Integrated Annual Report 2021

2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.5 Significant accounting estimates and judgements (cont'd.) (b) Key sources of estimation uncertainty (cont'd.) (ii) Impairment of goodwill The Group determines whether goodwill is impaired on an annual basis. This requires an estimation of the value-in-use of the CGU to which 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 choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the impairment losses recognised, carrying amount, the key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in the assumptions are provided in Note 16. (iii) Provisions Provisions are recognised in accordance with the accounting policy in Note 2.3(r). To determine whether it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made, the Group and the Corporation take into consideration factors such as existence of legal/contractual agreements, past historical experience, external advisors’ assessments and other available information. Further details of provisions balances recognised is disclosed in Note 9 and Note 26(c). (iv) Impairment of ships, offshore floating assets, other property, plant and equipment and right-of-use assets 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 impairment losses as disclosed in Note 5(a). The Group and the Corporation carried out the impairment test based on a variety of estimations, including the value-in-use of the CGU to which ships, offshore floating assets, other property, plant and equipment and right-of-use are allocated. Estimating the value-in-use requires the Group and the Corporation to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate to calculate the present value of those cash flows. Further details of the impairment losses recognised are disclosed in Note 14(b). 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.5 Significant accounting estimates and judgements (cont'd.) (b) Key sources of estimation uncertainty (cont'd.) (v) Impairment of trade and other receivables The Group and the Corporation assess at each reporting date whether there is any objective evidence that their trade and other receivables is impaired. To determine whether there is objective evidence of impairment, factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments are considered. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The Group and the Corporation have performed a review of the recoverable amount of their receivable during the financial year. The review led to the recognition of impairment losses as disclosed in Note 22. (vi) Deferred tax assets Deferred tax assets are recognised for all unutilised tax losses, unabsorbed capital allowances and unutilised tax allowances to the extent that it is probable that taxable profits will be available against which the losses and tax allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the business plans of the Group, the likely timing and level of future taxable profits together with future tax planning strategies. Estimating future taxable profits requires the Group to make estimates of the expected future projects and forecasted margins. Any changes in the assumptions will affect the probable taxable profits available to the Group. The information on deferred tax assets is disclosed in Note 29. (vii) Discount rate used in leases Where the interest rate implicit in the lease cannot be readily determined, the Group and the Corporation use the incremental borrowing rate to measure the lease liabilities. The incremental borrowing rate is the interest rate that the Group and the Corporation would have to pay to borrow over a similar term, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Therefore, the incremental borrowing rate 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. The Group and the Corporation estimate the incremental borrowing rate using observable inputs when available and is required to make certain entity-specific estimates. NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 MISC Berhad 340 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 341 FINANCIAL STATEMENTS FINANCIAL STATEMENTS

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