UEM EDGENTA BERHAD ANNUAL REPORT 2021 1 2 3 4 5 6 7 219 218 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.4 Summary of significant accounting policies (contd.) (aa) Fair value measurement (contd.) A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: - Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities - Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable - Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. 2.5 Significant accounting judgements and estimates The preparation of the Group’s and of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. (a) Judgements There are no critical judgements made by management in the process of applying the Group’s and the Company’s accounting policies that may have significant effects on the amounts recognised in the financial statements. 2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.5 Significant accounting judgements and estimates (contd.) (b) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows: (i) Revenue recognition - Asset consultancy The Group recognises its revenue and profit on consultancy contract services based on the percentage of completion, calculated by reference to the proportion of costs incurred to date against the total expected costs for the contracts. Full provision is made for losses on all contracts when they are first foreseen. Significant estimates are applied especially in determining the total expected costs for the contracts in order to reliably estimate the percentage of completion. (ii) Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the VIU 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 2021 was RM539.7 million (2020: RM534.5 million). Further details are disclosed in Note 15(a). (iii) Impairment of investment in subsidiaries The 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 2021 was RM1,546.1 million (2020: RM1,688.2 million). Further details are disclosed in Note 16. (iv) Provision for ECLs of trade receivables and contract assets The 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 forwardlooking 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.
RkJQdWJsaXNoZXIy NDgzMzc=