165 06 / FINANCIAL STATEMENTS 01 02 03 04 05 07 08 09 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KENANGA INVESTMENT BANK BERHAD (INCORPORATED IN MALAYSIA) Key audit matters (cont’d.) Risk area and rationale Our response 3) Valuation of investments in unquoted equity instruments As at 31 December 2025, the carrying values of the Group’s and of the Bank’s investments in unquoted securities classified as fair value through profit or loss and fair value through other comprehensive income amounted to RM271.33 million and RM1.38 million, and RM273.91 million and RM1.38 million, respectively. The accounting policy for determination of fair value is disclosed in Note 3.4(j), significant accounting estimates and judgements involved in Note 4(ii) and relevant details of fair value of financial instruments in Note 52 to the financial statements. The valuation of unquoted investments involved significant judgements and estimates which are based on current and future market and economic conditions. As the fair values of unquoted financial investments cannot be obtained directly from active markets, they are determined using the market and income approach, as well as the adjusted net asset method. Each approach has its own inputs and valuation technique in determining the fair value. The Group and the Bank use a variety of valuation techniques appropriate in the circumstances that include the use of financial models. The inputs to these models are taken from relevant observable inputs where possible to minimise the use of unobservable inputs. Such inputs include using prices and other relevant information of comparable peer companies, prices of recent transactions involving similar instruments and adjusted net assets amount. Judgements include considerations such as selection of comparable peer companies, growth rates and discount rates. Our audit procedures include reviewing and evaluating management’s rationale for selecting and using the valuation models to assess if the use of such models was appropriate. We assessed the accuracy and appropriateness of market observable inputs. Our audit procedures also included, among others, understanding management’s controls related to the development and calibration of any model used, challenged and assessed the assumptions used, taking into account historical evidence supporting underlying assumptions and comparing internal information against external economic and market data. As the fair values are sensitive towards changes to some of the key inputs, we also assessed the impact that reasonable alternative assumptions would have on the overall carrying amounts. We also reviewed the adequacy of the Group’s and of the Bank’s disclosures within the financial statements about those key assumptions to which the fair value is most sensitive.
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