Key Audit Matters (continued) a) Recoverability of trade and other receivables (continued) Audit response Our audit procedures, with the involvement of component auditors, included the following: (i) recomputed the probability of default using historical data and forward-looking information adjustment applied by the Group; (ii) recomputed the correlation coefficient between the macroeconomic indicators set by the Group and historical losses to determine the appropriateness of the forward-looking information used by the Group; and (iii) inquired of management to assess the rationale underlying the relationship between the forward-looking information and expected credit losses. b) Valuation of biological assets The carrying amount of biological assets has been disclosed in Note 19 to the financial statements. The valuation of biological assets is determined by income approach which considers the net present value of all directly attributable net cash flows based on Directors’ estimation by reference to inputs used in valuation report performed by independent valuers. We determined this to be a key audit matter as it involves significant judgements and is subject to estimation uncertainty as subjective variables were used to derive the fair value. Audit response Our audit procedures included the following: (i) assessed the reasonableness of assumptions used in the cash flow projections to available sources of data, where applicable; (ii) reviewed the valuation report prepared by the independent valuers for appropriateness of the valuation methodology and for reasonableness of the assumptions used; (iii) assessed the competency, independence and integrity of the independent valuers; and (iv) tested the integrity of the data and inputs used by the independent valuers. c) Impairment assessment of the carrying amount of goodwill The carrying amount of the goodwill of the Group has been disclosed in Note 9 to the financial statements. We determined this to be a key audit matter because the recoverable amount of goodwill requires significant judgement and estimates about the future results and the key assumptions applied to cash flow projections of the cash generating units, including projected growth in future revenues and operating profit margins, as well as determining an appropriate pre-tax discount rate and growth rates. INDEPENDENT AUDITORS’ REPORT P R G H O L D I N G S B E R H A D A N N U A L R E P O R T 2 0 2 1 70 To the Members of PRG Holdings Berhad (Incorporated in Malaysia) (cont’d)
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