Yinson Annual Report 2019

213 Yinson Group Overview Strategy and Sustainability Governance Accountability Annual General Meeting 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 financial 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 assessing the carrying value of vessels Refer to Note 5(c) which sets out the critical accounting estimates and judgement andNote 16(e) to the financial statements. As at 31 January 2019, the Group has three Floating, Production, Storage and Offloading (“FPSO”) vessels totalling RM4,094.4 million, four Offshore Support Vessels (“OSV”) totalling RM193.2 million, a tanker totalling amounting to RM130.6 million and a FPSO vessel under construction amounting to RM864.6 million. The carrying value of these vessels totalling RM5,282.8 million, representing 65% of the Group’s total assets. Significantjudgementsareexercisedbymanagement in identifying impairment indicator. Consequently, critical estimates on key assumptions are applied by management when performing impairment assessments over the carrying value of vessels for which impairment indicators were identified. In assessing the recoverable amounts of these assets, value-in-use (“VIU”) is used whereby management estimates the future cash flows expected tobeearned by these vessels, current utilisation and in particular the timing for the subsequent redeployment of certain FPSO vessels beyond their current contract periods. In addition, key assumptions that are subject to significant judgement are charter rates, vessels utilisation levels and discount rates. Arising from the above, the Group recognised an impairment charge of RM33.0 million on its OSVs for the current financial year. Audit procedures performed over this key audit matter were as follows: • Evaluated management’s assessment of impairment indicators for the vessels; and • For vessels which 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 key assumptions used bymanagement in the VIU calculations such as charter rates and vessel utilisation levels to market data such as oil prices, interest rates and market outlook for the oil & gas sector; • Assessed reliability of management’s prior years assumptions on utilisation levels and charter rates to evaluate robustness of management’s assumptions by backtesting to actual utilisation levels and revenue earned against prior year’s projections; • Compared management’s discount rates against the industry’s weighted average cost of capital with the assistance from our internal experts; • Tested the mathematical accuracy of the VIU calculations prepared by management; and • Evaluated the adequacy of theGroup’s disclosures included in Note 16 of the consolidated financial statements. Based on the procedures performed, no material exception was noted.