Tropicana Corporation Berhad Annual Report 2019

Independent Auditors’ Report To the members of Tropicana Corporation Berhad (Incorporated in Malaysia) KEY AUDIT MATTERS (CONT’D.) Revenue and cost of sales in respect of property development activities (cont’d.) (Refer to Note 4 and Note 5 to the financial statements) (cont’d.) We identified revenue and cost of sales in respect of property development activities as areas requiring audit focus as significant management’s judgement and estimates are involved in estimating the total property development costs which include the common infrastructure costs (which is used to determine progress towards complete satisfaction of the Group’s performance obligation and gross profit margin of the property development activities undertaken by the Group). How our audit addressed this matter To address these areas of audit focus, we performed, amongst others, the following procedures: • We obtained an understanding of the internal controls over the accuracy and timing of revenue recognised in the financial statements, including controls performed by management in estimating the total property development cost, gross profit margin and progress towards complete satisfaction of the Group’s performance obligation of the property development activities; • For significant property development phases, we read the sale and purchase agreements entered into with the customers to obtain an understanding of the specific terms and conditions; • We evaluated the assumptions applied in estimating the total property development costs for each property development phase by examining documentary evidence such as letters of award issued to contractors to support the total budgeted costs. We also considered the historical accuracy of management’s forecasts for the similar property development projects in evaluating the estimated total property development costs; and • We evaluated the determination of the progress towards complete satisfaction of the Group’s performance obligations by examining supporting evidence such as contractors’ progress claims and suppliers’ invoices. • We observed the progress of the property development phases by performing site visits and examined physical progress reports. We also discussed the status of on-going property development phases with management, finance personnel and project officials. Valuation of investment properties (Refer to Note 17 to the financial statements) The Group adopts fair value model for its investment properties. When estimating the fair value of a property, the objective is to estimate the price that would be received from the sale of the investment property in an orderly transaction between market participants at the reporting date under current market conditions. In addition, the fair value should reflect, among other things, rental income from current leases and other assumptions that market participants would use when pricing the investment property under current market conditions, which are highly judgmental. Accordingly, we consider this to be an area of audit focus. Tropicana Corporation Berhad Annual Report 2019 pg 114 About Tropicana Our Strategic Performance Our Leadership