable value.

12 LONG-TERM EQUITY INVESTMENTS

The Group

	Investments in joint ventures	Investments in associates	Provision for impairment losses	Total
	RMB million	RMB million	RMB million	RMB million
Balance at 1 January 2021	55,018	136,872	(3,548)	188,342
Additions for the year	4,110	5,212	-	9,322
Share of profits less losses under the equity method	9,366	13,887	-	23,253
Change of other comprehensive loss under the equity method	155	286	-	441
Other equity movements under the equity method	24	675	-	699
Dividends declared	(3,872)	(7,120)	-	(10,992)
Disposals for the year	(1,176)	(97)	-	(1,273)
Foreign currency translation differences	(368)	(315)	42	(641)
Other movements	127	100	-	227
Movement of provision for impairment	-	-	(199)	(199)
Balance at 31 December 2021	63,384	149,500	(3,705)	209,179

The Company

	Investments in subsidiaries	Investments in joint ventures	Investments in associates	Provision for impairment losses	Total
	RMB million	RMB million	RMB million	RMB million	RMB million
Balance at 1 January 2021	266,939	14,762	69,540	(7,885)	343,356
Additions for the year	12,646	812	1,014	-	14,472
Share of profits less losses under the equity method	-	4,190	3,961	-	8,151
Change of other comprehensive loss under the equity method	-	-	12	-	12
Other equity movements under the equity method	-	18	155	-	173
Dividends declared	-	(1,387)	(1,019)	-	(2,406)
Disposals for the year	(2,275)	(786)	(8)	-	(3,069)
Other movement	-	-	199	-	199
Movement of provision for impairment	-	-	-	(41)	(41)
Balance at 31 December 2021	277,310	17,609	73,854	(7,926)	360,847

For the year ended 31 December 2021, the Group and the Company had no individually significant long-term investment impairment.

Details of the Company's principal subsidiaries are set out in Note 59.

12 LONG-TERM EQUITY INVESTMENTS (Continued)

Principal joint ventures and associates of the Group are as follows:

(a) Principal joint ventures and associates

Name of investees	Principal place of business	Register location	Legal representative	Principal activities	Registered Capital RMB million	Percentage of equity/voting right directly or indirectly held by the Company
1. Joint ventures
Fujian Refining & Petrochemical Company Limited ("FREP")	PRC	PRC	Gu Yuefeng	Manufacturing refining oil products	14,758	50.00%
BASF-YPC Company Limited ("BASF-YPC")	PRC	PRC	Gu Yuefeng	Manufacturing and distribution of petrochemical products	12,704	40.00%
Taihu Limited ("Taihu")	Russia	Cyprus	NA	Crude oil and natural gas extraction	25,000 USD	49.00%
Yanbu Aramco Sinopec Refining Company Ltd. ("YASREF")	Saudi Arabia	Saudi Arabia	NA	Petroleum refining and processing	1,560 million USD	37.50%
Sinopec SABIC Tianjin Petrochemical Company Limited ("Sinopec SABIC Tianjin")	PRC	PRC	AHMED AL-SHAIKH	Manufacturing and distribution of petrochemical products	10,520	50.00%
2. Associates
China Oil & Gas Pipeline Network Corporation ("PipeChina") (i)	PRC	PRC	Zhang Wei	Operation of oil and natural gas pipelines and auxiliary facilities	500,000	14.00%
Sinopec Finance Company Limited ("Sinopec Finance")	PRC	PRC	Jiang Yongfu	Provision of non-banking financial services	18,000	49.00%
Sinopec Capital Co.,Ltd. ("Sinopec Capital")	PRC	PRC	Sun Mingrong	Project management, equity management, investment consulting,self-owned equity management	10,000	49.00%
Zhongtian Synergetic Energy Company Limited ("Zhongtian Synergetic Energy")	PRC	PRC	Peng Yi	Mining coal and manufacturing of coal- chemical products	17,516	38.75%
Caspian Investments Resources Ltd. ("CIR")	The Republic of Kazakhstan	British VirginIslands	NA	Crude oil and natural gas extraction	10,002 USD	50.00%

Joint ventures and associates above are limited companies.

12 LONG-TERM EQUITY INVESTMENTS (Continued)

(b) Major financial information of principal joint ventures

Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group's principal joint ventures:

	FREP		BASF-YPC		Taihu		YASREF		Sinopec SABIC Tianjin
	At 31	At 31	At 31	At 31	At 31	At 31	At 31	At 31	At 31	At 31
	December	December	December	December	December	December	December	December	December	December
	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020
	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
Current assets
Cash and cash equivalents	6,562	7,448	5,375	1,838	1,258	1,280	5,441	1,408	4,820	5,259
Other current assets	9,217	7,492	6,953	4,777	2,188	1,223	12,404	7,516	3,437	2,665
Total current assets	15,779	14,940	12,328	6,615	3,446	2,503	17,845	8,924	8,257	7,924
Non-current assets	13,744	15,237	9,336	9,993	14,032	12,531	41,947	45,413	18,835	18,258
Current liabilities
Current financial liabilities	(1,177)	(1,203)	(77)	(456)	(32)	(38)	(9,549)	(9,520)	(597)	(998)
Other current liabilities	(5,008)	(5,147)	(2,546)	(2,190)	(1,931)	(1,043)	(15,844)	(8,644)	(3,547)	(3,052)
Total current liabilities	(6,185)	(6,350)	(2,623)	(2,646)	(1,963)	(1,081)	(25,393)	(18,164)	(4,144)	(4,050)
Non-current liabilities
Non-current financial liabilities	(6,857)	(8,761)	-	-	(85)	(85)	(30,903)	(29,650)	(7,599)	(6,773)
Other non-current liabilities	(242)	(235)	(92)	(42)	(1,439)	(2,017)	(1,723)	(2,008)	(382)	(378)
Total non-current liabilities	(7,099)	(8,996)	(92)	(42)	(1,524)	(2,102)	(32,626)	(31,658)	(7,981)	(7,151)
Net assets	16,239	14,831	18,949	13,920	13,991	11,851	1,773	4,515	14,967	14,981
Net assets attributable to shareholders of the company	16,239	14,831	18,949	13,920	13,523	11,439	1,773	4,515	14,967	14,981
Net assets attributable to minority interests	-	-	-	-	468	412	-	-	-	-
Share of net assets from joint ventures	8,120	7,416	7,580	5,568	6,626	5,605	-	-	7,484	7,491
Carrying Amounts	8,120	7,416	7,580	5,568	6,626	5,605	-	-	7,484	7,491

