Yinson Annual Report 2021

247 ANNUAL REPORT 2021 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) For the financial year ended 31 January 2021 16. Property, plant and equipment (continued) (f) The carrying amount of property, plant and equipment subject to operating leases, primarily comprising FPSO John Agyekum Kufuor and FPSO Adoon, as disclosed in Note 39(b) at each reporting date were as follows: Group 2021 2020 RM million RM million FPSOs, OSVs and tankers 3,477 4,431 (g) Impairment of Offshore Support Vessels ("OSVs") The decline in vessel utilisation and charter rates of OSVs in the current financial year were identified as impairment indicators. Subsequently, the Group undertook an impairment review, which resulted in an impairment loss of RM22 million (2020: RM5 million) on certain OSVs based on shortfall between the recoverable amounts using the forecasted value in use and their carrying values. The key assumptions used are as follows: (i) Utilisation rates and charter rates forecasted over the projected service lives of these OSVs. These were estimated based on past performance records, future market outlook and management expectation of market developments; (ii) Relevant operating costs adjusted for average inflation rate of 2.0% (2020: 2.0%) per annum over the projected service lives of the respective OSVs; (iii) Expected residual value of OSVs based on scrap values at the end of their service lives; (iv) Regional industry weighted average cost of capital ("WACC") ranging from 6.5% to 7.9% (2020: 6.5% to 7.3%); and (v) The projected service lives of these OSVs. The discount rates used are pre-tax and reflect specific risks relating to the CGUs. The discount rates applied to the cash flow projections are derived from the cost of capital plus a reasonable risk premium at the date of assessment of the CGUs. The Group had taken into consideration the current depressed market conditions in the oil and gas industry in the cash flow projections, which include lower forecasted vessel utilisation and charter rates. Sensitivity to changes in key assumptions Changing the assumptions selected by management would significantly affect the Group's results. The Group's review includes the sensitivity of key assumptions to the cash flow projections. An increase by 5% in the utilisation rates and charter rates respectively will result in a reduction of impairment loss by approximately RM5 million (2020: RM3 million) and RM5 million (2020: RM3 million) respectively with all other inputs remaining constant. A decrease by 5% in utilisation rates and charter rates respectively will result in an additional impairment loss of approximately RM5 million (2020: RM3 million) and RM4 million (2020: RM3 million) respectively with all other inputs remaining constant. 17. Investment properties Investment properties are stated at fair value, which were determined based on valuations at the reporting date using the market comparison approach. Group 2021 2020 RM million RM million At 1 February 18 20 Changes in fair value (Note 9) (3) (2) At 31 January 15 18 The investment properties of the Group were pledged to financial institutions for banking facilities granted to the Company as disclosed in Note 32.