Wah Seong Corporation Berhad Annual Report 2017

FINANCIAL STATEMENTS WAH SEONG CORPORATION BERHAD ANNUAL REPORT 2017 72 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters Impairment assessment on investments in associates and joint venture Refer to Note 8 ‘Investment in Associates’, Note 9 ‘Investment in Joint Ventures’ and Note 3(c) ‘Critical Accounting Estimates and Judgements’. As at 31 December 2017, the Group holds investments in Petra Energy Berhad (“PEB”) and Alam-PE Holdings (L) Inc. (“Alam-PE”) which are accounted for as an associate and joint venture respectively. PEB and Alam-PE are primarily operating in the offshore oil and gas market. Management assessed the carrying amounts of the above investments for impairment in view of the decreased activities in the offshore oil and gas market and lower market value in PEB. We focused on this area due to the size of the investments totalling RM208.7 million and because management’s estimate of the VIU required significant estimates over the future cash flows. We performed the following audit procedures to evaluate management’s methodology and assumptions used in the VIU for each investments: • Revenue growth rate by reference to the secured contracts, historical performance and future market outlook; • Current year profit margin by comparing to historical profit margins; • Terminal value growth rates to reference external macroeconomic sources of data and industry specific trends; and • We involved PwC valuation specialists to assist us in evaluating the appropriateness of methodology and discount rates used for PEB and Alam-PE. This involved independently assessing the cost of equity using comparable companies in the same territories. We considered the sensitivity of the recoverable amount of PEB and Alam-PE by varying the key assumptions within reasonably possible ranges. The results of the sensitivity analysis are disclosed in the consolidated financial statements. There are no key audit matters in relation to the financial statements of the Company. 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 of Corporate Information, Sustainability Statement, Management Discussion & Analysis, Audit Committee report, Remuneration Committee report, Nomination Committee report, Corporate Governance Overview Statement, Additional Compliance Information, Statement on Risk Management and Internal Control, Statement of Directors’ Responsibilities, and Directors’ 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. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WAH SEONG CORPORATION BERHAD