NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2025 2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT'D) (c) Significant accounting estimates and judgements (Cont'd) (ii) Tax expense (Note 8) - significant judgement is required in determining the capital allowances and deductibility of certain expenses when estimating the tax expense. There were transactions during the ordinary course of business for which the ultimate tax determination of whether additional taxes will be due is uncertain. The Group recognises liabilities for tax based on estimates of assessment of the tax liability due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current tax and deferred tax in the periods in which the outcome is known. As such, significant judgement is required in determining the tax litigation status in Indonesia as a tax refund may be recognised when it is probable that an inflow of economic benefits will be received by the Group. (iii) Valuation of land and buildings (Note 11) - the valuation of land and buildings 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 when necessary, adjusting for location, accessibility, visibility, time, terrain, size, present market trends and other differences; and - Cost method of valuation, being assumed to have a direct relationship with its cost of construction, which 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 11) - 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. 6 Financial Insights Through Numbers 1 3 5 2 4 7 PG | 181 ANNUAL REPORT 2025 MKH BERHAD
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