ACCOUNTABILITY 192 YINSON HOLDINGS BERHAD 4. STANDARDS, AMENDMENTS TO PUBLISHED STANDARDS AND INTERPRETATIONS TO EXISTING STANDARDS THAT ARE APPLICABLE TO THE GROUP AND THE COMPANY BUT NOT YET EFFECTIVE (CONTINUED) (b) Financial year beginning on/after 1 February 2027 (continued) (ii) Amendments to MFRS 121 “Translation to a Hyperinflationary Presentation Currency” The amendments clarify the requirements for translating financial statements into a presentation currency when the presentation currency is that of a hyperinflationary economy. The amendments require entities to apply the translation method consistently with the requirements for hyperinflationary economies, including the use of a closing rate at the date of the most recent statement of financial position and restatement of comparative information. The amendments are not expected to have a material impact on the Group’s financial statements. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective. 5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. (a) Critical judgement in determining the lease classification Finance leases – Group as a lessor The Group has determined, based on the analysis of the terms and conditions of the contract on assessing whether the Group retains the significant risks and rewards of ownership of the FPSO subject of the lease contract. To identify whether risks and rewards are retained, the Group systematically considers, amongst others, the indicators listed by MFRS 16 Leases on a contract-by-contract basis. The Group makes significant judgements to determine whether the arrangement results in a finance lease or an operating lease. This judgement can have a significant effect on the amounts recognised in the financial statements and its recognition of profits in the future. The most important judgement areas assessed by the Group in respect of finance leases are as follows: • Revenue recognition in the construction phase for leased FPSOs For manufacture lease contracts classified as finance leases, construction revenue based on the fair value of the leased FPSO is recognised throughout the construction period, as stated in Note 5(b). Significant judgements are also used to estimate the fair value of the leased FPSO upon commencement of the lease, determined based on the relative stand-alone selling price as described below. The determination of fair value of the leased FPSO takes into account among others: time value of money, financing structure, country risk and risk profile of a client and project. Therefore, the fair value requires estimation, particularly when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.
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