Wah Seong Corporation Berhad Annual Report 2019

80 WAH SEONG CORPORATION BERHAD REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters We also considered the adequacy of the disclosures made in the financial statements on key assumptions and the sensitivity analysis for the investment. We considered the sensitivity of the recoverable amount Alam-PE by varying the key assumptions within reasonably possible ranges. Based on the procedures performed, no material exception was noted. Impairment assessment for property, plant and equipment in Europe The Group has RM226.2 million of property, plant and equipment in Germany and Finland related to a pipe coatings project which ends in year 2020. In view of this, management had performed impairment assessment to determine whether the recoverable amount is higher than the carrying amount using VIU computation. We focused on this area due to the size of the property, plant and equipment and because the recoverable amounts are determined based on VIU calculation which involves estimates about the future cash flows generated and the appropriate discount and growth rates applied. We performed the following audit procedures to evaluate management’s methodology and assumptions used in the VIU: l Compared forecasted revenues to approved budgets and current order books; l Compared revenue growth rate to historical track records and external market trends; and l Compared costs to approved budget and historical performance. We assessed the appropriateness of the discount rate used by management for the VIU. This involved consideration of inputs from comparable industries and peer companies. We also considered the adequacy of the disclosures made in the financial statements on key assumptions for the property, plant and equipment. Based on the procedures performed, no material exception was noted. Expected credit loss on other receivables and amounts owing by joint ventures As at 31 December 2019, the gross amount of other receivables is RM117.7 million and the gross amounts owing by joint ventures is RM50.0 million. Impairment loss totalling RM18.3 million was recognised in the financial year ended 31 December 2019. We focused on this area because significant judgement and estimates were used in applying the expected credit loss model. In assessing the expected credit loss model on other receivables and amounts owing by joint ventures, we performed the following audit procedures: l Discussed with management to understand the underlying assumptions used in the general 3-stage approach for other receivables and amounts owing by joint ventures; and l Tested key assumptions and checked mathematical accuracy of the expected credit loss model. Based on the procedures performed, no material exception was noted. There are no key audit matters to report for the Company. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WAH SEONG CORPORATION BERHAD