297 INTEGRATED ANNUAL REPORT 2025 ACCOUNTABILITY | INDEPENDENT AUDITORS’ REPORT REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters How our audit addressed the key audit matters The Group has determined that it is probable that part of its operations are attributable to a permanent establishment (“PE”) in Brazil, which involves significant judgement in interpreting tax legislations. This requires an allocation of taxable profits between The Netherlands entity and the Brazilian PE, which involves estimation based on transfer pricing methodologies. Significant estimation is also involved when determining the Fair Market Value (“FMV”) of the FPSO upon transfer from the Netherlands head office to the Brazil PE. The difference between the FMV and tax book value of the FPSO triggers an object exemption, resulting in lower tax relief during the operational phase of the FPSO. Given the significance of the amounts and the complexity involved in these tax determinations, this matter is considered significant in determining the appropriateness of the tax position adopted in the consolidated financial statements. The tax position adopted by management resulted in a change in estimate of RM704 million being recognised in the consolidated income statement in the financial year. - Assessed the competence, capabilities and objectivity of the tax experts and evaluated the consistency of their conclusions against the tax position adopted by management with applicable tax legislations; - Examined tax installments paid to supporting documentation and reconciled these to the tax accounting entries in the consolidated financial statements; and - Assessed the adequacy of disclosures in the consolidated financial statements. Based on procedures performed, no material exceptions were noted. Deconsolidation of Yinson Boronia Consortium Pte. Ltd. Group Refer to Note 12 Other gains/(losses) - net, Note 20 Investment in subsidiaries, Note 21 Investment in joint ventures and Note 48 Summary of effects of dilution and disposal of companies to the financial statements. During the financial year ended 31 January 2025, Yinson reduced its ownership in the Yinson Boronia Consortium Pte. Ltd. Group (“YBC Group”) from 75.0% to 63.2%. Following this reduction, on 31 January 2025, Yinson waived its casting vote in YBC Group, prompting management to reassess its control over the YBC Group. As a result, it was determined that Yinson no longer controlled the YBC Group and reclassified its investment from subsidiary to a joint venture. Consequently, Yinson derecognised YBC Group’s net assets from its financial statements and recognised the fair value of its retained net assets of 63.2% as an investment in a joint venture, valued at RM1,755 million. The difference between the carrying value of its investment and the fair value of its retained interest resulted in a gain on disposal of RM502 million. This change in accounting of YBC Group from a subsidiary to a joint venture involves significant judgement in the application of accounting standards, particularly in determining the point control was lost and and significant estimates applied in the valuation of the retained net assets which include assumptions regarding inflation rates, weighted average cost of capital (“WACC”) and projected expenses over the charter period of FPSO Anna Nery. We have performed the following audit procedures: - Obtained an understanding of the events that led to the Group’s loss of control of its investment in the YBC Group; - Assessed the Group’s control assessment over the subsidiary based on the principles of MFRS 10 “Consolidated Financial Statements”; - In relation to the valuation of the retained net assets, we have: • obtained an understanding of the underlying assumptions and judgements underpinning the fair valuation workings; • with assistance from our valuation experts, assessed the valuation methodology and the WACC computation used by management in estimating the fair value of retained net assets; and • tested reasonableness of management’s assumptions, including inflation rates, WACC and projected expenses over the charter period of FPSO Anna Nery to corroborating documentation, such as quotations, approved manpower budget, signed agreements, independent research data and/ or other supporting documentations; - Recomputed the gain on disposal by comparing the fair value of retained interest in the YBC Group against the net assets of the YBC Group as at the disposal date of 31 January 2025; - Tested the Group consolidation adjustments; and - Evaluated the adequacy of the disclosures included in the consolidated financial statements. Based on procedures performed, no material exceptions were noted. Revenue recognition for FPSO projects Refer to Note 5(a) and (b) Critical accounting estimates and judgements, Note 6 Revenue, Note 7 Cost of sales and Note 36(b) Trade and other payables to the financial statements. The accounting for the Group’s revenue contracts involves MFRS 16 “Leases” and MFRS 15 “Revenue from Contracts with Customers.” Due to the complex and bespoke nature of each contract, management has analysed terms and conditions of each contract to determine the appropriate revenue recognition approach. For revenue recognised for EPCIC contracts, the following audit procedures were performed: - Gained an understanding of relevant processes, evaluated how management records, tracks and monitors costs and computes revenue for EPCIC contracts; - Performed look back procedures by comparing estimates included in the current year with the past year’s approved budget and obtained an understanding of variances;
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