Wah Seong Corporation Berhad Annual Report 2020

83 ANNUAL REPORT 2020 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WAH SEONG CORPORATION BERHAD REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters 4.0 Expected credit loss on amounts owing by joint ventures and other receivables Refer to Note 2.17(d) for the accounting policy and Note 16 and Note 19(a) to the financial statements. As at 31 December 2020, the gross amounts owing by joint ventures is RM51.0 million and other receivables is RM75.1 million. Impairment loss totalling RM24.7 million and RM17.1 million were recognised respectively in the financial year ended 31 December 2020. We focused on this area because significant judgement and estimates were used in applying the expected credit loss models. Audit procedures performed over this key audit matter were as follows: • Discussed with management to understand the underlying assumptions used in the general 3-stage approach for amount owing by joint ventures and other receivables; • Tested key assumpt ions and checked mathematical accuracy of the expected credit loss models; • Assessed the reasonableness of management judgment on multiple scenarios with different default rate and probabilities assigned to each of the scenarios; and We also considered the adequacy of the Group’s disclosures made in the financial statements. Based on the procedures performed, no material exception was noted. 5.0 Recognition of deferred tax assets for unutilised tax losses Refer to Note 2.25(b) for the accounting policy and Note 8 to the financial statements. As at 31 December 2020, the Group recognised deferred tax assets amounted to RM26.7 million from unused tax losses. In order to determine the extent of deferred tax assets to be recognised as at 31 December 2020, management prepared a taxable profit projection, to be utilised against the unused tax losses within the expiry period. We focused on this area because significant judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits. Audit procedures performed over this key audit matter were as follows: • Reviewed appropriateness of the key assumptions used by management in the taxable profit projection to support the recoverability of deferred tax assets; • Tested mathematical accuracy of management’s taxable profit projection; and We also considered the adequacy of the disclosures made in the financial statements. Based on the procedures performed, no material exception was noted. There are no key audit matters to report for 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 the Directors’ Report, Statement on Risk Management and Internal Control and other sections of Annual Report 2020, 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.