Report on the Audit of Financial Statements (Continued) Key Audit Matters (Continued) Key audit matter 2 Audit response Impairment of investment in associate – Pristine Islands Investment Pte. Ltd. and its subsidiary (“PIIPL Group”) (Refer to Notes 3.2, 14, 19 and 36 to the financial statements) As at 30 September 2024, the Group’s investments in associate comprise investments in equity interests and amounts due from PIIPL Group, which are mainly in the business of hospitality operations and related business. As at financial year end, the Group applied the general approach to measure the expected credit losses on the non-trade amounts due from PIIPL Group and determined the loss allowance based on 12-month expected credit loss (“ECL”), a loss allowance of $4,000,000 was recorded to reflect the credit risk exposure. During the financial year, the management identified indicators of impairment in PIIPL Group and carried out an impairment assessment to determine whether an impairment loss should be recognised in the financial statements. Recoverable amount was determined based on higher of value-in-use or fair value less cost of disposal. The determination of the recoverable amount involved estimating the present value of future cash flows of PIIPL Group, the fair value of PIIPL Group’s business and estimated disposal costs. Accordingly, a reversal of impairment loss amounting to $27,285,000 was recognised in the current financial year. We focused on this area as a key audit matter due to significant management judgements and estimates involved in determining the market value of the PIIPL Group. We performed the following audit procedures, amongst others: • Evaluated management’s assessment of whether the credit risk of the non-trade amount due from an associate has increased significantly; • Reviewed the adequacy of ECL allowance at end of the financial year, including assessing whether management’s approach is consistent with SFRS(I) 9 Financial Instruments (“SFRS(I) 9”) requirements; • Evaluated management’s assessment of whether the investment in an associate has any indicators of impairment; • Assessed the reasonableness of key assumptions used in the valuations to derive fair value less cost of disposal, which included the range adjustments applied, the marketability discount with assistance of internal valuation specialist and obtained management representation on the accuracy and completeness of financial data; • Assessed the reasonableness of the key assumptions and estimates used in the future cash flows to derive value-inuse, including the revenue growth rates, discount rates and terminal growth rates used with the assistance of internal valuation specialist to independently develop expectations on the discount rates and terminal growth rates applied; • Carried out sensitivity analysis on revenue growth rates, discount rates and terminal growth rates applied by management to determine the impact on the carrying amount of the investment in associate; and • Reviewed the adequacy and appropriateness of the disclosures made in the financial statements. Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and the independent auditors’ report thereon, which we obtained prior to the date of this report. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this report, we conclude that there is a material misstatement of this other information, we are required to report that fact. As a result of the matter described in the Basis for Qualified Opinion section above, we are unable to conclude whether or not the other information is materially misstated for the same matter. 55 ANNUAL REPORT 2024 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF KEONG HONG HOLDINGS LIMITED
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