MISC Integrated Annual Report 2020

14. SHIPS, OFFSHORE FLOATING ASSETS AND OTHER PROPERTY, PLANT AND EQUIPMENT (CONT’D.) (a) The net carrying amounts of ships pledged as security for borrowings (Note 20(c)) are as follows: Group 2020 2019 RM’000 RM’000 Ships in operation 8,991,447 6,300,806 (b) The volatility of charter hire rates, expired charter contracts or contracts that are approaching the expiry date were identified as indications that the carrying amount of certain ships may be impaired. The indications of impairment identified for the Group’s Marine & Heavy Engineering segment’s other property, plant and equipment and right-of-use assets are disclosed in Note 5(a). The Group and the Corporation have performed a review of the recoverable amount of their ships, offshore floating assets, other property, plant and equipment and right-of-use assets during the financial year. The review led to the recognition of net impairment losses of RM321,160,000 (2019: RM195,335,000) and RM10,444,000 (2019: RM8,582,000) for the Group and the Corporation respectively, as disclosed in Note 5(a). The recoverable amount was based on the higher of fair value less costs of disposal or value-in-use, and determined at the CGU of each asset. Recoverable amount determined from value-in-use (“VIU”) As at the current financial year, the Group’s recoverable amount for impaired other property, plant and equipment and right-of-use assets of its Marine & Heavy Engineering segment of RM1,795,583,000 was determined from the VIU calculations using cash flow projections discounted at rate ranging from 10.5% to 11.0%. Impairment losses of RM300,000,000 for the Group was recognised in the current financial year using this basis. As at the end of the previous financial year, the Group’s recoverable amount for impaired ships and right-of-use assets of RM21,877,000 was determined from the VIU calculations using cash flow projections discounted at rate 7.8%. Impairment losses of RM40,386,000 for the Group was recognised in the previous financial year using this basis. Recoverable amount determined from fair value less costs of disposal The fair values of certain ships and offshore floating assets were determined based on valuation performed by independent valuers based on comparable ships and offshore floating assets. Impairment of RM21,160,000 (2019: RM154,949,000) and RM10,444,000 (2019: RM8,582,000) for the Group and the Corporation respectively were recognised using this basis. Both fair value measurement and VIU were categorised as Level 3 fair value as defined in Note 2.3(z). (c) Included in additions to the ships under construction and project-in-progress of the Group is finance costs capitalised during the year of RM73,655,000 (2019: RM67,245,000), including general borrowing costs. 15. PREPAID LEASE PAYMENTS ON LAND AND BUILDINGS Group Corporation 2020 2019 2020 2019 RM’000 RM’000 RM’000 RM’000 At 1 January 219,843 212,988 3,566 3,730 Addition – 14,300 – – Amortisation for the year (Note 5) (7,359) (7,405) (100) (124) Currency translation differences 50 (40) 50 (40) At 31 December 212,534 219,843 3,516 3,566 Analysed as: Leasehold land 209,018 216,277 – – Leasehold buildings 3,516 3,566 3,516 3,566 212,534 219,843 3,516 3,566 Included in leasehold land of the Group is the carrying value of a long term leasehold and foreshore land of a subsidiary of RM209,018,000 (2019: RM216,277,000) which cannot be disposed off, charged or subleased without the prior consent of the Johor State Government. 16. INTANGIBLE ASSETS Group Other intangible Goodwill assets Total RM’000 RM’000 RM’000 Cost At 1 January 2019 992,030 212,557 1,204,587 Currency translation differences (9,855) – (9,855) At 31 December 2019/1 January 2020 982,175 212,557 1,194,732 Currency translation differences (15,547) – (15,547) At 31 December 2020 966,628 212,557 1,179,185 Accumulated amortisation and impairment At 1 January 2019 162,501 185,205 347,706 Amortisation for the year (Note 5) – 6,373 6,373 At 31 December 2019/1 January 2020 162,501 191,578 354,079 Amortisation for the year (Note 5) – 5,884 5,884 At 31 December 2020 162,501 197,462 359,963 Net carrying amount At 31 December 2020 804,127 15,095 819,222 At 31 December 2019 819,674 20,979 840,653 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS 10 392 10 393 /// Leadership / Governance / Financial Statements / Additional Information / Annual General Meeting ////// /// Leadership / Governance / Financial Statements / Additional Information / Annual General Meeting ////// Section Section MISC Berhad / Integrated Annual Report 2020 MISC Berhad / Integrated Annual Report 2020