2020 UEM Edgenta Annual Report

2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.5 Significant accounting judgements and estimates (contd.) b. Key sources of estimation uncertainty (contd.) ii. Impairment of goodwill T he Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the ‘value-in-use’ of the CGU to which the goodwill is allocated. Estimating a value-in-use amount requires management to make an estimate of the expected future cash flows from the CGU and also to determine suitable discount and growth rates in order to calculate the present value of those cash flows. The carrying amounts of goodwill at 31 December 2020 was RM534.5 million (2019: RM534.7 million). Further details are disclosed in Note 15(a). iii. Impairment of investment in subsidiaries T he Company determines whether investment in subsidiaries is impaired when there is an indication of impairment. This requires an estimation of the ‘value-in-use’ of the investment in subsidiaries. Estimating a value-in-use amount requires management to make an estimate of the expected future cash flows and also to determine suitable discount and growth rates in order to calculate the present value of those cash flows. The carrying amounts of investment in subsidiaries at 31 December 2020 was RM1,688.2 million (2019: RM1,707.6 million). Further details are disclosed in Note 16. iv. Provision for ECLs of trade receivables and contract assets T he Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments in calculating ECLs for trade receivables and contract assets. The amount and timing of future cash flows are then estimated based on historical credit loss experience for assets with similar credit risk characteristics and adjusted with forward-looking information such as forecast economic conditions. The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the Group’s trade receivables and contract assets is disclosed in Note 20 and Note 21 respectively. v. Income taxes S ignificant estimation is involved in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. UEM EDGENTA BERHAD 224 Financial Statements NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2020