FINANCIAL PERFORMANCE 168 Report on the Audit of the Financial Statements (cont’d) Key Audit Matters (cont’d) Impairment of property, plant and equipment and right-of-use assets (cont’d) Our response Our audit procedures included, amongst others: - obtained understanding of the Group’s policies and procedures to identify indications of impairment of assets relating to lossmaking stores; - held discussion with management and the auditors of the subsidiaries to obtain an understanding of assumptions used in the cash flow forecast and projections; - examined approved cash flow forecast and projections as well as historical trend analysis; - compared the key assumptions used in the impairment assessment to historical performance, external data reflecting current market conditions and our understanding of the business, in particular gross margin and growth rates used in determining the value in use at each CGU. - performed sensitivity analysis of the key assumptions and determined if the carrying amount of CGU materially exceed the recoverable amount; - involved our internal specialist to assist us in evaluating the appropriateness of discount rates, methodologies and assumptions used in cash flow forecast and projections; and - assessed the adequacy of disclosures 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 assets. Impairment assessment of investment in subsidiaries (Parent company only) The risk The Company has the balance of investment in subsidiaries of RM103,344,000. On an annual basis, management is required to assess for any indications of impairment to determine if impairment assessment should be carried out. 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. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MST GOLF GROUP BERHAD (Incorporated in Malaysia) Registration No: 199301009307 (264044-M)
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