MKH BERHAD | ANNUAL REPORT 2023 147 2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) (c) Significant accounting estimates and judgements (Cont’d) (iii) Valuation of land and buildings (Note 10) - the valuation of land and buildings performed by management is based on independent professional valuations with reference to: (Cont’d) - Cost method of valuation, being assumed to have a direct relationship with its cost of construction, is then adjusted to allow for cost of finance, profit, physical, functional, economic obsolescence and demand to reflect its probable present market value. Management believes that the chosen valuation techniques and assumptions are appropriate in determining the valuation of the Group’s and of the Company’s land and buildings. (iv) Impairment of property, plant and equipment (Note 10) - the Group and the Company assess impairment of property, plant and equipment when there is an indication that the carrying amount of an asset may be impaired, the asset’s recoverable amount, being the higher of its fair value less costs to sell and its value-in-use (“VIU”), will be assessed. The assessment of the recoverable amounts involves a number of methodologies. In determining the VIU of an asset, being the future economic benefits to be expected from its continued use and ultimate disposal, the Group and the Company make estimates and assumptions that require significant judgements. While the Group and the Company believe these estimates and assumptions of VIU such as discount rate, revenue growth and costs of sales could be reasonable and appropriate, changes on these estimates and assumptions of VIU could impact the Group’s and the Company’s financial position and results. (v) Depreciation of property, plant and equipment (Note 10) - the cost of property, plant and equipment are depreciated on a straight-line basis over the assets’ useful lives and lease term respectively. Management estimates the useful lives of these property, plant and equipment to be within 4 to 99 years (2022: 4 to 99 years) based on past experience with similar assets or/and common life expectancies of the industries. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets resulting in revision of future depreciation or amortisation charges. Depreciation of bearer plants is charged so as to write off the cost of mature plantations, using the straight-line method, over the estimated useful lives of 20 years (2022: 20 years) or over the lease period, whichever is shorter. (vi) Fair values of investment properties (Note 14) - the measurement of the fair values for investment properties performed by management is based on independent professional valuations with reference to: - direct comparison method, being comparison of current prices in an active market for similar properties in the same location and condition and where necessary, adjusting for location, accessibility, visibility, time, terrain, size, present market trends and other differences; - investment method, being the projected net income and other benefits that the subject property can generate over the life of the property capitalised at market derived yields to arrive at the present value of the property; and NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2023
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