300 YINSON HOLDINGS BERHAD ACCOUNTABILITY REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matter How our audit addressed the key audit matter Accounting for the issuance of Redeemable Convertible Preference Shares (“RCPS”) and Warrants Refer to Note 5(f) and Note 48 to the financial statements. In January 2025, Yinson had entered into definitive agreements with a consortium of investors for a USD1.0 billion investment into the Yinson Production segment, with an option to upsize by another USD0.5 billion. The investment was finalised in June 2025, followed by the issuance of two tranches of Redeemable Convertible Preference Shares (“RCPS”) totalling USD500 million (RM2,097 million), together with detachable warrants amounting to RM25 million as at 31 January 2026. The RCPS has been classified as equity, while the warrants have been classified as financial liabilities in the consolidated statement of financial position. The accounting for the RCPS and warrants involved significant judgement, as disclosed in the financial statements, particularly in determining whether the contractual terms give rise to a present obligation to deliver cash or another financial asset in accordance with MFRS 132 – Financial Instruments: Presentation. In making this assessment, the Group evaluated the contractual terms of the RCPS. The Group concluded that decisions relating to distributions, redemption and conversion are subject to the discretion of the Company, through its control over Yinson Production Offshore Holdings Limited (“YPOHL” or the “Issuer”), an indirect wholly-owned subsidiary of the Company and remain within the control of the Board of Directors of the issuer, including decisions over the timing and approval of an Initial Public Offering (“IPO”), the determination of whether Distributable Excess Cash exists, and how such cash is applied. Accordingly, any cash outflows can only arise following actions approved by the Board of Directors of the Issuer and do not constitute enforceable payment obligations at the reporting date. The warrants were assessed together with the RCPS as part of the same financing arrangement. However, the Group concluded that the warrants give rise to a financial liability, as their settlement involves the issuance of a variable number of equity shares, such that the “fixed for fixed” criterion for equity classification under MFRS 132 is not met. Accordingly, the warrants were classified as financial liabilities. Given the magnitude of the RCPS balance issued under the USD1 billion programme, the linkage between the RCPS and warrants, and the significant judgement involved in assessing control of the Board of Directors of the Issuer, discretion and contractual settlement features, we determined the accounting for the RCPS and warrants to be a key audit matter. We have performed the following: - Obtained, reviewed and evaluated the agreements entered into between Yinson and the consortium of investment funds, including identification of key terms and rights and obligations of the investors and Yinson; - Assessed the classification of the RCPS and warrants based on the principles of MFRS 132 between equity and financial liability, including identifying the liability triggers for the financial instrument; - Evaluated the Group’s assessment of the RCPS terms and conditions, whether key decisions in respect of distributions, redemption and conversion, including the determination and approval of an IPO, the existence of Distributable Excess Cash and how such cash may be applied, are subject to the control and discretion of the Board of Directors, through its control over YPOHL and whether any contractual terms give rise to a present obligation under MFRS 132 to deliver cash or any other financial asset; - Evaluated the classification of the warrants by considering whether the settlement terms result in the issuance of a variable number of equity shares and therefore meet the definition of a financial liability under MFRS 132; and - Reviewed the adequacy of the Group’s disclosures included in the consolidated financial statements. Based on our procedures performed, no material exceptions were noted.
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