353 ANNUAL REPORT 2022 ACCOUNTABILITY INDEPENDENT AUDITORS’ REPORT (CONT’D) to the menbers of Yinson Holdings Berhad (Incorporated in Malaysia) Registration No. 199301004410 (259147-A) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matter How our audit addressed the key audit matter Estimates and judgements in EPCIC contracts Refer to Note 5(g), Note 6 and Note 7 to the financial statements. The accounting for revenue for the Engineering, Procurement, Construction, Installation andCommissioning (“EPCIC”) falls under MFRS 15 Revenue from Contracts with Customers. The revenue recognition is complex and dependent on specific arrangements set out in the contracts between theGroup and its customer. Given the specialised nature of the project and its respective contract, management analysed the contracts’ terms and conditions to determine the applicable accounting and revenue recognition. Based on our risk assessment, the critical and judgmental estimates include the determination of allocation of transaction price between EPCIC revenue and finance lease income, ascertaining the number of multiple arrangement elements embedded in the contracts, assessing the satisfaction of the performance obligations over time, completeness of the estimated costs to complete the respective performance obligations and accuracy of construction progress. These include assessing the subjectivity and estimation uncertainty on determining estimated costs for the remaining obligations and contingencies that theprojectwould faceover the contractual period. In the current financial year, theGroup continues to face operational challenges in light of the current COVID-19 pandemic. This include travel, logistical and supply chain disruptions causing uncertainties to prices of materials and services. The degree to which these challenges influenced the cost to complete can be significant. During the financial year, the Group recognised EPCIC revenue totalling to RM2,206million in the consolidated income statement. The revenue recognised relates to the construction of FPSO Anna Nery in which the Group had entered into a time charter contract for providing a FPSO and an operations andmaintenance contract for a 25 year term with its customer. Given the magnitude and complexity of the Group’s EPCIC contract and the significant judgements and estimates, these areas were particularly subject to the risk of misstatements. Based on the considerations above, we have identified this as a key audit matter. Audit procedures performed over this key audit matter were as follows: • Evaluatedmanagement’sboardassessmentpaper andconsidered the judgements made by management on the accounting treatment for the contracts with the customer for the provision of FPSO Anna Nery; • Read the contracts, anddiscussedwithmanagement the relevant terms and the resultant financial implications. Consequently identified and assessed themultiple arrangement elements and their respective performance obligations; • Gained an understanding of relevant processes, evaluated and tested the relevant controls implemented to record, track and monitor costs and revenues relating to EPCIC contracts; • Evaluated the measurement of progress towards complete satisfaction of the performance obligation undertaken by the Group’s internal project reviews; • Performed look back procedures as part of our risk assessment by comparing estimates included in the current year with the past financial year as this provided insight to management’s ability to provide reliable estimates; • Checkedtheaccuracyofmanagement’s calculationsof percentage of completion by recomputing the construction costs incurred against the total estimated construction costs to completion; • Tested the reasonableness of the total estimated budgeted construction costs basedon the approvedbudgets to supporting and corroborating documentation, including management’s evaluation of budget variances and contingencies; • Tested samples of costs incurred to date on significant cost elements to relevant documents such as sub-contractors’ reports verified by the Group’s operations team; and • Evaluated the adequacy of the Group’s disclosures included in the consolidated financial statements. Based on our procedures performed, no material exceptions were noted. We have determined that there are no key audit matters to report for the Company. Information other than the financial statements and auditors’ report thereon The Directors of the Company are responsible for the other information. The other information comprises the Director’s Report and other contents of the Annual Report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon.
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