301 INTEGRATED ANNUAL REPORT 2026 ACCOUNTABILITY | INDEPENDENT AUDITORS’ REPORT REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matter How our audit addressed the key audit matter Revenue recognition arising from contract modification for FPSO Atlanta Refer to Note 5 (d) and Note 6 to the financial statements. The Group recognises revenue from Project Atlanta in accordance with MFRS 15 – Revenue from Contracts with Customers. Contracts with the customer included engineering, procurement, construction, installation and commissioning (“EPCIC”) services and long-term operation and maintenance services, which were combined and accounted for as a single contract with the customer. The combined contract gives rise to an overall transaction price, which is allocated to the respective performance obligations and recognised based on the satisfaction of those performance obligations. As part of this contractual arrangement, amounts arising from the project loan were previously assessed, based on their commercial substance, as forming part of the overall transaction price of the services contract and were accounted for as consideration payable to the charterer, offset against contract assets arising from the fulfilment of the EPCIC performance obligation in previous financial years. During the financial year, the Group completed the buy-out of the project loan relating to FPSO Atlanta. Management assessed that, in substance, the outcome of the buyout resulted in an increase in the transaction price of USD153 million (equivalent to RM651 million) under the combined FPSO Atlanta contract and therefore constituted a contract modification in accordance with MFRS 15. The accounting for this contract modification involved significant judgement, particularly in determining the extent to which the increase in transaction price relates to services under the existing scope of work, and that relating to variation of scope arising from modifications to the contractual arrangement, including enhancements to the operation and maintenance services. These judgements have a direct impact on the timing of revenue recognition, as amounts relating to services relating to existing scope of work are recognised through a cumulative catch-up adjustment, while the remaining amounts are recognised over time. Given the magnitude of the transaction price adjustment and the significant judgement required in distinguishing between existing scope and variation to scope for future services under MFRS 15, we determined revenue recognition arising from the FPSO Atlanta contract modification to be a key audit matter. For revenue recognised for the loan buy-out, we have performed the following procedures: - Obtained, reviewed and evaluated the buy-out letter and the Amendment and Restatement Agreement relating to a Time Charter Agreement dated 21 February 2022, including identification of key terms, rights and obligations and condition precedents of the transaction; - Recomputed the total gain on loan buy-out, comparing the agreed buy-out price against the existing project economics; - Understand management’s evaluation of the project under MFRS 15 principles of contract modification; - Obtained management’s transaction price allocation worksheet and verified the allocation performed, on a sample basis, to the supporting documents (e.g. signed purchase orders, variation orders, milestone completion certificates, etc.); - Recomputed the gain to be recognised immediately to the profit or loss and the amortisation of the remaining scope of works over the charter period; and - Reviewed the adequacy of the Group’s disclosures included in the consolidated financial statements. Based on procedures performed, no material exceptions were noted. We have determined that there are no key audit matters to report for the Company. Information other than the financial statements and auditors’ report thereon The Directors of the Company are responsible for the other information. The other information comprises the Directors’ Report and the Integrated Annual Report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial statements The Directors of the Company are responsible for the preparation of the financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
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