MSM Malaysia Holdings Berhad Annual Report 2020

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (continued) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters Impairment assessment of property, plant and equipment, right-of-use assets and intangible assets other than goodwill (continued) We focused on this area as the recoverable amount of the assets based on VIU calculations require management’s judgement on the assumptions used in the calculations, in particular selling price, raw sugar price, sales volume, realisability of the assets at terminal year, discount rate and exchange rate. Refer to Notes 3(e), 3(i), 3(k) and 3(r) in the significant accounting policies, Note 5 in the critical accounting estimates and judgement and Notes 17, 18 and 19 to the financial statements. • We examined the sensitivity analysis prepared by the management on selling premiums, raw sugar price, sales volume, capital expenditure, discount rate and exchange rate to evaluate the impact on the impairment assessment; and • We assessed the adequacy of the disclosures in the financial statements. Based on our procedures, we noted no significant exceptions. Impairment of cost of investments in subsidiaries As at 31 December 2020, the carrying value of investments in subsidiaries is RM1,301.2 million. Management performed impairment assessments of certain investments in subsidiaries, which had impairment indicators. Subsequently an impairment of RM27.4 million was recorded. We focused on this area due to the significant judgements and assumptions made by management in determining the recoverable amount of the investments. The recoverable amounts of investments in subsidiaries were determined based on discounted cash flows of subsidiaries which are available for distributions as dividends except for a subsidiary which operation is classified as discontinuing operations. The recoverable amount for this subsidiary is based on offer prices for assets by third parties. Refer to Note 3(f) in the significant accounting policies and Note 20 to the financial statements. We performed the following audit procedures: • We agreed the cash flow projections used to determine the recoverable amount of the investment in subsidiaries to cash flow projections used to determine the recoverable amount of property, plant and equipment, right-of-use assets and intangible assets which we have assessed above; • We have checked that the cash flow projections used to determine the recoverable amount of investment in subsidiaries had been appropriately adjusted for opening working capital balances, financing and tax cash flows of the respective subsidiaries; and • We have sighted the offer price from third parties for assets in the subsidiary which operations is classified as discontinuing operations. Based on our procedures, we noted no significant exceptions. 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, Chairman’s Statement, Management Discussion and Analysis, Group Financial Report, Sustainability Report, Corporate Governance (including Audit, Governance and Risk Committee Report and Statement of Risk Management and Internal Control), and other sections of the Annual Report 2020, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MSM MALAYSIA HOLDINGS BERHAD (INCORPORATED IN MALAYSIA) REGISTRATION NO. 201101007583 (935722-K) MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 130 CHAIRMAN’S STATEMENT DELIVERING VALUE MSM OVERVIEW MANAGEMENT DISCUSSION & ANALYSIS GROUP FINANCIAL REPORT