ACCOUNTABILITY | FINANCIAL STATEMENTS 231 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 January 2024 5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) (b) The measurement and recognition of revenues on EPCIC contracts based on the input method (continued) Present obligations arising under onerous contracts are recognised and measured as provisions by accessing each contract. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The management has also applied judgement to assess whether facts and circumstances indicate that a group of contracts has become onerous as a whole at the Group. Intra-group transactions will be eliminated at consolidation. Significant judgement is used to estimate the above-mentioned total contract costs to complete. In making these estimates, management has applied its past experience of completing similar projects, as well as quotations from and contracts with suppliers and sub-contractors. These estimations are also made with due consideration of the circumstances and relevant events that were known to management at the date of these financial statements. Total contract costs may also be affected by factors such as uncertainties in contract execution, variation in scope of works and acceptance of claims by customers. For the financial year ended 31 January 2024, if there is an increase/decrease of 5% to the estimated total contract costs, revenue would decrease/increase by RM601 million (2023: RM441 million). Costs and revenue (and the resulting gross margin) at completion reflect, at each reporting period, management’s current best estimate of the probable future benefits and obligations associated with the contract. (c) Income taxes Judgement is involved in determining the Group’s provision for income taxes as there are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. (d) Impairment of solar plant Each solar plant is deemed to be a single CGU as the Group manages each solar plant separately. The Group reviews these CGUs at each reporting date for impairment indicators in accordance with the accounting policy stated in Note 2.19. If there is an impairment indicator, the recoverable amount for the solar plant will be ascertained based on the higher of the fair value less costs of disposal and its value-in-use. For value-in-use calculations, the future cash flows are based on contracted cash flows and estimates of uncontracted cash flows over the tenure of the power purchase agreement for each solar plant discounted by an appropriate discount rate. The impairment testing for each CGU requires management’s estimates and judgement to derive future cash flows based on key assumptions such as carbon credit revenue, commissioning date and impact of change of law on power generation revenue. The discount rate used is based on industry average that varies over time. The Group has evaluated the carrying amounts of solar plant under construction against their recoverable amounts and recorded an impairment charge to the carrying value of solar plant under construction of RM32 million (2023: RM117 million). The key assumptions and basis used to determine the recoverable amounts of the solar plant under construction are disclosed in Note 16(h).
RkJQdWJsaXNoZXIy NDgzMzc=