EXCEL FORCE MSC BERHAD - ANNUAL REPORT 2020 64 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2020 (CONT’D) 2. BASIS OF PREPARATION (CONT’D) (c) Significant accounting judgements, estimates and assumptions (Cont’d) Key sources of estimation uncertainty (Cont’d) Discount rate used in leases Where the interest rate implicit in the lease cannot be readily determined, the Group uses the incremental borrowing rate to measure the lease liabilities. The incremental borrowing rate is the interest rate that the Group would have to pay to borrow over a similar term, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Therefore, the incremental borrowing rate requires estimation, particularly when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the incremental borrowing rate using observable inputs when available and is required to make certain entity-specific estimates. Income taxes Judgement is involved indetermining theprovision for income taxes. Thereare certain transactionsandcomputations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these tax matters is different from the amounts that were initially recognised, such differences will impact the income tax and/or deferred tax provisions in the period in which such determination is made. As at 31 December 2020, the Group and the Company have tax recoverable of RMNil (2019: RM3,840) and RMNil (2019: RMNil) and tax payable of RM1,235,211 (2019: RM125,616) and RM1,235,005 (2019: RM125,616) respectively. Fair value of financial instruments Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the Note 35(c) regarding financial assets and liabilities. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the end of the reporting period. 3. SIGNIFICANT ACCOUNTING POLICIES The Group and the Company apply the significant accounting policies set out below, consistently throughout all periods presented in the financial statements unless otherwise stated. (a) Basis of consolidation (i) Subsidiary companies Subsidiary companies are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with theentityandhas theabilitytoaffect those returns through itspowerover theentity. Subsidiarycompanies are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.