Yinson Annual Report 2020

327 Annual Report 2020 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(d) and Note 16(g) to the financial statements. As at 31 January 2020, the Group has three Floating, Production, Storage and Offloading (“FPSO”), four Offshore Support Vessels (“OSV”), two newly acquired tankers, and two other vessels under conversion. The carrying value of these vessels amounted to RM4,796.4 million, representing 50% of the Group’s total assets. The decline in vessel utilisation and charter rates for the OSVs were identified as impairment triggers. Accordingly, management had performed impairment assessments of these affected vessels. In assessing the recoverable amounts of these vessels, value-in-use (“VIU”) method is used where management estimates the future cash flows expected to be earned by these vessels. The key assumptions subject to significant judgement are the charter rates, charter periods, vessels utilisation levels and discount rates. The existence of significant estimation and judgement used for the VIU, is why we have given specific audit focus and attention to this area. As a result of the above, the Group recognised an impairment charge of RM4.9 million on one of 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: o Checked that the valuation methodologies have been consistently applied from prior years and across the Group; o Benchmarked key assumptions used by management in estimating future cash flows in the VIU calculations such as charter rates and vessel utilisation levels to market data in the oil & gas sector; o Assessed reliability of management’s prior years assumptions on utilisation levels, charter periods and charter rates to evaluate robustness of management’s assumptions by backtesting to actual utilisation levels and revenue earned against prior year’s projections; o Compared management’s basis for determining discount rates by checking the key inputs used such as risk free rate, market risk premium and industry’s debt and equity ratios to market data, with assistance from our internal experts; o Tested themathematical accuracy of the VIU calculations prepared by management; and o Evaluated the adequacy of the Group’s disclosures included in Note 16(g) of the consolidated financial statements. As a result of our work, no material exceptions were noted.