MSM Malaysia Holdings Berhad Annual Report 2020

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (continued) 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 Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters How our audit addressed the key audit matters Impairment assessment of goodwill As at 31 December 2020, the Group has goodwill of RM576.2 million. We focused on this area as the recoverable amount of the cash generating unit (“CGU”) is based on value-in-use (“VIU”) calculations, which require management’s judgement on the assumptions used in the calculations, in particular selling price, raw sugar price, sales volume, terminal value growth rate, discount rate and exchange rate. Refer to Notes 3(d) and 3(k) in the significant accounting policies, Note 5 in the critical accounting estimates and judgement and Note 19 to the financial statements. We performed the following procedures on the cash flow projections prepared by the management: • We assessed the reasonableness of the key assumptions used by management in the VIU calculations, in particular selling price, raw sugar price, sales volume, terminal value growth rate, discount rate and exchange rate by comparing with business plans, historical results or market trends; • We assessed the reliability of management’s forecast through the review of past trends of actual financial performance against previous forecasted results; • We examined the sensitivity analysis prepared by the management on selling premiums, raw sugar price, sales volume, capital expenditure, discount rate and exchange rate to evaluate the impact on the impairment assessment; and • We assessed the adequacy of the disclosures in relation to goodwill in the financial statements. Based on our procedures, we noted no significant exceptions. Impairment assessment of property, plant and equipment, right-of-use assets and intangible assets other than goodwill The carrying values of property, plant and equipment, right-of-use assets and intangible assets of the Group as at 31 December 2020 is RM1,255.2 million, RM92.6 million and RM48.9 million respectively (“non-financial assets”). As at 31 December 2020, the Group’s market capitalisation of RM400.7 million was below the carrying value of its net assets of RM1,581.5 million which is an indication that the non-financial assets of the Group may be impaired. Consequently, management performed an impairment assessment on the Group’s non-financial assets. Management concluded that the non-financial assets were not impaired as at 31 December 2020. We performed the following procedures on the cash flow projections prepared by the management: • We assessed the reasonableness of the key assumptions used by management in the VIU calculations, in particular selling price, raw sugar price, sales volume, realisability of assets at terminal year, discount rate and exchange rate by comparing with business plans, historical results or market trends; • We assessed the reliability of management’s forecast through the review of past trends of actual financial performance against previous forecasted results; INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MSM MALAYSIA HOLDINGS BERHAD (INCORPORATED IN MALAYSIA) REGISTRATION NO. 201101007583 (935722-K) MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 129 SUSTAINABILITY REPORT EFFECTIVE LEADERSHIP CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION DETAILS OF THE ANNUAL GENERAL MEETING