280 YINSON HOLDINGS BERHAD ACCOUNTABILITY NOTES TO THE FINANCIAL STATEMENTS (CONT’D) For the financial year ended 31 January 2022 16. Property, plant and equipment (continued) (f) The carrying amount of property, plant and equipment subject to operating leases, primarily comprising FPSO John Agyekum Kufuor and FPSO Adoon, as disclosed in Note 38(b) at each reporting date were as follows: Group 2022 2021 RM million RM million FPSOs, OSVs and tankers 3,310 3,477 (g) Impairment of Offshore Support Vessels (“OSVs”) The decline in vessel utilisation and charter rates of OSVs in the current financial year were identified as impairment indicators. Subsequently, the Group undertook an impairment review, which resulted in an impairment loss of RM3 million (2021: RM22 million) on certain OSVs based on shortfall between the recoverable amounts using the forecasted value-in-use and their carrying values. The key assumptions used are as follows: (i) Utilisation rates and charter rates forecasted over the projected service lives of these OSVs. These were estimated based on past performance records, future market outlook and management expectation of market developments; (ii) Relevant operating costs adjusted for average inflation rate of 2.0% (2021: 2.0%) per annum over the projected service lives of the respective OSVs; (iii) Expected residual value of OSVs based on scrap values at the end of their service lives; (iv) Regional industry weighted average cost of capital (“WACC”) ranging from 6.5% to 8.0% (2021: 6.5% to 7.9%); and (v) The projected service lives of these OSVs. The discount rates used are pre-tax and reflect specific risks relating to the CGUs. The discount rates applied to the cash flow projections are derived from the cost of capital plus a reasonable risk premium at the date of assessment of the CGUs. The Group had taken into consideration the current depressed market conditions in the oil and gas industry in the cash flow projections, which include lower forecasted vessel utilisation and charter rates. Sensitivity to changes in key assumptions An increase or decrease of 5% (2021: 5%) in the utilisation rates and charter rates respectively, with all other inputs remaining constant, will not result in a material effect on the Group’s impairment charge and results. 17. Investment properties Investment properties are stated at fair value, which were determined based on valuations at the reporting date using the market comparison approach. Group 2022 2021 RM million RM million At 1 February 15 18 Changes in fair value (Note 9) - (3) At 31 January 15 15 The investment properties of the Group were pledged to financial institutions for banking facilities granted to the Company as disclosed in Note 32. The Group uses assumptions that are based on market conditions existing at the end of each reporting period. The fair value of investment properties were estimated by management based on market evidence of transaction prices for similar properties, adjusted for differences in key attributes such as property size, view and quality of interior fittings.
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