Summarised income statement

For the year ended 31 December 2021	FREP		BASF-YPC		Taihu		YASREF		Sinopec SABIC Tianjin
	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020
	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
Turnover	47,224	38,691	27,499	15,701	15,190	9,528	68,548	37,337	24,631	14,881
Interest income	147	118	52	27	451	291	6	17	209	183
Interest expense	(411)	(535)	(5)	(16)	(107)	(20)	(945)	(1,136)	(89)	(131)
Profit/(loss) before taxation	2,261	520	8,218	1,518	2,864	2,304	(2,868)	(7,193)	1,393	954
Tax expense	(597)	(87)	(2,054)	(379)	(601)	(378)	332	1,057	(407)	(236)
Profit/(loss) for the year	1,664	433	6,164	1,139	2,263	1,926	(2,536)	(6,136)	986	718
Other comprehensive loss	-	-	-	-	(123)	(3,368)	(206)	(584)	-	-
Total comprehensive income/(loss)	1,664	433	6,164	1,139	2,140	(1,442)	(2,742)	(6,720)	986	718
Dividends from joint ventures	128	300	454	691	-	-	-	-	500	-
Share of net profit/(loss) from joint ventures	832	217	2,466	456	1,081	911	-	(2,301)	493	359
Share of other comprehensive loss from joint ventures (ii)	-	-	-	-	(60)	(1,593)	-	(219)	-	-

The share of profit and other comprehensive income for the year ended 31 December 2021 in all individually immaterial joint ventures accounted for using equity method in aggregate was RMB4,494 million (2020: RMB993 million) and RMB215 million (2020: other comprehensive income RMB808 million) respectively. As at 31 December 2021, the carrying amount of all individually immaterial joint ventures accounted for using equity method in aggregate was RMB30,640 million (2020: RMB26,099 million).

12 LONG-TERM EQUITY INVESTMENTS (Continued)

Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group's principal associates:

	PipeChina		Sinopec Finance		Sinopec Capital		Zhongtian Synergetic Energy		CIR
	At 31	At 31	At 31	At 31	At 31	At 31	At 31	At 31	At 31	At 31
	December	December	December	December	December	December	December	December	December	December
	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020
	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
Current assets	86,335	74,012	194,458	175,139	13,140	11,871	3,532	3,721	576	2,402
Non-current assets	768,161	655,982	55,086	53,008	102	106	51,331	53,124	870	903
Current liabilities	(136,150)	(55,562)	(217,987)	(197,872)	(28)	(18)	(8,577)	(8,315)	(822)	(699)
Non-current liabilities	(103,243)	(104,150)	(602)	(514)	(676)	(411)	(22,216)	(28,422)	(144)	(286)
Net assets	615,103	570,282	30,955	29,761	12,538	11,548	24,070	20,108	480	2,320
Net assets attributable to shareholders of the Company	526,241	505,336	30,955	29,761	12,538	11,548	24,070	20,108	480	2,320
Net assets attributable to minority interests	88,862	64,946	-	-	-	-	-	-	-	-
Share of net assets from associates	73,674	70,747	15,168	14,583	6,144	5,659	9,327	7,792	240	1,160
Carrying Amounts	73,674	70,747	15,168	14,583	6,144	5,659	9,327	7,792	240	1,160

Summarised income statement

For the year ended 31 December 2021	PipeChina		Sinopec Finance		Sinopec Capital		ZTHC Energy		CIR
	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020
	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
Turnover	101,572	22,766	5,177	4,742	2	2	16,959	11,707	1,826	1,252
Profit for the year	29,776	6,444	2,168	2,027	990	1,278	4,184	551	461	181
Other comprehensive income	2	-	26	(372)	-	-	-	-	3	(308)
Total comprehensive income	29,778	6,444	2,194	1,655	990	1,278	4,184	551	464	(127)
Dividends declared by associates	442	-	490	-	-	-	86	284	1,152	2,517
Share of profit from associates	3,205	709	1,062	993	485	626	1,621	214	231	91
Share of other comprehensive income from associates (ii)	-	-	13	(182)	-	-	-	-	2	(154)

The share of profit and other comprehensive income for the year ended 31 December 2021 in all individually immaterial associates accounted for using equity method in aggregate was RMB7,283 million (2020: RMB3,444 million) and RMB271 million (2020: loss of RMB1,101 million) respectively. As at 31 December 2021, the carrying amount of all individually immaterial associates accounted for using equity method in aggregate was RMB44,176 million (2020: RMB36,222 million).

