Yinson Annual Report 2019

215 Yinson Group Overview Strategy and Sustainability Governance Accountability Annual General Meeting Key audit matters How our audit addressed the key audit matters Assessing the carrying value of equity investments in subsidiaries and amounts due from subsidiaries Refer to Notes 19 and 24 to the financial statements. (a) YHB Company’s equity investment in subsidiaries As at 31 January 2019, the net carrying value of equity investments in subsidiaries reported in the Company’s statement of financial position totalled RM790.5 million. During the current financial year, the equity investments in certain subsidiaries were written down by RM3.5 million as the recoverable amounts were lower than the corresponding carrying values. We focused on the carrying value of equity investments in subsidiaries as the recoverable amounts are subject to significant judgement and critical estimatesmade bymanagement over the key assumptions used in projected cash flows and the discount rates. (b) YHB Company’s amounts receivable from subsidiaries As at 31 January 2019, the amounts receivable from subsidiaries reported in the Company’s statement of financial position amounted to RM1,181.6 million. During the current financial year, the amounts receivable from subsidiaries were impaired by RM101.9 million as a result of applying ECL. We focused on the carrying value of amounts receivable from subsidiaries as there are significant judgements and critical estimates made by management in determining the ECL. Audit procedures performed over this key audit matter were as follows: (a) YHB Company’s equity investments in subsidiaries In assessing the recoverable amounts of equity investments in subsidiaries, we performed the following audit procedures: • Evaluated management’s assessment of impairment indicators; • For equity investments which had impairment indicators, assessed the VIU from discounted cash flows used by management to determine the recoverable amounts; • Agreed the projected cash flows to the budgets approved by the Board of Directors; • Discussed with management the key assumptions used in the valuation model and checked these to supporting documentation; and • Back-testing actual historical cash flow results to previous forecasts to ascertain the robustness of forecasts. (b) YHB Company’s amounts receivable from subsidiaries In assessing the ECL model on the amounts receivable from subsidiaries, we performed the following audit procedures: • Discussed with management to understand the underlying assumptions used in the general 3-stage impairment model under MFRS 9 when determining the ECL for amounts receivable from subsidiaries; • Reviewed the appropriateness of key assumptions used in the 3-stage impairment model and testing mathematical accuracy of the model used; and • Tested the accuracy of the ageing against supporting documents on a sample basis. We evaluated the adequacy of the impairment charges that was recognised and the appropriateness of the disclosures included in the notes to the financial statements. Based on the procedures performed, no material exception was noted. REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued)