Yinson Annual Report 2021

313 ANNUAL REPORT 2021 INDEPENDENT AUDITORS’ REPORT (CONT'D) to the members of Yinson Holdings Berhad (Incorporated in Malaysia) Registration No. 199301004410 (259147-A) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters 1) Revenue recognition for FPSO projects The accounting for revenue for the Group falls under both MFRS 16 Leases and MFRS 15 Revenue from contracts with customers. These contracts are complex and dependent on the specific arrangements set out in the contracts between the Group and its customer. Given the specialised nature of each project and their respective contracts, management analysed the contracts’ terms and conditions to determine the applicable accounting and revenue recognition. During the financial year, the Group accounted for 2 major revenue contracts: (a) Revenue recognition for FPSO Anna Nery Refer to Note 5(g), Note 6 and Note 7 to the financial statements. The Group entered into a time charter FPSO contract and an operations and maintenance FPSO contract for a 25 year term with its customer during the financial year which also saw the construction of FPSO Anna Nery commencing. For the financial year ended 31 January 2021, EPCIC revenue totalling RM2,299 million was recognised in the consolidated income statement. Based on our risk assessment, the critical and judgmental estimates includes the determination of allocation of transaction price between EPCIC revenue and finance lease income, ascertaining the number of multiple arrangement elements embedded in the contracts, assessing the satisfaction of the performance obligations over time, completeness of the estimated costs to complete the respective performance obligations and accuracy of measurement of construction progress. These include assessing the subjectivity and estimation uncertainty on determining the estimated costs for the remaining obligations and contingencies that the project would face over the contractual period. Audit procedures performed over this key audit matter were as follows: (a) Revenue recognition for FPSO Anna Nery t &WBMVBUFE NBOBHFNFOU T CPBSE BTTFTTNFOU paper and considered the judgements made by management on the accounting treatment for the contracts with the customer for the provision of FPSO Anna Nery; t 3FBE UIF DPOUSBDUT BOE EJTDVTTFE XJUI NBOBHFNFOU on the relevant terms and the resultant financial implications. Consequently, identified and assessed the multiple arrangement elements and their respective performance obligations; t (BJOFE BO VOEFSTUBOEJOH PG SFMFWBOU QSPDFTTFT evaluated and tested the relevant controls implemented to record, track and monitor costs and revenues relating to EPCIC contracts; t &WBMVBUFE UIF NFBTVSFNFOU PG QSPHSFTT UPXBSET complete satisfaction of the performance obligation undertaken by the Group’s internal project reviews; t $IFDLFE UIF BDDVSBDZ PG NBOBHFNFOU T DBMDVMBUJPOT of percentage of completion by recomputing the construction costs incurred against the total estimated construction costs to completion; t 6TFE PVS JOUFSOBM WBMVBUJPO TQFDJBMJTUT UP BTTFTT BOE evaluate reasonableness of the discount rate applied by management; t 5FTUFE UIF SFBTPOBCMFOFTT PG UIF UPUBM FTUJNBUFE budgeted construction costs based on the approved budgets to supporting documentations; t 5FTUFE TBNQMFT PG DPTUT JODVSSFE UP EBUF PO TJHOJmDBOU cost elements to relevant documents such as sub- contractors’ reports verified by the Group’s operations team; and t &WBMVBUFE UIF BEFRVBDZ PG UIF (SPVQ T EJTDMPTVSFT included in the consolidated financial statements. Based on our procedures performed, no material exceptions were noted.