Key audit matters How we addressed the key audit matters Impairment of non-current assets – (Refer to Note 12 - Ships, offshore floating assets and other property, plant and equipment, to the financial statements) The Group is required to perform impairment test of CGU whenever there is an indication that the CGU may be impaired by comparing the carrying amount with its recoverable amount. (i) Other property, plant and equipment Due to the continued depressed oil and gas market, Malaysia Marine and Heavy Engineering Holdings Berhad (MHB), a subsidiary of the Corporation reported a decline in revenue and gross profit for the current financial year, indicating that the carrying amount of the related property, plant and equipment of MHB may be impaired. Accordingly, the Group estimated the recoverable amount of the property, plant and equipment of MHB using VIU based on cash flow projections covering a five year period. Estimating the VIU involves estimating the future cash inflows and outflows that will be derived from the CGU, and discounting them at an appropriate discount rate. The aforementioned impairment review gave rise to an impairment loss of property, plant and equipment of MHB of RM140.3 million for the year ended 31 December 2016. This impairment review was significant to our audit because the assessment process is complex and is based on assumptions that are highly judgemental. Our audit procedures included, among others evaluating the assumptions and methodologies used by the Group, in particular those relating to the discount rate and projected cash flows for the CGU. The areas that involved significant audit effort and judgement were the assessment of the probability of securing the revenue contracts, possible variations in the amount and timing of cash flows and the determination of an appropriate discount rate. Our procedures to assess management’s impairment testing included the following: a) enquired with the project teams to obtain an understanding of the status of negotiations and the likelihood of securing the significant revenue contracts; b) evaluated the reasonableness of the estimated profits to be derived from those significant revenue contracts by comparing the estimated profits with the actual profits derived from similar completed contracts in previous years; and c) assessed the appropriateness of the discount rate used to determine the present value of the cash flows and whether the rate used reflects the current market assessments of the time value of money and the risks specific to the asset. In addition, we also evaluated the adequacy of the Group’s disclosures of each key assumption on which the Group has based its cash flow projections and to which the CGU’s recoverable amount is most sensitive, as disclosed in Note 12 to the financial statements. Key audit matters (cont’d.) Financial Statements 337
RkJQdWJsaXNoZXIy NDgzMzc=