MISC Annual Report 2019

13. 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 19(c)) are as follows: Group 2019 2018 RM’000 RM’000 Ships in operation 6,300,806 6,761,553 (b) The volatility of charter hire rates, expired charter contracts or contracts that approaching the expiry date were identified as indications that the carrying amount of certain ships may be impaired. 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 RM195,335,000 (2018: RM75,222,000) and RM8,582,000 (2018: RM49,802,000) 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”) The Group’s recoverable amount for impaired ships and right-of-use assets of RM21,877,000 (2018: RM467,500,000) was determined from the VIU calculations using cash flow projections discounted at rate ranging from 7.2% to 10.3% (2018: 7.6% to 10.5%). Impairment losses of RM40,386,000 (2018: RM49,802,000) for the Group was recognised 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 RM154,949,000 (2018: RM25,420,000) and RM8,582,000 (2018: RMNil) 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(x). (c) Included in additions to the ships under construction and project-in-progress of the Group is finance costs capitalised during the year of RM67,245,000, including general borrowing costs (2018: RM5,404,000). 14. PREPAID LEASE PAYMENTS ON LAND AND BUILDINGS Group Corporation 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 At 1 January 212,988 220,128 3,730 3,775 Addition 14,300 – – – Amortisation for the year (Note 5) (7,405) (7,216) (124) (121) Currency translation differences (40) 76 (40) 76 At 31 December 219,843 212,988 3,566 3,730 Analysed as: Leasehold land 216,277 209,258 – – Leasehold buildings 3,566 3,730 3,566 3,730 219,843 212,988 3,566 3,730 Included in leasehold land of the Group is the carrying value of a long term leasehold and foreshore land of a subsidiary of RM216,277,000 (2018: RM209,258,000) which cannot be disposed off, charged or subleased without the prior consent of the Johor State Government. 15. INTANGIBLE ASSETS Group Other intangible Goodwill assets Total RM’000 RM’000 RM’000 Cost At 1 January 2018 974,136 212,557 1,186,693 Write-off (Note 5) (721) – (721) Currency translation differences 18,615 – 18,615 At 31 December 2018/1 January 2019 992,030 212,557 1,204,587 Currency translation differences (9,855) – (9,855) At 31 December 2019 982,175 212,557 1,194,732 Accumulated amortisation and impairment At 1 January 2018 162,501 179,813 342,314 Amortisation for the year (Note 5) – 5,392 5,392 At 31 December 2018/1 January 2019 162,501 185,205 347,706 Amortisation for the year (Note 5) – 6,373 6,373 At 31 December 2019 162,501 191,578 354,079 Net carrying amount At 31 December 2018 829,529 27,352 856,881 At 31 December 2019 819,674 20,979 840,653 NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 FINANCIAL STATEMENTS MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019 304 305