Tropicana Corporation Berhad Annual Report 2019

For the financial year ended 31 December 2019 Notes to the Financial Statements 3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D.) 3.1 Key sources of estimation uncertainty (cont’d.) (d) Impairment of investments in subsidiaries (cont’d.) During the financial year, after reviewing the business environment as well as the Company’s strategies, past and future performance of its investments in subsidiaries, management concluded that there were impairment losses in the investment in subsidiaries amounting to RM62,916,000 as disclosed in Note 18. (e) Fair valuation of investment properties The Group carries its investment properties at fair value, with changes in fair value being recognised in the profit or loss. Significant judgement is required in determining the fair value which may be derived based on different valuation methods. In making the judgement, the Group engaged independent valuation specialists to determine the fair values as disclosed in Note 17. (f) Impact of the Coronavirus (COVID-19) outbreak In assessing the expected credit loss, the Group and the Company considered reasonable and supportable information at the reporting date. At the reporting date, the Group and the Company evaluated the likelihood of the severity and impact of the COVID-19 outbreak and concluded that COVID-19 would not significantly affect the estimation of expected losses of financial assets. Accordingly, the methods, assumptions and information used to measure the ECL did not incorporate any forward-looking information relating to the effects of COVID-19. Subsequent to the reporting date, the Group and the Company changed its risk management practices in response to the COVID-19 outbreak and extended the payment terms for certain trade receivables. Accordingly, the Group and the Company changed their ECL methodology in order to better estimate the impact of the outbreak in accordance with the requirements of MFRS 9. The simplified ECL models adopted by the Group and the Company as at 31 December 2019 were not designed for the current economic shocks due to COVID-19. The Group and the Company have accordingly, calculated any overlays and adjustments to these simplified models. In addition, due to the abnormal circumstances caused by COVID-19, it may take time for the Group and the Company to detect actual changes in risk indicators for a specific customer. In order to accelerate the reflection of changes in credit quality not yet detected at an individual customer level, the Group and the Company adjust the ratings and the probabilities of default on a collective basis, considering risk characteristics such as the industry or geographical location of the customers. Whilst it is not possible to estimate the full impact of the outbreak’s short-term and longer-term effects or the Government’s varying efforts to combat the outbreak and support businesses, it is likely that the ECL would increase within the next financial year. 3.2 Judgement made in applying accounting policies In the process of applying the Group’s and the Company’s accounting policies, management has made the following judgements, apart from there involving estimations, which have the most significant effect on the amounts recognised in the financial statements: (a) Classification between investment properties and property, plant and equipment The Group has developed certain criteria based on MFRS 140 in making judgement whether a property quali es as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a nance lease), the Group would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insigni cant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so signi cant that a property does not qualify as investment property. Tropicana Corporation Berhad Annual Report 2019 pg 156 About Tropicana Our Strategic Performance Our Leadership