Yinson Annual Report 2020

328 Yinson Holdings Berhad SECTION 7 ACCOUNTABILITY Key audit matters How our audit addressed the key audit matters Lease Commencement of FPSO Helang Refer to Note 5(b), Note 6, Note 7 and Note 33(a) to the financial statements. During the financial year, the Group commenced the finance lease of FPSO Helang upon obtaining its provisional certificate of completion after achieving first gas in 6 December 2019. Being a manufacturer lessor, the Group recognises revenue and its corresponding selling profit arising from the underlying asset. Thereafter, finance income is recognised over the lease term based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the lease. As a result, RM1,551.5 million was recorded as revenue with a selling profit of RM7.5 million. As at 31 January 2020, a finance lease receivable pertaining to FPSO Helang amounting to RM1,533.8 million was recognised in the consolidated statement of financial position. The determination of the fair value of the underlying asset requires significant estimation and judgment. The key assumptions and estimates made included the lease term, residual value, implicit interest rate of the lease, and the lease payments. Focus is placed on this area due to the magnitude of the revenue recognised and the significant estimates and judgements used in arriving at the above key assumptions. Audit procedures performed over this key audit matter were as follows: • Discussed and reviewed management’s basis and assumptions used for estimating the selling profit for the leased asset upon lease commencement in accordance with MFRS 16; • Assessed and evaluated the reasonableness of the discount rate applied by management by discussing with our internal experts on the appropriate financing and project risks; • Compared the lease payments to historical operational performance of other FPSOs of the Group to ascertain that these are reasonable; • Assessed the basis of management’s residual value estimates; • Tested the mathematical accuracy of the finance lease receivables calculations prepared by management; and • Evaluated the adequacy of the Group’s disclosures included in the consolidated financial statements. As a result of our work, no material exceptions were noted. REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (continued) Key audit matters (continued) Independent auditors’ report (cont’d) to the members of Yinson Holdings Berhad (Incorporated in Malaysia) Registration No. 199301004410 (259147-A)