Notes:

(i) Sinopec is able to exercise significant influence in PipeChina since Sinopec has a member in PipeChina's Board of Directors and has a member in PipeChina's Management Board.

(ii) Including foreign currency translation differences.

13 FIXED ASSETS

The Group

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Fixed assets (a)	598,925	593,615
Fixed assets pending for disposal	7	38
Total	598,932	593,653

(a) Fixed assets

	Plants and buildings	Oil and gas properties	Equipment, machinery and others	Total
	RMB million	RMB million	RMB million	RMB million
Cost:
Balance at 1 January 2021	138,550	757,592	996,702	1,892,844
Additions for the year	509	2,192	5,177	7,878
Transferred from construction in progress	5,487	40,357	65,182	111,026
Reclassifications	646	(617)	(29)	-
Decreases for the year	(1,970)	(5,539)	(18,710)	(26,219)
Exchange adjustments	(57)	(940)	(95)	(1,092)
Balance at 31 December 2021	143,165	793,045	1,048,227	1,984,437
Less: Accumulated depreciation:
Balance at 1 January 2021	59,471	572,603	577,748	1,209,822
Additions for the year	4,586	39,670	48,568	92,824
Reclassifications	185	(410)	225	-
Decreases for the year	(734)	(7)	(12,987)	(13,728)
Exchange adjustments	(29)	(844)	(56)	(929)
Balance at 31 December 2021	63,479	611,012	613,498	1,287,989
Less: Provision for impairment losses:
Balance at 1 January 2021	4,069	48,117	37,221	89,407
Additions for the year	742	1,904	6,774	9,420
Decreases for the year	(124)	(135)	(984)	(1,243)
Exchange adjustments	-	(60)	(1)	(61)
Balance at 31 December 2021	4,687	49,826	43,010	97,523

Net book value:
Balance at 31 December 2021	74,999	132,207	391,719	598,925
Balance at 31 December 2020	75,010	136,872	381,733	593,615

The Company

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Fixed assets (a)	284,618	283,691
Fixed assets pending for disposal	4	4
Total	284,622	283,695

13 FIXED ASSETS (Continued)

(a) Fixed assets (Continued)

The Company (Continued)

	Plants and buildings	Oil and gas properties	Equipment, machinery and others	Total
	RMB million	RMB million	RMB million	RMB million
Cost:
Balance at 1 January 2021	49,356	618,483	484,351	1,152,190
Additions for the year	2,056	1,592	10,850	14,498
Transferred from construction in progress	970	29,458	27,752	58,180
Reclassifications	360	(620)	260	-
Transferred from subsidiaries	-	-	33	33
Transferred to subsidiaries	(422)	(286)	(667)	(1,375)
Decreases for the year	(624)	(2,607)	(8,157)	(11,388)
Balance at 31 December 2021	51,696	646,020	514,422	1,212,138
Accumulated depreciation:
Balance at 1 January 2021	25,189	468,718	309,841	803,748
Additions for the year	2,604	31,534	27,473	61,611
Reclassifications	98	(412)	314	-
Transferred from subsidiaries	-	-	1	1
Transferred to subsidiaries	(91)	-	(383)	(474)
Decreases for the year	(428)	(7)	(6,793)	(7,228)
Balance at 31 December 2021	27,372	499,833	330,453	857,658
Provision for impairment losses:
Balance at 1 January 2021	1,917	41,406	21,428	64,751
Additions for the year	359	1,901	3,472	5,732
Transferred to subsidiaries	(27)	-	(2)	(29)
Decreases for the year	(21)	-	(571)	(592)
Balance at 31 December 2021	2,228	43,307	24,327	69,862

Net book value:
Balance at 31 December 2021	22,096	102,880	159,642	284,618
Balance at 31 December 2020	22,250	108,359	153,082	283,691

The additions to oil and gas properties of the Group and the Company for the year ended 31 December 2021 included RMB2,163 million (2020: RMB1,563 million) and RMB1,525 million (2019: RMB1,256 million), respectively of the estimated dismantlement costs for site restoration.

In 2021, the impairment loss on fixed assets was mainly due to the impairment loss of the chemical segment of RMB5,184 million (2020: RMB2,680 million), and the impairment loss of the exploration and development segment of RMB2,467 million (2020: RMB8,435 million). RMB894 million (2020: RMB226 million), impairment loss of the refining segment and RMB873 million (2020: RMB442 million) of the marketing and distribution segment. The impairment losses in the exploration and development segment were mainly impairment losses on fixed assets related to oil and gas production activities. Among them, oil and gas properties and other fixed assets provided impairment losses of RMB1,904 billion and RMB563 million respectively, which were mainly related to the decline in oil and gas reserves of individual oilfields. The Exploration and Development segment allocates fixed assets related to oil and gas production activities into individually identifiable groups of assets and estimates their recoverable amounts. The recoverable amount is determined based on the discounted value of the reserves of the relevant asset group and estimated future cash flows, and the pre-tax discount rate adopted is 10.47% (2020: 10.47%). If the Group's estimate of future oil prices is lowered, further impairment losses may be incurred and the aggregate amount of impairment losses may be significant. With other conditions remaining constant and a 5% drop in oil prices, the Group's impairment loss on fixed assets related to oil and gas production activities will increase by approximately RMB3,628 million (2020: RMB4,548 million); Other conditions remain unchanged and operating costs increase by 5%, the Group's impairment loss on fixed assets related to oil and gas production activities will increase by approximately RMB2,400 million (2020: RMB2,836 million); With other conditions remaining unchanged and the discount rate increasing by 5%, the Group's impairment loss on fixed assets related to oil and gas production activities will increase by approximately RMB180 million (2020: RMB287 million). Impairment losses recognised in the chemical segment and refining segment relate to certain refinery and chemical production facilities and are not individually significant. The primary factors resulting in the impairment losses were due to the suspension of operations of certain production facilities, and evidence that indicate the economic performance of certain production facilities was lower than the expectation, thus the carrying amounts of these facilities were written down to their recoverable amounts, which were determined based on the present values of expected future cash flows of the assets using a pre-tax discount rates ranging from 10.50% to 13.9% (2020: 9.87% to 11.60%).

