Notes to the Financial Statements for the Financial Year Ended 30 September 2024 MKH BERHAD ANNUAL REPORT 2024 Laying The Foundation of Excellence Where People Matter Guided by Leadership, Inspired by People Delivering Value That Matters to People PG. 186 2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D) (c) Significant accounting estimates and judgements (Cont’d) (viii) Deferred tax assets (Note 19) - deferred tax assets are recognised for deductible temporary differences, unused tax losses and unabsorbed capital allowances based on the projected future taxable profits of the Group to the extent that is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and unabsorbed capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the future financial performance of the Group. (ix) Impairment loss on receivables (Note 20) - the Group accounts for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. The Group uses a simplified approach for measuring the loss allowance at an amount equal to lifetime expected credit loss (“ECL”) for trade receivables, contract assets and loan receivables. (x) Inventories (Note 22) - the saleability of inventories are reviewed by management on a periodic basis. This review involves comparison of the carrying value of the inventory items with the respective net realisable value. The purpose is to ascertain whether a write down to net realisable value is required to be made. (xi) Fair values of biological assets (Note 25) - to arrive at the fair value of fresh fruit bunches (“FFB”), the management considered the oil content of the unripe FFB and derived the assumption that the net cash flows to be generated from FFB prior to more than 15 days to harvest to be negligible, therefore quantity of unripe FFB on bearer plant of up to 15 days prior to harvest was used for valuation purpose. Costs to sell, which include harvesting and transport cost, are deducted in arriving at the net cash flow to be generated. (xii) Provision of post-employment benefit obligations (Note 30) - the provision is determined using actuarial valuation prepared by an independent actuary. The actuarial valuation involved making assumptions about discount rate, future salary increase, mortality rates, resignation rate, disability rate and normal retirement age. As such, this estimated provision amount is subject to significant uncertainty. (xiii) Revenue and cost recognition for intangible asset model (Note 12) - a subsidiary, which adopts the intangible asset model has recognised a construction margin of Nil (2023: 7%) in the construction of commuter station. Income and expenses associated with the said construction are recognised based on percentage of completion method. The estimated margin is based on relative comparison with general industry trend although actual margins may differ due to location, materials and other pricing considerations. (xiv) Liquidated damages in relation to the construction of KTM Komuter Station (Note 36) - significant judgement is required in determining the potential liquidated damages. This judgement involves the understanding of relevant case facts, past experience and updates on the legal assessment status from time to time. Should it be probable that an outflow of resources will be required to settle the obligation, a provision may be required.
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