Yinson Annual Report 2021

233 ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) For the financial year ended 31 January 2021 5. Critical accounting estimates and judgements (continued) (h) Recoverable amounts of investment in subsidiaries (continued) Based on the above, the Company has recognised an impairment charge of RM41 million (2020: RM8 million) (Note 9) on its investment in subsidiaries during the financial year. As at 31 January 2021, the carrying amount of investment in subsidiaries amounted to RM2,011 million (2020: RM807 million) (Note 19). (i) Critical judgement over interest rate benchmark reform Following the financial crisis, the reform and replacement of benchmark interest rates such as USD LIBOR and other interbank offered rates (‘IBORs’) has become a priority for global regulators. There is currently uncertainty around the timing and precise nature of these changes. The Group’s risk exposure that is directly affected by the interest rate benchmark reform are its floating rate debt denominated in USD (Note 32). The Group has hedged certain of this debt with interest rate swaps (Note 42(a)(i)), and it has designated the swaps in cash flow hedges of the variability in cash flows of the debt, due to changes in 3 month USD LIBOR that is the current benchmark interest rate. It is currently expected that the Secured Overnight Financing Rate (“SOFR”) will replace USD LIBOR. To transition existing contracts and agreements that reference USD LIBOR to SOFR, adjustments for term differences and credit differences might need to be applied to SOFR, to enable the two benchmark rates to be economically equivalent on transition. At the time of reporting, industry working groups are reviewing methodologies for calculating adjustments between USD LIBOR and SOFR. The Alternative Reference Rates Committee has stated that it anticipates that a term SOFR reference rate could be developed in the first half of 2021. On 5 March 2021, the Financial Conduct Authority in the United Kingdom has announced that the 3-month USD LIBOR will continue to be published up to 30 June 2023. The Group’s treasury function is managing the Group’s USD LIBOR transition plan. This transition plan may include changes to systems, processes, risk and valuation models, as well as managing related tax and accounting implications. The Group currently anticipates that the areas of greatest change will be amendments to the contractual terms of the Group’s 3-month USD LIBOR-referenced floating-rate debt and associated swaps, and the corresponding update of the hedge designations. Reliefs applied The Group has applied the following reliefs that were introduced by the amendments made to MFRS 9 "Financial Instruments": t 8IFO DPOTJEFSJOH UIF AIJHIMZ QSPCBCMF SFRVJSFNFOU UIF (SPVQ IBT BTTVNFE UIBU UIF 64% -*#03 JOUFSFTU SBUF on which the Group’s hedged debt is based does not change as a result of the IBOR reform. t *O BTTFTTJOH XIFUIFS UIF IFEHF JT FYQFDUFE UP CF IJHIMZ FGGFDUJWF PO B GPSXBSE MPPLJOH CBTJT UIF (SPVQ IBT assumed that the USD LIBOR interest rate on which the cash flows of the hedged debt and the interest rate swaps that hedges it are based is not altered by IBOR reform. t 5IF (SPVQ IBT OPU SFDZDMFE UIF DBTI nPX IFEHF SFTFSWF SFMBUJOH UP UIF QFSJPE BGUFS UIF SFGPSNT BSF FYQFDUFE to take effect. Assumptions made In calculating the change in fair value attributable to the hedged risk of floating-rate debt, the Group has made the following assumptions that reflect its current expectations: t 5IF nPBUJOH SBUF EFCU XJMM NPWF UP 40'3 EVSJOH BOE UIF TQSFBE XJMM CF TJNJMBS UP UIF TQSFBE JODMVEFE JO the interest rate swaps used as the hedging instruments. t /P PUIFS DIBOHFT UP UIF UFSNT PG UIF nPBUJOH SBUF EFCU BSF BOUJDJQBUFE