At 31 December 2021 and 31 December 2020, the Group and the Company had no individually significant fixed assets which were pledged.

At 31 December 2021 and 31 December 2020, the Group and the Company had no individually significant fixed assets which were temporarily idle or pending for disposal.

At 31 December 2021 and 31 December 2020, the Group and the Company had no individually significant fully depreciated fixed assets which were still in use.

14 CONSTRUCTION IN PROGRESS

	The Group	The Company
	RMB million	RMB million
Cost:
Balance at 1 January 2021	127,572	60,182
Additions for the year	159,729	72,196
Disposals for the year	(146)	(90)
Dry hole costs written off	(7,702)	(6,733)
Transferred to fixed assets	(111,026)	(58,180)
Reclassification to other assets	(10,302)	(927)
Exchange adjustments	(56)	-
Balance at 31 December 2021	158,069	66,448
Provision for impairment losses:
Balance at 1 January 2021	2,047	302
Additions for the year	144	-
Decreases for the year	(39)	-
Exchange adjustments	(22)	-
Balance at 31 December 2021	2,130	302

Net book value:
Balance at 31 December 2021	155,939	66,146
Balance at 31 December 2020	125,525	59,880

At 31 December 2021, major construction projects of the Group are as follows:

Project name	Budgeted amount	Balance at 1 January 2021	Net change for the year	Balance at 31 December 2021	Percentage of project investment to budgeted amount	Source of funding	Accumulated interest capitalised at 31 December 2021
	RMB million	RMB million	RMB million	RMB million			RMB million
Hainan Refining and Chemical Ethylene and Refining Reconstruction and Expansion Project	28,565	5,002	10,600	15,602	55%	Bank loans & self-financing	63
Zhenhai Refinery Expansion Ethylene Project	23,055	9,155	2,022	11,177	48%	Bank loans & self-financing	305
Caprolactam Industry Chain Relocation and Upgrading Transformation Development Project	13,950	1,000	2,700	3,700	27%	Bank loans & self-financing	32
Tianjin Nangang Ethylene and Downstream High-end New Material Industry Cluster Project	29,052	-	2,999	2,999	10%	Bank loans & self-financing	13
Zhenhai Refining and Chemical Refining and High-end Synthetic New Material Project	41,639	328	1,800	2,128	5%	Self-financing	-

15 RIGHT-OF-USE ASSETS

The Group

	Land	Others	Total
	RMB million	RMB million	RMB million
Cost：
Balance at 1 January 2021	171,392	40,698	212,090
Additions for the year	2,389	9,653	12,042
Decreases for the year	(1,677)	(3,430)	(5,107)
Balance at 31 December 2021	172,104	46,921	219,025
Accumulated depreciation:
Balance at 1 January 2021	12,591	10,481	23,072
Additions for the year	6,495	6,863	13,358
Decreases for the year	(182)	(2,197)	(2,379)
Balance at 31 December 2021	18,904	15,147	34,051

Net book value:
Balance at 31 December 2021	153,200	31,774	184,974
Balance at 31 December 2020	158,801	30,217	189,018

The Company

	Land	Others	Total
	RMB million	RMB million	RMB million
Cost：
Balance at 1 January 2021	115,047	2,272	117,319
Additions for the year	653	1,619	2,272
Decreases for the year	(211)	(935)	(1,146)
Balance at 31 December 2021	115,489	2,956	118,445
Accumulated depreciation:
Balance at 1 January 2021	7,494	1,088	8,582
Additions for the year	3,760	882	4,642
Decreases for the year	(50)	(441)	(491)
Balance at 31 December 2021	11,204	1,529	12,733

Net book value:
Balance at 31 December 2021	104,285	1,427	105,712
Balance at 31 December 2020	107,553	1,184	108,737

16 INTANGIBLE ASSETS

The Group

	Land use rights	Patents	Non-patent technology	Operation rights	Others	Total
	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
Cost:
Balance at 1 January 2021	102,177	5,383	5,593	53,567	6,179	172,899
Additions for the year	10,690	1,159	379	912	2,122	15,262
Decreases for the year	(1,003)	(9)	(832)	(688)	(84)	(2,616)
Balance at 31 December 2021	111,864	6,533	5,140	53,791	8,217	185,545
Accumulated amortisation:
Balance at 1 January 2021	24,957	3,791	3,477	21,522	3,931	57,678
Additions for the year	3,406	1,123	332	2,458	604	7,923
Decreases for the year	(169)	(7)	(9)	(310)	(43)	(538)
Balance at 31 December 2021	28,194	4,907	3,800	23,670	4,492	65,063
Provision for impairment losses:
Balance at 1 January 2021	226	482	27	189	17	941
Additions for the year	11	-	103	241	-	355
Decreases for the year	(1)	-	-	(23)	-	(24)
Balance at 31 December 2021	236	482	130	407	17	1,272

Net book value:
Balance at 31 December 2021	83,434	1,144	1,210	29,714	3,708	119,210
Balance at 31 December 2020	76,994	1,110	2,089	31,856	2,231	114,280

Amortisation of the intangible assets of the Group charged for the year ended 31 December 2021 is RMB6,363 million (2020: RMB5,907 million).

