153 ANNUAL REPORT 2023 MST GOLF GROUP BERHAD 15 Registration No: 199301009307 (264044-M) Report on the Audit of the Financial Statements (cont’d) Impairment assessment of investment in subsidiaries (cont’d) The risk (cont’d) The impairment testing requires management to make assumptions in the underlying cash flow forecast and projections. The assumption include expectations for gross margin, growth rates and discount rates, as well as the overall market and economic conditions in the markets. In view of the significance of the amount and the level of judgement exercised by management, we consider this as a key audit matter. The disclosure for investment in subsidiaries of the Company are included in Note 6 to the financial statements. Our response Our audit procedures included, amongst others: - held discussion with management to obtain an understanding of assumptions used in the forecast and cash flow projections; - compared the key assumptions used in the impairment assessments to historical performance, external data reflecting current market conditions and our understanding of the business, in particular gross margin and growth rates used to determine the value in use at each cash generating unit (“CGU”) level, and considering the viability of future plans, local economics and industry outlook; - performed sensitivity analysis of the key assumptions and determine if the carrying amount of CGU materially exceeded the recoverable amount; - involved our internal valuation specialists to assist us in evaluating the appropriateness of discount rate, methodologies and assumptions used in the cash flow forecast and projections; and - assessed the adequacy of disclosure in relation to impairment assessment including those assumptions to which the outcome of the impairment test is most sensitive, that have the most significant effect on the determination of the recoverable amount of the investment.
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