91 FINANCIAL STATEMENTS & OTHERS ENRA GROUP BERHAD ANNUAL REPORT 2023 Key Audit Matters (Cont’d) (2) Impairment assessment of inventories (Cont’d) Audit response (Cont’d) Our audit procedures included the following: (Cont’d) (b) for those unsold completed units in Malaysia, we tested the carrying amount by obtaining the recent transacted prices of comparable development units in similar or nearby locations, and adjusted for the size of the units; and (c) for those unsold completed units outside Malaysia which did not have recent sale transactions, we have obtained the valuation report of inventories from an independent valuer and assessed management’s impairment testing based on fair value less costs of disposal as follows: (i) Considered the independence, competence, capabilities and objectivity of the external valuer; and (ii) Obtained an understanding of the methodology adopted by the independent valuer in estimating the fair value of the inventories and assessed whether such methodology is consistent with those used in the industry. (3) Impairment assessment of the carrying amounts of costs of investments in subsidiaries As at 31 March 2023, costs of investments in subsidiaries of the Company were RM24.45 million as disclosed in Note 6 to the financial statements of which an impairment of RM25.40 million was recognised during the financial year. 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 pretax 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; and (d) performed sensitivity analysis to stress test the key assumptions used by management in the impairment model. Independent Auditors’ Report To The Members Of Enra Group Berhad (Incorporated In Malaysia) (Cont’d)
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