Tropicana Corporation Berhad Annual Report 2019

Independent Auditors’ Report To the members of Tropicana Corporation Berhad (Incorporated in Malaysia) KEY AUDIT MATTERS (CONT’D.) Impairment of property, plant and equipment (Refer to Note 15 to the financial statements) The Group is required to perform impairment test of CGU whenever there is an indication that the CGU may be impaired by comparing the carrying amount with its recoverable amount. The management determined that there is an indication of impairment of property, plant and equipment relating to its hotel operation (“ Hotel Building ”) due to economic performance of hotel operation is below expectations. Accordingly, the Group engaged a firm of independent valuers to estimate the fair value of the Hotel Building by using income approach, which involves future cash inflows and outflows that will be derived from its hotel operations and discounting them with an appropriate commercial yield rate. The aforementioned impairment review gave rise to an impairment loss of the Hotel Building of RM50.5 million representing 14% of the Group’s profit before tax. This impairment review process involved assumptions that are highly judgemental and 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 considered the objectivity, independence and expertise of the firms of independent valuers; • We assessed the reasonableness of the key assumptions and methodologies adopted by the independent valuers in estimating the fair value of the Hotel Building in the valuation and whether such key assumptions and methodologies used are within a reasonable range of expectations; • As part of our evaluations of the fair value of the Hotel Building, 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 assessed the appropriateness of the commercial yield rate used to determine the present value of the cash flows and whether the rate used reflects the current market assessments of the time value of money. 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 information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Tropicana Corporation Berhad Annual Report 2019 pg 116 About Tropicana Our Strategic Performance Our Leadership