Annual Report 2020

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. We have determined that there are no key audit matters to communicate in our report on the financial statements of the Company. In addition to the matters described in the Material Uncertainty Related to Going Concern section, the key audit matters for the audit of the financial statements of the Group are described below. These matters were addressed in the context of our audit of the financial statements of the Group as a 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 assessment of non-financial assets a) I mpairment assessment of right-of-use assets ("ROUA") and property, plant and equipment ("PPE") Our response Refer toNote3.1,Note11andNote29tothefinancial statements. At 31December 2020, the carrying amount of ROUAandPPEof theGroupareRM9,445millionandRM1,086million, respectively. The Group is required to assess at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset. The COVID-19 pandemic has resulted in significant losses and a significant amount of economic uncertainty in the current and future economic environment inwhich theGroup operates. The Group’s current andnear-termcashflows have beennegatively impacted due to global travel restrictions and the resultant global decrease in travel demand. The duration and severity of the crisis is dependent on events which are continuously unfolding and are beyond the control of the Group. As a result, there is a high degree of estimation uncertainty inherent inestimating thedurationandseverity of theeconomic downturn caused by the COVID-19 pandemic, and the pattern of any expected recovery. The estimates and assumptions used in the cash flow projections which form the basis of the recoverable amounts attributable to the CGUs require significant judgement. These judgements require estimates to bemade over areas including those relating to the timing of recovery of theCOVID-19 pandemic, future revenues, operating costs, growth rates, projected aircraft usage, aircraft capital expenditure, foreign exchange rates and discount rates. As the impairment assessment involves estimation and judgement arising from the above factors, this is a key area of focus for our audit. In addressing this area of audit focus, our audit procedures included, amongst others: • H eld discussions with senior management to understand the basis of the assumptions used in forming the estimates underpinning the assessment of the recoverable amount of the CGUs. These estimates include those relating to the timing of recovery of the COVID-19 pandemic, future revenues, operating costs, growth rates, projected aircraft usage, aircraft capital expenditure, foreign exchange rates and discount rates; • A ssessed the key assumptions on which the cash flow projections are based, including, and where relevant, comparing them against financial and non-financial historical trends. We also referred to publicly available aviation industry reports relating to the impact COVID-19 pandemic has on global passenger demand, as well as local regulatory requirements and developments in the various jurisdictions that the Group operates in to gauge the possible timing of recovery; • A ssessed the arithmetical accuracy of the computations used in assessing the recoverable amount of the CGUs; • I nvolved internal specialists to assess the appropriateness of the discount rates applied in the respective discounted cash flow projections; and • E valuated the adequacy of the Group’s disclosures of key assumptions used in estimations. 173 ANNUAL REPORT 2020