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Impairment assessment of intangible assets
Our response
Refer to Note 3.4 and Note 16 to the financial statements.
The Group is required to perform annual impairment test of cash
generating units (CGUs) to which intangible assets have been
allocated. The Group estimated the recoverable amount of its
CGUs allocated based on value-in-use (VIU). Estimating the VIU
of CGUs involves estimating the future cash inflows and outflows
that will be derived from the CGUs, and discounting them at an
appropriate rate.
Included in the Group’s intangible assets as 31 December 2017 are:
(a) goodwill amounted to RM103 million arising from step-up
acquisition of Think Big Digital Sdn Bhd;
(b) goodwill arising from consolidation of IAA amounted to
RM38.4 million; and,
(c) landing rights arising from consolidation IAA and PAA
amounted to RM374.6 million and RM69.3 million,
respectively.
We focused on the impairment assessment of the intangible
assets due to the magnitude of the balance and the subjectivity
involved. Specifically, we focused on the assumptions applied in
respect of revenue growth, cost escalation rates, terminal value
and discount rates.
In addressing this area of audit focus, our audit procedures
included, amongst others:
• Obtained an understanding and assessed the management’s
internal control over the estimations of recoverable amounts
of the CGU.
• Evaluated the assumptions applied on revenue growth,
cost escalation rates, terminal value and discount rates by
comparing these assumptions to industry analysis and future
economic conditions.
• Analysed the sensitivity of the key assumptions by assessing
the impact of changes to the recoverable amounts.
• Evaluated the adequacy of the Group’s disclosures of key
assumptions used in estimations.
Information Other than the Financial Statements and Auditors’ Report Thereon
The directors of the Company are responsible for the other information. The other information comprises the information included in the
annual report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon, which we
obtained prior to the date of this auditors’ report, and the annual report 2017, which is expected to be made available to us after the date
of this auditors’ report.
Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connectionwith our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the
Company 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 auditors’ report, we conclude
that there is a material misstatement of this other information, we are required to report that fact.We have nothing to report in this regard.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter
to the Directors of the Company and take appropriate action.
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF AIRASIA BERHAD
(INCORPORATED IN MALAYSIA)
Key Audit Matters (cont’d.)
[ ]
AirAsia Berhad
REPORTS AND FINANCIAL STATEMENTS
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