My EG Services Berhad Annual Report 2020

MY E.G. SERVICES BERHAD Regisration No. 200001003034 (505639-K) 128 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONT’D) Key Audit Matters (cont’d) Capitalisation and Impairment Assessment of Capital Work-In-Progress Refer to Note 8 to the financial statements Key Audit Matter How our audit addressed the key audit matter As disclosed in Note 8 to the financial statements, capital work-in-progress as at the reporting date amounted to approximately RM44.52 million representing 13% of total carrying value of property and equipment of RM330.82 million. The management assessed the impairment based on the value in use method which involves significant assumptions on future results of the business. In particular, key assumptions are made on the growth rates and discount rates in the future cash flow forecasts. This assessment involves significant judgement and there is inherent uncertainty in the assumptions applied by the management to determine the level of impairment losses. We considered this as a key audit matter due to the significance of the capital work-in-progress of the Group and the uncertainty inherent in determining the level of impairment losses. Our procedures included, amongst others:- r We obtained management’s impairment analysis and gained an understanding of their impairment assessment process; r We reviewed the reasonableness of the key assumptions used and judgement made in determining the recoverable amount; r We also checked the sensitivity analysis on revenue growth, profit margin and discount rate; and r Evaluated the capital isation process and determined that costs capitalised met the requirements of MFRS 116. Impairment of Development Costs Refer to Note 12 to the financial statements Key Audit Matter How our audit addressed the key audit matter As disclosed in Note 12 to the financial statements, development costs as at the reporting date amounted to approximately RM126.73 million representing approximately 9% of total assets of the Group. Development costs are subject to impairment assessment by comparing the carrying amounts to their corresponding recoverable amounts. The recoverable amounts were determined by the management using the value in use method, based on future financial information. We considered this as a key audit matter due to the significance of the carrying amount and the uncertainty inherent in determining the recoverable amounts. Our procedures included, amongst others:- r We obtained management’s impairment analysis and gained an understanding of their impairment assessment process; r We reviewed the reasonableness of the key assumptions used and judgement made in determining the recoverable amount; and r We also checked the sensitivity analysis on revenue growth, profit margin and discount rate. Information Other than the Financial Statements and Auditors’ Report Thereon The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Company 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 of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. INDEPENDENT AUDITORS’ REPORT To The Members of MY E.G. Services Berhad (Incorporated In Malaysia) Registration No: 200001003034 (505639 - K) (CONT’D)