Tropicana Corporation Berhad Annual Report 2019

KEY AUDIT MATTERS (CONT’D.) Valuation of investment properties (cont’d.) (Refer to Note 17 to the financial statements) (cont’d.) How our audit addressed the matter Our audit procedures focused on the valuations performed by firms of independent valuers, which included amongst others the following procedures: • We considered the objectivity, independence and expertise of the firms of independent valuers; • We obtained an understanding of the methodology adopted by the independent valuers in estimating the fair value of the investment properties and assessed whether such methodology is consistent with those used in the industry; • As part of our evaluations of the fair values of investment properties, we had discussions with the independent valuers to obtain an understanding of the property related data used as input to the valuation models; and • We also assessed whether the yield rate used in the valuation models reflects the return that investors would require if they were to choose an investment that would generate cash flows of amounts, timing and risk profile equivalent to those that the entity expects to derive. Business combination (Refer to Note 18 to the financial statements) The Group and the Company acquired several subsidiaries during the financial year. We identified these acquisitions of Acquiree Companies as disclosed in Note 18(a)(xxii) to the financial statements as areas requiring audit focus for the reasons below. Acquisition of Acquiree Companies that has been accounted for as a business combination (“ MFRS 3 ”) involves significant and complex judgements in the determination of the fair value of the assets and liabilities acquired. Included in the identifiable assets of Acquiree Companies as at date of acquisition is inventories of RM3,325.9 million, representing the land held for development and property development costs, which accounted for approximately 92% of total identifiable assets of Acquiree Companies. The Group estimated the fair value these inventories on date of acquisition based on several methods such as income approach and comparison approach. Such valuations include a number of significant and complex judgements in the determination of the fair value of the inventories. Accordingly, we consider this to be an area of audit focus. How our audit address this matter To address these areas of audit focus, we performed, amongst others, the following procedures: • We assessed the competence, capabilities and objectivity of the independent valuers appointed by management and evaluated the reasonableness of their conclusions in relation to the key assumptions used; • We assessed the reasonableness of the key assumptions and methodologies adopted by the independent valuers in estimating the fair value of the identifiable assets, inventories in the valuation whether such key assumptions and methodologies used are within a reasonable range of expectations; and • We read the sales and purchase agreement, confirmed that the accounting treatment is in accordance to MFRS 3 Business Combinations, and reviewed the financial statements for appropriate disclosure. pg 115 Tropicana Corporation Berhad Annual Report 2019 Sustainability at Tropicana What We’ve Governed Financial Statements & Other Information