Yinson Annual Report 2018

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) (b) Impairment of loans and receivables The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers event trigger potential cash flow loss, factors such as indication of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivable at the reporting date is disclosed in Note 24. (c) Impairment of vessels Each vessel is deemed to be a single cash generating unit (“CGU”) as the Group manages each vessel separately. The Group reviews these CGUs at each reporting date for impairment indicators in accordance with the accounting policy stated in Note 2.20. If there is an impairment indicator, the recoverable amount for the vessel will be ascertain based on the higher of the fair value less costs of disposal and its value in use. For value in use calculations, the future cash flows are based on contracted cash flows and estimates of uncontracted cash flows for the useful lives of each vessel discounted by an appropriate discount rate. The impairment testing for CGU requires management’s estimates and judgement to derive future cash flows based on key assumptions such as charter rates, utilisation levels and costs escalation based on historical trends amongst others. The discount rate used is based on industry average that varies over time. The Group has evaluated the carrying amounts of vessels against their recoverable amounts and recorded an impairment charge to the carrying value of vessels of RM32,793,000 (2017: RM11,630,000) as disclosed in Note 16. The key assumptions and basis used to determine the recoverable amounts of the vessels are disclosed in Note 16. (d) Useful life and residual value of vessels The Group reviews the residual value and useful life of vessels at each reporting date based on factors such as business plans and strategies, expected level of usage and future technological developments. A reduction in the estimated useful life and residual values of vessels would increase the recorded depreciation and decrease the carrying value of property, plant and equipment. The net book of value of vessels as at 31 January 2018 is RM4,520,854,000 as disclosed in Note 16. For the financial year ended 31 January 2018, the impact of the sensitivity resulting from a 5 years increase/ decrease in the estimated useful life and a 10% increase/decrease in estimated residual value of property, plant and equipment on the expected carrying value of property, plant and equipment and the depreciation expense charged to profit or loss annually are analysed as follows: Carrying value of property, plant Depreciation and equipment expense Group Group RM’000 RM’000 Useful life - Increase by 5 years 4,558,854 174,677 - Decrease by 5 years 4,248,315 513,789 Residual value - Increase by 10% 4,523,358 213,439 - Decrease by 10% 4,518,052 219,233 Corporate Overview Stewardship Governance Accountability 131 Yinson Holdings Berhad Annual Report 2018