CAHYA MATA SARAWAK ANNUAL REPORT 2016

www.cmsb .com.my Cahya Mata Sarawak Berhad 86 Section 07 Financial Statements INDEPENDENT AUDITORS’ REPORT to the members of Cahya Mata Sarawak Berhad (Incorporated in Malaysia) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Opinion We have audited the financial statements of Cahya Mata Sarawak Berhad , which comprise the statements of financial position as at 31 December 2016 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 90 to 196. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2016, and of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence and other ethical responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. 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 year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis of our audit opinion on the accompanying financial statements. Impairment testing of goodwill As at 31 December 2016, the Group recorded a goodwill of RM61.7 million resulting from the acquisition of a subsidiary in prior years. The annual impairment test for goodwill is significant to our audit as the assessment process is complex and highly judgemental. Significant judgement is required in determining the assumptions used to estimate the recoverable amount of the cash generating unit to which the above goodwill has been allocated to and is based on assumptions that are affected by expected future demand or economic conditions of the construction and related industries. The assumptions used include estimates of future sales volumes, prices, operating costs, terminal value growth rate and the discount rate. As such, we determined this to be a key audit matter. Our procedures included, among others, involving a valuation expert to assist in evaluating the discount rate applied which included comparing the weighted average cost of capital with sector averages for the industry and markets in which the cash generating unit operates, evaluating the assumptions used by management, in particular those relating to sales volume and prices, profit margins, operating costs and growth rates. Our procedures also include reviewing the sensitivity analysis to assess the effect of how reasonable changes in certain key assumptions affect the recoverable amount of the cash generating unit. We further focused on the adequacy of the disclosures set out in Note 18 to the financial statements.