KEY AUDIT MATTERS (CONT’D.) Revenue and cost of sales in respect of property development activities (Refer to Note 4 and Note 5 to the financial statements) A significant proportion of the Group’s revenues and profits are derived from property development contracts which span more than one accounting period. For the financial year ended 31 December 2024, property development revenue from ongoing projects of RM926,983,000 and cost of sales of RM663,962,000 accounted for approximately 66% and 69% of the Group’s revenue and cost of sales respectively. For these property development contracts where revenue is recognised over time, the Group uses the input method in determining the percentage of completion, which is based on the actual cost incurred to date on the property development project over the total budgeted cost for the respective development projects in accounting for the progress towards complete satisfaction of the Group’s performance obligation. We identified revenue and cost of sales in respect of property development activities as areas requiring audit focus as significant management’s judgement and estimates are involved in estimating the total property development costs to complete the project, which include the common infrastructure costs (which is used to determine progress towards complete satisfaction of the Group’s performance obligation and gross profit margin of the property development activities undertaken by the Group). How have our audit addressed the matter To address these areas of audit focus, we performed, amongst others, the following procedures: • Obtained an understanding of the internal controls over the accuracy and timing of revenue recognised in the financial statements, including controls performed by management in estimating the total property development cost; • Obtained an understanding of the internal control over the timeliness of updating the gross development value of each property development project by the management by reference to the latest selling price; • Read the sale and purchase agreements entered into with the customers on a sampling basis to obtain an understanding of the specific terms and conditions; • Evaluated the assumptions applied in estimating the total property development costs on a sampling basis by examining documentary evidence such as letters of award issued to contractors to support the total budgeted costs. We also considered the historical accuracy of management’s budgets for the similar property development projects in evaluating the estimated total property development costs; • Evaluated the determination of the progress towards complete satisfaction of the Group’s performance obligation by examining supporting evidence such as contractors’ progress claims and suppliers’ invoices; • Evaluated the mathematical accuracy of the revenue and profit based on the percentage of completion calculations and considered the implications of identified errors and changes in estimates; and • Observed the progress of the property developments on a sampling basis by performing site visit. FINANCIAL STATEMENTS & OTHER INFORMATION 231
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