ENRA Group Berhad | Annual Report 2022 103 NOTES TO THE FINANCIAL STATEMENTS 31 MARCH 2022 4. PROPERTY, PLANT AND EQUIPMENT (Cont’d) (a) All items of property, plant and equipment are initially measured at cost. After initial recognition, property, plant and equipment except for freehold land is stated at cost less accumulated depreciation and any accumulated impairment losses. (b) Depreciation is calculated to write off the costs of the assets to their residual values on a straight line basis over their estimated useful lives. The principal depreciation rates and period are as follows: Building 3% Furniture, fittings, renovation and office equipment 10% - 33.33% Computer hardware and software 20% - 33.33% Motor vehicles 20% Marine equipment 7% Plant and machinery 10% Freehold land has unlimited useful life and is not depreciated. Capital work-in-progress represent asset which is not ready to use. Capital work-in-progress are stated at cost and not depreciated until such time when the asset is available for use. (c) Expiration and subsequent non-renewal of a service agreement with a customer subsequent to the financial year ended 31 March 2022 in a Cash Generating Unit (“CGU”) within the Energy Service operating segment caused the Group to assess the recoverable amount of the related marine equipment. The assessment led to the recognition of an impairment losses of RM9,006,000 for the Group during the financial year. Recoverable amount was based on the higher of fair value less cost of disposal or value in use (“VIU”), and determined at the CGU of each asset. (i) Recoverable amount determined from VIU: The Group estimated the recoverable amount for impaired marine equipment of RM52,098,000 based on the assumptions that replacement service agreement with another customer will be secured within the financial year ending 31 March 2023 or on a worst case scenario, disposal of these marine equipment at its fair value less cost to sell within the same financial year. Due to inherent uncertainty arising from the outcome of contract tendering process currently undertaken, the VIU is determined based on the following scenarios: 2022 Worst Base case case Key assumptions Weightage 66% 34% Cash flow projections period 1 year 5 years Profit margin 48% 48% Discount rate 4.9% 4.9%
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