Wah Seong Corporation Berhad Annual Report 2021 131 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021 4 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Impairment of building, plant and equipment For financial year 2021 During the financial year ended 31 December 2021, the Group has performed an impairment assessment on the carrying value of the buildings that will be disposed off. The recoverable amount of the building is determined using the fair value less costs of disposal based on the agreed disposal price of the building for a total consideration of SGD13,000,000 (equivalent to approximately RM40,102,000). The building was reclassified as assets held for sale. Accordingly, RM4,243,000 of impairment loss was recognised for the building in the profit or loss. For financial year 2020 In the financial year ended 31 December 2020, due to the end of a significant pipe coating project in Europe and the adverse impact of Covid-19 pandemic to the pipe coatings market in Europe, impairment indicators exist for the building, plant and equipment in Europe. The Group had performed an impairment assessment on the carrying value of the buildings, plant and equipment used in the pipe coating projects in Europe. The recoverable amount of plant and equipment was fair value less cost of disposal, which was RM5,099,000. Management had measured the recoverable amount of fair value less cost of disposal based on estimation by an independent expert using the market approach where the fair value was estimated based on comparison of market transacted price for similar plant and equipment, and where necessary, adjusted for age, usage and conditions of the plant and equipment and expectation of future market outlook due to the Covid-19 pandemic. The recoverable amount was classified as Level 3 in the fair value hierarchy. Accordingly, RM130,070,000 of impairment loss was recognised for the plant and equipment in the profit or loss. The recoverable amount of the building was determined using the fair value less costs of disposal based on the sales and purchase agreement transacted on arm’s length basis, which was RM7,183,000. Accordingly, RM3,362,000 of impairment loss was recognised for the building in the profit or loss. The building was disposed before 31 December 2020. Due to the poor market outlook as a result of Covid-19 pandemic, management had also assessed the recoverable amount of other plant and equipment with carrying value of RM27,977,000. The recoverable amount was determined to be nil as there were no future projects available to utilise these plant and equipment and there are no resale value. Accordingly, an impairment loss of RM27,977,000 was recognised in the profit or loss. Total impairment loss in previous financial year was RM164,045,000. The impairment losses on buildings, plant and equipment are presented as part of the Oil & Gas segment in Note 43.
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