ENRA Group Berhad | Annual Report 2022 84 Key Audit Matters (Cont’d) (2) Impairment assessment of inventories (Cont’d) Audit response (Cont’d) Our audit procedures included the following: (Cont’d) (c) for those unsold completed units which did not have recent sale transactions, we obtained the recent transacted prices of comparable development units in similar or nearby locations, and adjusted for the size of the units. (3) Impairment assessment of the carrying amounts of costs of investments in subsidiaries As at 31 March 2022, costs of investments in subsidiaries of the Company were RM38.58 million as disclosed in Notes 6 to the financial statements. Management used the VIU approach based on present value of forecasted future cash flows for the subsidiaries to determine if there is any impairment loss required on the costs of investments in subsidiaries. We determined this to be a key audit matter because the determination of whether or not an impairment loss is necessary involved significant judgements and estimates by the Directors about the future results and key assumptions applied to cash flow projections of the subsidiaries in determining their recoverable amounts. These key assumptions include forecast growth in future revenue, as well as determining an appropriate pre-tax discount rate. Audit response Our audit procedures included the following: (a) compared cash flow projections against recent performance and assessed the reasonableness of the key assumptions used by management in the cashflow forecast and projections by comparing to actual growth rates; (b) compared prior period budgets and forecasts to current period’s actual results to assess the historical accuracy of the forecasts; (c) assessed the suitability of the pre-tax discount rate used by each subsidiary by comparing to the weighted average cost of capital of the Group and relevant risk factor incorporating the impact of the COVID-19 pandemic; and (d) performed sensitivity analysis to stress test the key assumptions used by management in the impairment model. (4) Impairment assessment of the carrying amounts of amounts due from subsidiaries As at 31 March 2022, amounts due from subsidiaries of the Company amounted to RM78.09 million as disclosed in Notes 11 to the financial statements. We determined this to be a key audit matter because it requires management to exercise significant judgement in determining the probability of default by subsidiaries, appropriate forward looking information, significant increase in credit risk with incorporating the impact of the COVID-19 pandemic and estimated cash flows recoverable in worst-case scenarios. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ENRA GROUP BERHAD (INCORPORATED IN MALAYSIA)
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