17 GOODWILL

Goodwill is allocated to the following Group's cash-generating units:

		At 31 December	At 31 December
Name of investees	Principal activities	2021	2020
		RMB million	RMB million
Sinopec Zhenhai Refining and Chemical Branch	Manufacturing of intermediate petrochemical products and petroleum products	4,043	4,043
Shanghai SECCO Petrochemical Company Limited ("Shanghai SECCO")	Production and sale of petrochemical products	2,541	2,541
Sinopec Beijing Yanshan Petrochemical Branch	Manufacturing of intermediate petrochemical products and petroleum products	1,004	1,004
Other units without individual significant goodwill		1,006	1,032
Total		8,594	8,620

Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the above cash generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 11.4% to 11.7% (2020: 11.4% to 13.4%). Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no major impairment loss was recognised.

Key assumptions used for cash flow forecasts for these entities are the gross margin and sales volume. Management determined the budgeted gross margin based on the gross margin achieved in the period immediately before the budget period and management's expectation on the future trend of the prices of crude oil and petrochemical products. The sales volume was based on the production capacity and/or the sales volume in the period immediately before the budget period.

18 LONG-TERM DEFERRED EXPENSES

Long-term deferred expenses primarily represent catalysts expenditures and improvement expenditures of fixed assets.

19 DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets and liabilities before the consolidated elimination adjustments are as follows:

	Deferred tax assets		Deferred tax liabilities
	At 31 December	At 31 December	At 31 December	At 31 December
	2021	2020	2021	2020
	RMB million	RMB million	RMB million	RMB million
Receivables and inventories	3,763	2,411	-	-
Payables	2,858	1,286	-	-
Cash flow hedges	258	1,790	(2,709)	(4,420)
Fixed assets	16,777	15,793	(15,037)	(13,415)
Tax value of losses carried forward	4,749	13,322	-	-
Other equity instrument investments	127	127	(9)	(11)
Intangible assets	1,008	869	(492)	(517)
Others	1,056	371	(870)	(676)
Deferred tax assets/(liabilities)	30,596	35,969	(19,117)	(19,039)

The consolidated elimination amount between deferred tax assets and liabilities are as follows:

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Deferred tax assets	11,207	10,915
Deferred tax liabilities	11,207	10,915

Deferred tax assets and liabilities after the consolidated elimination adjustments are as follows:

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Deferred tax assets	19,389	25,054
Deferred tax liabilities	7,910	8,124

At 31 December 2021, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB18,342 million (2020: RMB17,718 million), of which RMB5,564 million (2020: RMB4,349 million) was incurred for the year ended 31 December 2021, because it was not probable that the related tax benefit will be realised. These deductible losses carried forward of RMB4,135 million, RMB2,308 million, RMB1,986 million, RMB4,349 million and RMB5,564 million will expire in 2022, 2023, 2024, 2025, 2026 and after, respectively.

Periodically, management performed assessment on the probability that future taxable profit will be available over the period which the deferred tax assets can be realised or utilised. In assessing the probability, both positive and negative evidence was considered, including whether it is probable that the operations will have sufficient future taxable profits over the periods which the deferred tax assets are deductible or utilised and whether the tax losses result from identifiable causes which are unlikely to recur.

20 OTHER NON-CURRENT ASSETS

Other non-current assets mainly represent long-term receivables, prepayments for construction projects and purchases of equipment.

21 DETAILS OF IMPAIRMENT LOSSES

At 31 December 2021, impairment losses of the Group are analysed as follows:

	Note	Balance at 1 January 2021	Provision for the year	Written back for the year	Written off for the year	Other increase/ (decrease)	Balance at 31 December 2021
		RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
Allowance for doubtful accounts
Included: Accounts receivable	7	3,860	436	(127)	(30)	(106)	4,033
Prepayments	9	77	14	(54)	-	46	83
Other receivables	10	1,531	83	(12)	(12)	-	1,590
Other non-current assets		-	1,931	-	-	2	1,933
		5,468	2,464	(193)	(42)	(58)	7,639
Inventories	11	3,107	3,148	(18)	(1,300)	(40)	4,897
Long-term equity investments	12	3,548	206	-	(7)	(42)	3,705
Fixed assets	13	89,407	9,420	-	(1,141)	(163)	97,523
Construction in progress	14	2,047	144	-	(33)	(28)	2,130
Intangible assets	16	941	262	-	(24)	93	1,272
Goodwill	17	7,861	-	-	-	-	7,861
Others		6	43	-	-	-	49
Total		112,385	15,687	(211)	(2,547)	(238)	125,076

The reasons for recognising impairment losses are set out in the respective notes of respective assets.

