MISC Annual Report 2019

2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 2.5 Significant accounting estimates and judgements (cont’d.) (b) Key sources of estimation uncertainty (cont’d.) (iv) Impairment of trade and other receivables The Group and the Corporation assess at each reporting date whether there is any objective evidence that their trade and other receivables is impaired. To determine whether there is objective evidence of impairment, factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments are considered. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The Group and the Corporation have performed a review of the recoverable amount of their receivable during the financial year. The review led to the recognition of impairment losses as disclosed in Note 21. (v) Deferred tax assets Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits, together with future tax planning strategies. The total carrying value of recognised deferred tax assets and the unrecognised tax losses and capital allowances are as disclosed in Note 28. (vi) Fair value of financial instruments Where the fair value of financial assets and financial liabilities recorded in the statements of financial position cannot be derived from active markets, they are determined using valuation techniques, including the discounted cash flow method. Where possible, the inputs to these valuation models are taken from observable markets. However, when this is considered unfeasible, a degree of judgement is made in establishing fair values. The judgements made include having considered a host of factors including liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Further disclosure of fair value of financial instruments is provided in Note 36. (vii) Discount rate used in leases Where the interest rate implicit in the lease cannot be readily determined, the Group and the Corporation use the incremental borrowing rate to measure the lease liabilities. The incremental borrowing rate is the interest rate that the Group and the Corporation 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 and the Corporation estimate the incremental borrowing rate using observable inputs when available and is required to make certain entity-specific estimates. 3. REVENUE Group Corporation 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 Revenue from contracts with customers Voyage, lightering and other shipping related income 2,721,968 2,841,578 – – Construction contract and marine repair (Note 22) 936,523 956,245 – – Non-shipping income 382,765 399,068 5,079 78,740 4,041,256 4,196,891 5,079 78,740 Revenue from charter Charter income 3,862,807 3,456,976 927,547 783,398 Finance income on lease receivables 1,058,661 1,126,408 83,363 35,087 4,921,468 4,583,384 1,010,910 818,485 Total revenue 8,962,724 8,780,275 1,015,989 897,225 Non-shipping income mainly represents revenue generated from the operation and maintenance of offshore floating assets, management of operation of ports, marine terminals and marine vessels, provision of marine support services and consulting services for marine matters. Timing of recognition Group Corporation 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 Goods and services transferred at a point in time 440,230 526,730 – – Services transferred over time 3,601,026 3,670,161 5,079 78,740 Total 4,041,256 4,196,891 5,079 78,740 Contract balances The following table provides information about receivables, contracts assets and contracts liabilities from contracts with customers. Group Corporation 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 Receivables 714,045 780,013 – 75,277 Contract assets (Note 22) 39,137 221,286 – – Contract liabilities (Note 22) (5,993) (2,406) – – 747,189 998,893 – 75,277 NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 FINANCIAL STATEMENTS MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019 280 281

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