Frontken Berhad Annual Report 2016

Frontken Corporation Berhad (651020-T)

ANNUAL REPORT

2016

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Frontken Corporation Berhad, which comprise the statements of financial position

as at 31 December 2016 of the Group and of the Company, and the statements of profit or loss and other comprehensive

income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial

year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out

on pages 49 to 129.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of

the Company as at 31 December 2016, and of their financial performance and their cash flows for the financial year then

ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the

requirements of the Companies Act 1965 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on

Auditing. Our responsibilities under those standards are further described in the

Auditors’ Responsibilities for the Audit of the

Financial Statements

section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate

to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and Company in accordance with the By-Laws (on Professional Ethics, Conduct and

Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’

Code of Ethics for Professional Account

ants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in

accordance with the By-Laws and the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial

statements of the Group and of the Company for the current financial year. These matters were addressed in the context of

our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and

we do not provide a separate opinion on these matters.

We have determined the matters described below to be the key audit matters to be communicated in our report:-

Goodwill impairment

Refer to Note 13 in the financial statements.

Key Audit Matter

How our audit address the key audit matter

The Group has goodwill of approximately RM33.8 million

comprised within the 3 cash-generating units (“CGU”).

For the CGUs which comprised goodwill, the determination

of recoverable amount, being the higher of fair value less

costs to sell and value-in-use, requires judgement on the part

of management in identifying and then valuing the relevant

CGUs.

The value-in-use models used to assess the risk of impairment

are based on assumptions including revenue forecasts, gross

and operating margins and discount rates, all of which are

country-specific.

We focused on this area because of the inherent judgement

involved in determining key assumptions such as future sales

growth, profit margins and discount rates.

Our procedures in relation to management’s impairment

assessment included:-

(a) Making enquiries of and challenging the management

on the key assumptions made, including:

The achievement of the business plan; and

ii.

Sales growth, operating margin, discount rates

and long-term growth rates;

(b) We also performed sensitivity analysis on key

assumptions and agreedwithmanagement’s conclusion

that reasonable possible changes to the assumptions

would result in a material difference to the changes

already recognised; and

financial statements.

Independent Auditors’ Report

To The Member Of Frontken Corporation Berhad