22 SHORT-TERM LOANS

The Group's short-term loans represent:

	At 31 December 2021			At 31 December 2020
	Original currency million	Exchange rates	RMB million	Original currency million	Exchange rates	RMB million
Short-term bank loans			24,959			16,111
- Renminbi loans			24,959			16,111
Short-term other loans			-			3
- Renminbi loans			-			3
Short-term loans from Sinopec Group Company and fellow subsidiaries			2,407			4,642
- Renminbi loans			1,320			1,141
- US Dollar loans	146	6.3757	934	505	6.5249	3,298
- Hong Kong Dollar loans	-		-	37	0.8416	31
- Euro loans	21	7.2197	153	21	8.0250	172
Total			27,366			20,756

At 31 December 2021, the Group's interest rates on short-term loans were from interest 0.53% to 4.20% (At 31 December 2020: 0.63% to 4.55%) per annum. The majority of the above loans are by credit.

At 31 December 2021 and 31 December 2020, the Group had no significant overdue short-term loans.

23 BILLS PAYABLE

Bills payable primarily represented bank accepted bills for the purchase of material, goods and products. Bills payable were due within one year.

At 31 December 2021 and 31 December 2020, the Group had no overdue unpaid bills.

24 ACCOUNTS PAYABLE

At 31 December 2021 and 31 December 2020, the Group had no individually significant accounts payable aged over one year.

25 CONTRACT LIABILITIES

As at 31 December 2021 and 31 December 2020, the Group's contract liabilities primarily represent advances from customers. Related performance obligations are satisfied and revenue is recognised within one year.

26 EMPLOYEE BENEFITS PAYABLE

(1) Employee benefits payable:

	Balance at the beginning of the year	Accrued during the year	Decreased during the year	Balance at the end of the year
Short-term employee benefits	7,043	97,396	(90,472)	13,967
Post-employment benefits	74	12,241	(12,246)	69
defined contribution plans	12	91	(91)	12
Total	7,129	109,728	(102,809)	14,048

(2) Short-term employee benefits

	Balance at the beginning of the year	Accrued during the year	Decreased during the year	Balance at the end of the year
Salaries, bonuses, allowances	3,836	72,704	(65,810)	10,730
Staff welfare	2,660	7,610	(7,684)	2,586
Social insurance	234	5,955	(5,912)	277
Medical insurance	224	5,423	(5,382)	265
Work-related injury insurance	5	381	(380)	6
Maternity insurance	5	151	(150)	6
Housing fund	47	6,244	(6,243)	48
Labour union fee, staff and workers' education fee	236	2,246	(2,203)	279
Other short-term employee benefits	30	2,637	(2,620)	47
Total	7,043	97,396	(90,472)	13,967

(3) Post-employment benefits - defined contribution plans

	Balance at the beginning of the year	Accrued during the year	Decreased during the year	Balance at the end of the year
Basic pension insurance	51	8,147	(8,148)	50
Unemployment insurance	8	305	(305)	8
Annuity	15	3,789	(3,793)	11
Total	74	12,241	(12,246)	69

27 TAXES PAYABLE

The Group

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Value-added tax payable	8,818	5,089
Consumption tax payable	56,084	56,762
Income tax payable	4,809	6,586
Mineral resources compensation fee payable	8	132
Other taxes	11,548	8,279
Total	81,267	76,848

28 OTHER PAYABLES

At 31 December 2021 and 31 December 2020, other payables of the Group over one year primarily represented payables for constructions.

29 NON-CURRENT LIABILITIES DUE WITHIN ONE YEAR

The Group's non-current liabilities due within one year represent:

	At 31 December 2021			At 31 December 2020
	Original currency million	Exchange rates	RMB million	Original currency million	Exchange rates	RMB million
Long-term bank loans
- Renminbi loans			3,281			4,613
- US Dollar loans	2	6.3757	12	4	6.5249	24
Long-term loans from Sinopec Group Company and fellow subsidiaries
- Renminbi loans			466			622
Long-term loans due within one year			3,759			5,259
Debentures payable due within one year
- Renminbi debentures			7,000			-
Lease liabilities due within one year			15,173			15,293
Others			2,719			1,942
Non-current liabilities due within one year			28,651			22,494

At 31 December 2021 and 31 December 2020, the Group had no significant overdue long-term loans.

30 OTHER CURRENT LIABILITIES

At 31 December 2021 and 31 December 2020, other current liabilities mainly represent output VAT to be transferred.

31 LONG-TERM LOANS

The Group's long-term loans represent:

		At 31 December 2021			At 31 December 2020
	Interest rate and final maturity	Original currency million	Exchange rates	RMB million	Original currency million	Exchange rates	RMB million
Long-term bank loans
- Renminbi loans	Interest rates ranging from interest 1.08% to 4.00% per annum at 31 December 2021 (2020: 1.08% to 5.23%) with maturities through 2039			38,880			38,226
- US Dollar loans	Interest rates at 1.55% per annum at 31 December 2020 (2020: 1.55%) with maturities through 2038	10	6.3757	64	14	6.5249	92
Less: Portion with one year				(3,293)			(4,637)
Long-term bank loans				35,651			33,681
Long-term loans from Sinopec Group Company and fellow subsidiaries
- Renminbi loans	Interest rates ranging from interest 1.08% to 5.23% per annum at 31 December 2021 (2020: 1.08% to 5.23%) with maturities through 2037			12,988			11,013
- US Dollar loans	Interest rates at 1.65% per annum at 31 December 2021 (2020:1.60%)with maturities in 2027	183	6.3757	1,168	213	6.5249	1,387
Less: Portion with one year (note 29)				(466)			(622)
Long-term loans from Sinopec Group Company and fellow subsidiaries				13,690			11,778

Total				49,341			45,459

The maturity analysis of the Group's long-term loans is as follows:

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Between one and two years	18,373	3,520
Between two and five years	26,633	39,504
After five years	4,335	2,435
Total	49,341	45,459

Long-term loans are carried at amortised costs.

