Yinson Annual Report 2021

232 YINSON HOLDINGS BERHAD SECTION 07 : ACCOUNTABILITY NOTES TO THE FINANCIAL STATEMENTS (CONT’D) For the financial year ended 31 January 2021 5. Critical accounting estimates and judgements (continued) (f) Share-based compensation plans (continued) The final number of Yinson Shares or cash performance bonuses to be awarded will depend on the achievement of pre-determined target points for daily share price and Award Conditions over a four-year performance period, and is subject to approval by the Employees’ Share Scheme Committee and the Board of Directors of the Company. No Yinson Shares or cash performance bonuses will be awarded if the share price targets and Award Conditions are not met at each annual assessment date within the performance period. Significant judgment is required to determine whether the target points for daily share price and Award Conditions are expected to be achieved at each annual assessment date within the performance period, and correspondingly, the number of Yinson Shares or cash performance bonuses to be awarded. Based on the above, compensation costs of the Group's LTIP of RM15 million (Note 29(c)), reflecting the benefits accruing to the employees over the service period to which the performance criteria relate, were recognised in the current financial year. (g) The measurement and recognition of revenues on EPCIC contracts based on the input method The Group has an ongoing EPCIC contract to construct an FPSO vessel for a customer. For this contract, revenue is recognised over time by reference to the Group’s progress towards completing the EPCIC of the FPSO. The measure of progress is determined based on the proportion of contract costs incurred to date to the estimated total contract costs (“input method”). Management has to estimate the total contract costs to complete, which are used in the input method to determine the Group’s recognition of contract revenue. When it is probable that the total contract costs will exceed the total contract revenue, a provision for onerous contracts is recognised immediately. Significant judgement is used to estimate the above-mentioned total contract costs to complete. In making these estimates, management has applied its past experience of completing similar projects, as well as quotations from and contracts with suppliers and sub-contractors. These estimations are also made with due consideration of the circumstances and relevant events that were known to management at the date of these financial statements. Total contract costs may also be affected by factors such as uncertainties in contract execution, variation in scope of works and acceptance of claims by customers. Costs and revenue (and the resulting gross margin) at completion reflect, at each reporting period, management’s current best estimate of the probable future benefits and obligations associated with the contract. (h) Recoverable amounts of investment in subsidiaries The Company reviews its investment in subsidiaries for impairment indicators in accordance with the accounting policy stated in Note 2.20. If an impairment indicator exists, the recoverable amount for the investment will be ascertained based on its value-in-use (“VIU”). For VIU calculations, the future cash flows from these subsidiaries are discounted by an appropriate discount rate. Significant judgments are used to estimate the future cash flows and discount rates applied in computing the recoverable amounts of the investments. In making these estimates, management has relied on past performance and its expectations of future cash flows from these subsidiaries. The discount rates applied reflects specific risks relating to the relevant industry and geographical location of the underlying cash flows.