Annual Report 2016
-
74
-
Key auditmatters (cont’d)
Goodwill impairment
As disclosed in Note 11, during the current financial year, the Group recognised a full impairment of its goodwill
(S$7.6million) allocated to the cashgeneratingunit (CGU) comprisingof its subsidiary, SeaDeepShipyardPte. Ltd.
In accordance with the requirement of FRS 36
Impairment of Assets
, goodwill acquired in business combination is
required tobe tested for impairment annually.Wehave identified thisasakeyauditmatteras themanagement’sannual
impairment test was complex and involvedmanagement exercising significant judgement andmaking assumptions
about futuremarket and economic conditions to determine the recoverable amount of theCGU.
We reviewed management’s impairment assessment of the goodwill based on our understanding of the current
business conditionof theCGU and theoutlookof theoil andgas industry. Inour reviewof the cash flows projections
of theCGU, we evaluated the reasonableness ofmanagement’s forecast by reviewing the status of ongoing projects
as at year end and the projected order book and considered market analyst reports. We also involved our internal
valuation specialist to review the reasonableness of the discount rate used in computing the recoverable amount.We
recomputed the excess of the carrying amount of theCGU over the recoverable amount.
We also performed sensitivity analysis on changes in the key assumptions to the recoverable amount of theCGU.
We further considered subsequent events or transactions that may provide additional evidence to support the cash
flow projections.
We considered the adequacyof the disclosures related to the results of the impairment testingof goodwill inNotes 3
and11 to the consolidated financial statements.
Independent
auditor’s report
For the financial year ended 31 December 2016
