Yinson Annual Report 2018

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters How our audit addressed the key audit matters Significant judgements used to evaluate for impairment indicators and significant estimates used in impairment assessment of vessels As at 31 January 2018, the Group has three Floating, Production, Storage and Offloading (“FPSO”) vessels totalling RM4,131 million, four Offshore Support Vessels (“OSV”) totalling RM179 million and a FPSO conversion candidate vessel amounting to RM211 million. These vessels totalling RM4,521 million, represents 70% of the Group’s total assets. The Group identified impairment indicators such as continued low charter rates and/ or utilisation rates due to lack of secured long term charter contracts for the Group OSVs, the lay-up period and coming off contracts for FPSO vessels. The recoverable amounts for these vessels are based on value in use calculations. A significant portion of the carrying value of the FPSOs with short remaining contractual period is expected to be recovered through redeployment. Therefore, significant judgement is exercised by management in estimating the uncontracted cash flows arising from the possibilities in determining whether an additional contract extension would be requested from clients or if and when a new contract can be obtained. The details of the significant estimates and judgement used by management are set out in Note 5(c) and Note 16. The Group recognised an impairment charge of RM32.8 million on two of its OSVs for the current financial year. As management use significant judgement in determining the estimates used in assessing the value in use for these vessels and there are inherent uncertainty in assessing estimates, this is a key audit matter. Audit procedures performed over this key audit matter were as follows: • We evaluated management’s assessment of impairment indicators for the vessels; and • for vesselswhich had impairment indicators, the audit procedures performed on management’s VIUs were as follows: • Checked that the valuation methodologies have been consistently applied from prior years and across the Group; • Benchmarked the key assumptions used by management in the value in use calculations such as charter and vessel utilisation rates to market data such as oil prices, interest rates and market outlook for the oil & gas sector. • In addition, we assessed the reliability of management’s prior year’s assumptions on utilisation level and charter rates to evaluate robustness of management’s assumptions. This involves comparing the vessel’s recent actual utilisation levels and revenue earned against prior year’s projections; • Assessed management’s discount rates whether these are reasonable compared to the industry’s weighted average cost of capital with the assistance of internal experts; • Tested the mathematical accuracy of the VIU calculations prepared by management; and • Reviewed management’s sensitivity analysis over the recoverable amounts of the affected OSVs by varying the key assumptions within reasonably possible ranges. The results of the sensitivity analysis are disclosed in Note 16(f) of the consolidated financial statements. • Evaluated the adequacy of the Group’s disclosures regarding the impairment of these vessels, which are included in Note 16 of the consolidated financial statements. Based on the work performed, there was no material exception to report. to the Members of Yinson Holdings Berhad (Cont’d) (Incorporated in Malaysia) (Company No. 259147-A) 190 Yinson Holdings Berhad Annual Report 2018 Accountability