REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters How our audit addressed the key audit matters 1.0 Impairment assessment for goodwill of CGU A and CGU B Refer to Note 2.10(a) Goodwill for the accounting policy, Note 3(a) – Impairment of goodwill and Note 7 - Goodwill and Intangible Assets to the financial statements. As at 31 December 2023, the Group's goodwill totalled RM157.8 million which is allocated to the following cash generating units ("CGU"): • Specialised Pipe Coating and Corrosion Protection Services (CGU A); and • EPC, Fabrication and Rental of Gas Compressors and Process Equipment (CGU B). We focused on this area due to the size of the goodwill and because the recoverable amounts of the CGUs are determined based on value in use ("VIU") calculation which involve significant judgement in determining the key assumptions on the future cash flows generated. Audit procedures performed over this key audit matter were as follows: l Involved our valuation specialist to assess the appropriateness of the valuation methodology used by management; l Tested mathematical accuracy of VIU calculations prepared by management; l Compared forecasted revenue to past performance records, market outlook and management's expectation and market developments; l Compared terminal growth rates to external macroeconomic sources of data and industry specific trends; l Compared costs to approved budgets and historical performance; l Involved our valuation specialist to evaluate the appropriateness of the discount rates used for CGU A and CGU B. This involved consideration of inputs from comparable industries and peer companies, adjusted for business risk and marketability; l Assessed reasonableness of probabilities of occurrence assigned to best, base and worst case scenarios for CGU A; and l Assessed reasonableness of probabilities of occurrence assigned to base and worst case scenarios for CGU B. We also considered the adequacy of disclosures in the financial statements of key assumptions and sensitivity analysis for the respective CGUs. Based on procedures performed, no material exception was noted. Independent Auditors’ Report TO THE MEMBERS OF WASCO BERHAD (formerly known as Wah Seong Corporation Berhad) Integrated Annual Report 2023 154
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