2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.4 Summary of significant accounting policies (contd.) (aa) Fair value measurement (contd.) The Group and the Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: (i) Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities (ii) Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable (iii) Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group and the Company determine whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. (ab) Contingencies A contingent liability is: (i) A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or (ii) A present obligation that arises from past events but is not recognised because: – it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or – the amount of the obligation cannot be measured with sufficient reliability. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group. Contingent liabilities and assets are not recognised in the statement of financial positions of the Group, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined. 2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.5 Significant accounting judgements and estimates The preparation of the Group’s and of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. (a) Judgements There are no critical judgements made by management in the process of applying the Group’s and the Company’s accounting policies that may have significant effects on the amounts recognised in the financial statements. (b) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows: (i) Revenue recognition – Asset consultancy The Group recognises its revenue and profit on consultancy contract services based on the percentage of completion, calculated by reference to the proportion of costs incurred to date against the total expected costs for the contracts. Full provision is made for losses on all contracts when they are first foreseen. Significant estimates are applied especially in determining the total expected costs for the contracts in order to reliably estimate the percentage of completion. (ii) Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the VIU of the CGU to which the goodwill is allocated. Estimating a value-in-use amount requires management to make an estimate of the expected future cash flows from the CGU and also to determine suitable discount and growth rates in order to calculate the present value of those cash flows. The carrying amounts of goodwill at 31 December 2022 was RM561.0 million (2021: RM539.7 million). Further details are disclosed in Note 17(a). (iii) Impairment of investment in subsidiaries The Company determines whether investment in subsidiaries is impaired when there is an indication of impairment. This requires an estimation of the VIU of the investment in subsidiaries. Estimating a VIU amount requires management to make an estimate of the expected future cash flows and also to determine suitable discount and growth rates in order to calculate the present value of those cash flows. The carrying amounts of investment in subsidiaries at 31 December 2022 was RM1,673.3 million (2021: RM1,546.1 million). Further details are disclosed in Note 18. p.300 p.301 UEM EDGENTA BERHAD INTEGRATED ANNUAL REPORT 2022 1 2 3 4 5 6 7 8 9 FINANCIAL STATEMENTS Notes to the financial statements For the year ended 31 December 2022 Notes to the financial statements For the year ended 31 December 2022
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