Yinson Annual Report 2021

315 ANNUAL REPORT 2021 INDEPENDENT AUDITORS’ REPORT (CONT'D) to the members of Yinson Holdings Berhad (Incorporated in Malaysia) Registration No. 199301004410 (259147-A) Key audit matters How our audit addressed the key audit matters 2) Accounting for Share Based Compensation Plans Refer to Note 5(f), Note 29(b) and Note 29(c) to the financial statements. The Group implemented a Performance Bonus Scheme and a Share Award Scheme under an Employees' Long- term Incentive Plan ("LTIP") for certain eligible employees during the financial year. The maximum bonus and number of the Group’s shares to be allotted and issued under the Performance Bonus Scheme and Share Award Scheme would not be more than 2.66% and 4.50% of the Group’s paid-up ordinary share capital (excluding treasury shares) respectively. The accounting for share based compensation plans under MFRS 2 Share-Based Payments is complex as the recognition and measurement of such share based payments are dependent on achieving specific market and non-market vesting conditions as agreed between the Group and its eligible employees. This necessitates significant management judgement to ascertain the achievability of the vesting conditions such as the daily share price targets, estimated number of shares and bonuses which would eventually be awarded. Significant estimation uncertainties exist when determining the valuation of the shares to be awarded to eligible employees. These includes assessment of market conditions and consequently the inputs to the Monte Carlo Simulation Model such as grant date, risk free rates and expected volatility rates. For the financial year ended 31 January 2021, the impact of these expenses from the Performance Bonus Scheme and Share Award Scheme were RM7 million and RM8 million respectively. The magnitude of potential shares to be awarded, coupled with the complexity of the terms resulting in various significant estimates and judgements being applied by management increases the risk of misstatement to the audit. Based on the above considerations, we considered this area to be a key audit matter. Audit procedures performed over this key audit matter were as follows: t 3FWJFXFE UIF &44 CZ MBXT PGGFS MFUUFST BOE NBOBHFNFOU T basis and assumptions used for establishing vesting conditions, grant dates and vesting periods; t 3FWJFXFE BOE FWBMVBUFE NBOBHFNFOU T CPBSE QBQFS PO the assessment of non-market and market conditions and the judgements undertaken by management; t 3FBE BOE EJTDVTTFE XJUI NBOBHFNFOU UIF WBMVBUJPO report prepared by management’s expert and cross- checking the significant assumptions and inputs used to the Group’s historical experience; t $PNQBSFE UIF TJHOJmDBOU BTTVNQUJPOT VTFE CZ management’s expert to determine the fair value estimation by checking the key inputs used with assistance from our internal valuation specialists; t 6TFE PVS JOUFSOBM WBMVBUJPO TQFDJBMJTUT UP BTTFTT UIF reasonableness of the fair value calculation through re- performing the calculation using the Monte Carlo Model; t 3FDBMDVMBUFE BNPVOU PG DVSSFOU ZFBS TIBSF CBTFE compensation expense using underlying offer letters, including relevant terms and conditions, and based on the Group’s valuation; 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. REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued)