110 CSE Global Limited Revenue recognition on project contracts (cont’d) As part of the audit, we obtained an understanding of the Group’s costing and budgeting processes. In evaluating management’s budgeting process, we compared the budgeted costs to actual costs incurred to date, and assessed reasonableness on the remaining costs to be incurred to complete the projects, taking into consideration the current economic conditions on the project progress and profitability. For significant projects, we reviewed the terms and conditions of the contracts, and cost incurred. For potential disputes or variation claims, we tested their occurrence and measurement via review of correspondence with customers and contractors. We also inquired with the Group finance and operational management regarding the project status, budgeted costs to complete, provision for onerous contracts or liquidated damages, and where applicable, assessed the estimates of costs to complete and reasonableness of the provision for onerous contracts, if any. Further, we assessed the adequacy of the Group’s disclosures on project revenue in Note 19 to the financial statements. Impairment assessment of trade receivables and contract assets Trade receivables and contract assets balances amounted to $117,242,000 and $121,160,000 respectively as of 31 December 2024 and were significant to the Group as they represented 38% of the Group’s total assets. The Group uses a provision matrix to calculate the expected credit losses (ECLs) for trade receivables and contract assets. The provision matrix is based on historical default rates, existing economic conditions, adjusted for forward looking information at each reporting period. The determination of ECL requires the use of management judgement and estimates, and is sensitive to changes in circumstances and economic conditions. Given the magnitude of the amounts and the use of significant management judgement in assessing the ECLs, we have identified impairment on trade receivables and contract assets to be a key audit matter. As part of the audit, we obtained an understanding of the Group’s processes and controls relating to the impairment assessment of trade receivables and contract assets. We performed procedures on existence and assessed post year end receipts for key trade receivables. We tested management’s assumptions used to determine the ECLs on the trade receivables and contract assets, by considering the Group’s historical credit loss experience, ageing analysis of outstanding receivables, customer profile and local jurisdiction risks and comparison to forward-looking macroeconomic information affecting the recoverability of trade receivables and contract assets. Further, we assessed the adequacy of the Group’s disclosures on trade receivables and contract assets, and the related credit risk and liquidity risk in Notes 11 and 9 to the financial statements. Impairment testing on goodwill As at 31 December 2024, the Group has goodwill amounting to $90,430,000 which represented 47% of the total noncurrent assets. The Group allocated goodwill to cash generating units (“CGUs”) identified for impairment testing as disclosed in Note 7 to the financial statements. The recoverable amount of each CGU was determined using the value-in-use (“VIU”) calculations, which was based on assumptions in respect of future market and economic conditions such as economic growth, expected inflation rates, demographic developments, future revenue and budgeted gross margins. The audit procedures over management’s impairment tests were significant to our audit because the assessment process was complex and involved significant management judgment on the various assumptions used in the underlying cash flow forecasts. As part of our audit, we obtained an understanding of management’s impairment assessment process and reviewed the robustness of management’s budgeting process by comparing the actual financials versus previously forecasted financials. We assessed and tested the key assumptions used in the impairment assessment such as long-term growth rates and discount rate, and performed sensitivity analysis in these key assumptions to changes in the recoverable amount of each CGU. We also assessed whether assumptions have been determined and applied consistently across the Group, taking into considerations the current economic and market conditions. Our internal valuation specialists assisted us in testing the reasonableness of the discount rate and long term growth rate used in the VIU calculation. We reviewed the results of the impairment assessment performed by management by comparing the carrying values of the CGU to their respective recoverable amounts, and assessed if the carrying amounts exceed the recoverable amounts. Further, we assessed the adequacy of the Group’s disclosures in Note 7 to the financial statements concerning goodwill. INDEPENDENT AUDITOR’S REPORT For the financial year ended 31 December 2024
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