32 DEBENTURES PAYABLE

The Group

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Debentures payable:
- Corporate Bonds (i)	49,649	38,356
Less: Portion with one year (Note 29)	7,000	-
Total	42,649	38,356

Note:

(i) The Company issued corporate bonds with a maturity of five years on 26 July 2021 at par value of RMB100. The total issued amount of the corporate bonds is RMB5 billion. The corporate bonds adopt a simple interest rate on an annual basis with a fixed rate at 3.20% per annum and the interest is paid once a year.

The Company issued corporate bonds with a maturity of three years on 5 August 2021 at par value of RMB100. The total issued amount of the corporate bonds is RMB2 billion. The corporate bonds adopt a simple interest rate on an annual basis with a fixed rate at 2.59% per annum and the interest is paid once a year.

The Company issued corporate bonds with a maturity of two years on 6 August 2021 at par value of RMB100. The total issued amount of the corporate bonds is RMB2 billion. The corporate bonds adopt a simple interest rate on an annual basis with a fixed rate at 2.80% per annum and the interest is paid once a year.

The Company issued corporate bonds with a maturity of three years on 27 December 2021 at par value of RMB100. The total issued amount of the corporate bonds is RMB2.55 billion. The corporate bonds adopt a simple interest rate on an annual basis with a fixed rate at 2.50% per annum and the interest is paid once a year.

These corporate bonds are carried at amortised cost, including USD denominated corporate bonds of RMB11,127 million, and RMB denominated corporate bonds of RMB38,521 million (2020: USD denominated corporate bonds of RMB11,379 million, and RMB denominated corporate bonds of RMB26,977 million).

33 LEASE LIABILITY

The Group

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Lease liabilities	185,406	187,033
Deduct: Portion of lease liabilities with one year (Note 29)	15,173	15,293
Total	170,233	171,740

34 PROVISIONS

Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has established certain standardised measures for the dismantlement of its retired oil and gas properties by making reference to the industry practices and is thereafter constructively obligated to take dismantlement measures of its retired oil and gas properties. Movement of provision of the Group's obligations for the dismantlement of its retired oil and gas properties is as follows:

	The Group
	RMB million
Balance at 1 January 2021	43,713
Provision for the year	2,163
Accretion expenses	1,135
Decrease for the year	(6,435)
Exchange adjustments	(81)
Balance at 31 December 2021	40,495

35 OTHER NON-CURRENT LIABILITIES

Other non-current liabilities primarily represent long-term payables, special payables and deferred income.

36 SHARE CAPITAL

The Group

	At 31 December	At 31 December
	2021	2020
	RMB million	RMB million
Registered, issued and fully paid:
95,557,771,046 listed A shares (2020: 95,557,771,046) of RMB1.00 each	95,558	95,558
25,513,438,600 listed H shares (2020: 25,513,438,600) of RMB1.00 each	25,513	25,513
Total	121,071	121,071

The Company was established on 25 February 2000 with a registered capital of 68.8 billion domestic state-owned shares with a par value of RMB1.00 each. Such shares were issued to Sinopec Group Company in consideration for the assets and liabilities transferred to the Company (Note 1).

Pursuant to the resolutions passed at an Extraordinary General Meeting held on 25 July 2000 and approvals from relevant government authorities, the Company is authorised to increase its share capital to a maximum of 88.3 billion shares with a par value of RMB1.00 each and offer not more than 19.5 billion shares with a par value of RMB1.00 each to investors outside the PRC. Sinopec Group Company is authorised to offer not more than 3.5 billion shares of its shareholdings in the Company to investors outside the PRC. The shares sold by Sinopec Group Company to investors outside the PRC would be converted into H shares.

In October 2000, the Company issued 15,102,439,000 H shares with a par value of RMB1.00 each, representing 12,521,864,000 H shares and 25,805,750 American Depositary Shares ("ADSs", each representing 100 H shares), at prices of HKD1.59 per H share and USD20.645 per ADS, respectively, by way of a global initial public offering to Hong Kong SAR and overseas investors. As part of the global initial public offering, 1,678,049,000 state-owned ordinary shares of RMB1.00 each owned by Sinopec Group Company were converted into H shares and sold to Hong Kong SAR and overseas investors.

In July 2001, the Company issued 2.8 billion listed A shares with a par value of RMB1.00 each at RMB4.22 by way of a public offering to natural persons and institutional investors in the PRC.

During the year ended 31 December 2010, the Company issued 88,774 listed A shares with a par value of RMB1.00 each, as a result of exercise of 188,292 warrants entitled to the Bonds with Warrants.

During the year ended 31 December 2011, the Company issued 34,662 listed A shares with a par value of RMB1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds.

During the year ended 31 December 2012, the Company issued 117,724,450 listed A shares with a par value of RMB1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds.

On 14 February 2013, the Company issued 2,845,234,000 listed H shares ("the Placing") with a par value of RMB1.00 each at the Placing Price of HKD8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HKD24,042,227,300.00 and the aggregate net proceeds (after deduction of the commissions and estimated expenses) amounted to approximately HKD23,970,100,618.00.

