KEY AUDIT MATTERS (CONT’D.) Going concern assessment (cont’d.) The consolidated financial statements of the Group and of the Company have been prepared on a going concern basis. As disclosed in Note 2.1 to the financial statements, the directors have prepared a cash flow forecast as part of the assessment to demonstrate the Group’s and the Company’s ability to meet their loan repayment obligations for the next twelve months after the reporting date and to continue as a going concern. We identified the going concern assessment as an area requiring audit focus because the assessment is highly subjective as it requires significant management judgements and largely based on the expectations of and estimates made by management of future cash flow needs. Critical to the going concern assessment are the Group’s and the Company’s ability to secure the required financing, and to sell certain assets to raise the necessary funds to meet the loan repayment obligations. How have our audit addressed this matter In addressing this area of audit focus, we performed amongst others, the following procedures to assess the Group’s and Company’s ability to continue meeting their payment obligations: • We had discussions with the directors to understand the business plans and their plans to address the loan repayment obligations for the next twelve months after the reporting date; • We evaluated the estimates made by the directors in respect of revenue and major operating costs against the Group’s business plans, historical results and expected selling prices; • We evaluated the ability of the Group to sell certain land held for development and property, plant and equipment to raise the necessary funds by sighting to the signed letters of offer from identified buyers; • We evaluated the ability of the Group and of the Company to secure additional financing by obtaining the indicative term sheets and letters of offer from the financial institutions; • We sighted evidence of the additional cash injection by a major shareholder subsequent to year end; and • We evaluated the adequacy of disclosures in respect of this matter. Revenue and cost of sales in respect of property development activities (Refer to Note 4 and Note 5 to the financial statements) A significant proportion of the Group’s revenues and profits are derived from property development contracts which span more than one accounting period. For the financial year ended 31 December 2022, property development revenue from ongoing projects of RM448,891,000 and cost of sales of RM297,719,000 accounted for approximately 48% and 60% of the Group’s revenue and cost of sales respectively. For these property development contracts where revenue is recognised over time, the Group uses the input method in determining the percentage of completion, which is based on the actual cost incurred to date on the property development project over the total budgeted cost for the respective development projects in accounting for the progress towards complete satisfaction of the Group’s performance obligation. We identified revenue and cost of sales in respect of property development activities as areas requiring audit focus as significant management’s judgement and estimates are involved in estimating the total property development costs to complete the project, which include the common infrastructure costs (which is used to determine progress towards complete satisfaction of the Group’s performance obligation and gross profit margin of the property development activities undertaken by the Group). 151 FINANCIAL STATEMENTS & OTHER INFORMATION
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