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Annual Report 2017
119
Independent auditors’ report
to the members of Kumpulan Fima Berhad
(Incorporated in Malaysia)
Key Audit Matters (cont’d.)
Revenue recognition (cont’d.)
(Refer to Note 3 to the financial statements)
As part of our audit, we performed the following:
(a)
obtained an understanding of the Group’s relevant internal controls and tested the controls over timing and amount of revenue
recognised;
(b)
inspected the terms of significant sales contracts to determine the point of transfer of significant risk and rewards;
(c)
inspected documents evidencing the delivery of goods to customers; and
(d)
tested the recording of sales transactions close to the year end, including credit notes issued after year end, to establish
whether the transactions were recorded in the correct accounting period.
Provision for warranty
(Refer to Note 31 to the financial statements)
As at 31 March 2017, the provision for warranty amounted to RM14.8 million. The Group provides warranty for defective travel
documents and licenses for a specified period or term. The Group assessed the provision for warranty based on the estimated
replacement costs to be incurred for the defective products during the warranty periods. The costs are estimated based on historical
rate of return of the defective products. Given its magnitude and significant judgement involved in management’s assessment, we
identified the provision for warranty to be an area of audit focus.
As part of our audit, we performed the following:
(a)
obtained an understanding of the Group’s warranty estimation process;
(b)
assessed the reasonableness of the provision for warranty by comparing with the average historical rate of return of the
respective products. Our audit procedures, included amongst others, evaluating the validity of the historical data used to
determine the rate of return and performing test of details on the historical products claims; and
(c)
recomputed the management’s calculation of the provision for warranty.
Impairment of goodwill
(Refer to Note 18 to the financial statements)
As at 31 March 2017, the carrying amount of goodwill recognised by the Group amounted to RM12.7 million, representing 2% and 1%
of the Group’s total non-current assets and total assets respectively. This goodwill relates to the subsidiaries principally engaged in
bulking and plantation activities.
Goodwill impairment testing of cash generating units (“CGUs”) relies on estimates of value-in-use (“VIU”) based on estimated future
cash flows. The Group is required to annually test the amount of goodwill for impairment. Due to the significance of the amount and
significant judgements and estimation involved in the assessment of the VIU, we identified this as an area of audit focus.