In June 2013, the Company issued 21,011,962,225 listed A shares and 5,887,716,600 listed H shares as a result of bonus issues of 2 shares converted from the retained earnings, and 1 share transferred from capital reserve for every 10 existing shares.

During the year ended 31 December 2013, the Company issued 114,076 listed A shares with a par value of RMB1.00 each, as a result of exercise of conversion by the holders of the 2011 Convertible Bonds.

During the year ended 31 December 2014, the Company issued 1,715,081,853 listed A shares with a par value of RMB1.00 each, as a result of exercise of conversion by the holders of the 2011 Convertible Bonds.

During the year ended 31 December 2015, the Company issued 2,790,814,006 listed A shares with a par value of RMB1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds.

All A shares and H shares rank pari passu in all material aspects.

36 SHARE CAPITAL (Continued)

The Group (Continued)

Capital management

Management optimises the structure of the Group's capital, which comprises of equity and debts and bonds. In order to maintain or adjust the capital structure of the Group, management may cause the Group to issue new shares, adjust the capital expenditure plan, sell assets to reduce debt, or adjust the proportion of short-term and long-term loans and bonds. Management monitors capital on the basis of the debt-to-capital ratio, which is calculated by dividing long-term loans (excluding current portion) and debentures payable, by the total of equity attributable to shareholders of the Company and long-term loans (excluding current portion) and debentures payable, and liability-to-asset ratio, which is calculated by dividing total liabilities by total assets. Management's strategy is to make appropriate adjustments according to the Group's operating and investment needs and the changes of market conditions, and to maintain the debt-to-capital ratio and the liability-to-asset ratio of the Group at a range considered reasonable. As at 31 December 2021, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 10.6% (2020: 10.1%) and 51.5% (2020: 48.9%), respectively.

The schedule of the contractual maturities of loans and commitments are disclosed in Notes 31,32 and 61, respectively.

There were no changes in the management's approach to capital management of the Group during the year. Neither the Company nor any of its subsidiaries is subject to externally imposed capital requirements.

37 CAPITAL RESERVE

The movements in capital reserve of the Group are as follows:

	RMB million
Balance at 1 January 2021	127,389
Adjustment for business combination of entities under common control	(6,124)
Transaction with minority interests	(1,396)
Others	319
Balance at 31 December 2021	120,188

Capital reserve represents mainly: (a) the difference between the total amount of the par value of shares issued and the amount of the net assets transferred from Sinopec Group Company in connection with the Reorganisation; (b) share premiums derived from issuances of H shares and A shares by the Company and excess of cash paid by investors over their proportionate shares in share capital, the proportionate shares of unexercised portion of the Bond with Warrants at the expiration date, and the amount transferred from the proportionate liability component and the derivative component of the converted portion of the 2011 Convertible Bonds; (c) difference between consideration paid for the combination of entities under common control and the transactions with minority interests over the carrying amount of the net assets acquired.

38 OTHER COMPREHENSIVE INCOME

The Group

(a) The changes of other comprehensive income in consolidated income statement

	2021
	Before-tax amount	Tax effect	Net-of-tax amount
	RMB million	RMB million	RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments recognised during the year	15,659	(3,881)	11,778
Less: Reclassification adjustments for amounts transferred to the consolidated income statement	(8,858)	1,618	(7,240)
Subtotal	24,517	(5,499)	19,018
Cost of hedging reserve	(220)	-	(220)
Changes in fair value of other equity instrument investments	(6)	2	(4)
Other comprehensive loss that can be converted into profit or loss under the equity method	441	-	441
Foreign currency translation differences	(1,728)	-	(1,728)
Other comprehensive income	23,004	(5,497)	17,507

	2020
	Before-tax amount	Tax effect	Net-of-tax amount
	RMB million	RMB million	RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments recognised during the year	9,207	(2,295)	6,912
Less: Reclassification adjustments for amounts transferred to the consolidated income statement	(198)	37	(161)
Subtotal	9,405	(2,332)	7,073
Cost of hedging reserve	162	-	162
Changes in fair value of other equity instrument investments	(18)	(4)	(22)
Other comprehensive loss that can be converted into profit or loss under the equity method	(2,441)	-	(2,441)
Foreign currency translation differences	(4,457)	-	(4,457)
Other comprehensive income	2,651	(2,336)	315

(b) The change of each item in other comprehensive income

	Equity Attributable to shareholders of the company
	Other comprehensive income that can be converted into profit or loss under the equity method	Changes in fair value of other equity instrument investments	fair value hedges	Cash flow hedges	Foreign currency translation differences	Subtotal	Minority interests	Total other comprehensive income
	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million	RMB million
1 January 2020	(4,088)	(16)	-	1,037	2,746	(321)	(1,569)	(1,890)
Changes in 2020	(2,001)	(4)	81	6,768	(3,485)	1,359	(1,031)	328
31 December 2020	(6,089)	(20)	81	7,805	(739)	1,038	(2,600)	(1,562)
1 January 2021	(6,089)	(20)	81	7,805	(739)	1,038	(2,600)	(1,562)
Changes in 2021	324	2	(110)	(591)	(1,353)	(1,728)	(715)	(2,443)
31 December 2021	(5,765)	(18)	(29)	7,214	(2,092)	(690)

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Annual Financial Report-2