Section 8 UEM Edgenta Berhad FINANCIAL STATEMENTS 296 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 2. ACCOUNTING POLICIES (CONTD.) 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. (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 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 2023 was RM587.6 million (2022: RM561.0 million). Further details are disclosed in Note 17(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 VIU of the investment in subsidiaries. Estimating a VIU 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 2023 was RM1,674.0 million (2022: RM1,673.3 million). Further details are disclosed in Note 18.
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