SECTION A

3. Name of companies

CONSTRUCTION

Gamuda Berhad

George Kent (Malaysia) Berhad

4. Nature of businesses

GAMUDA BERHAD

Gamuda Berhad is one of the leading construction companies in Malaysia. It was established

in Petaling Jaya, Selangor in 1976. The three core businesses of the company are engineering

and construction, property development and infrastructure concessions. The company’s

engineering and construction activities include the construction of tunnels, railways, roads

and expressways, bridges, airports, dams, water treatment and power plants, ports and

buildings. One of its well-known projects was the Stormwater Management and Road Tunnel

(SMART), which aims to alleviate the recurring floods in Kuala Lumpur. Besides Malaysia,

Gamuda Berhad has also participated in a lot of international construction projects in foreign

countries such as Australia, Qatar, the United Kingdom and others.

GEORGE KENT (MALAYSIA) BERHAD

George Kent (Malaysia) Berhad is a Malaysian construction company established in 1936

and based in Puchong, Selangor. This company has categorised its business into two

divisions, which are engineering and metering. The company has delivered more than 30

projects in the water infrastructure, water works and services, rail transportation and hospital
construction sectors. George Kent (Malaysia) Berhad is also a major supplier and distributor

of water metering products and solutions for residential, industrial and commercial sectors in

local and global markets. This company exports water meters, valves and fittings and brass

products to more than 40 countries including Singapore, Papua New Guinea, South Africa,

the United Kingdom and others.

 SECTORS/ COMPANIES PLANT, PROPERTY AND EQUIPMENTS
Consumer products and Warehouse building and improvements,; Containers, pallets, plant and
services – Food and machinery,; Renovation and electrical installations,; Signboard, furniture
beverages and fittings, electronic data processing (EDP) equipment and office
1. Brahim's equipment,; Motor vehicles, lorries and trucks,; Capital work-in-
Holdings Berhad progress and; Right-of-use assets (7 types)
2. PPB Group Berhad Land and buildings (Freehold and leasehold),; Plant and
machinery,; Motor vehicles,; Furniture, fittings, office and other
equipment; and Capital work-in-progress (5 types)
3. Khee San Berhad Freehold land,; Buildings,; Electrical equipment,; Furniture, fittings and
equipment,; Motor vehicles,; Plant and machinery and; Plant and
Machinery in-progress (7 types)
Plantation Fixture and fittings,; Motor vehicles,; Office equipment,; Plant and
4. PLS Plantations Berhad machinery,; Renovation,; Buildings,; Containers; and Long-term leasehold
land (8 types)
5. Batu Kawan Berhad Freehold Land,; Buildings,; Plant and Machinery,; Vehicles,; Equipment,
fittings, etc,; Capital work in process,; Bearer Plants and; Long-Term
Leasehold Land (8 types)
6. Gopeng Berhad Freehold land,; Leasehold land,; Other properties,; Motor vehicles and
earthmoving equipment,; Plant and equipment,; Bearer plant and; Land
improvement (7 types)
7. TH Plantations Berhad Bearer plant,; Building,; Plant, machinery and equipment,; Computer
equipment,; Motor vehicles and; Work-in-progress (6 types)

Construction Freehold land,; Buildings,; Plant and machinery,; Barges and

8. Benalec Holdings Berhad dredgers,; Tools and office equipment,; Furniture and fittings,; Motor
vehicles and; Construction-in-progress (8 types)
9. Gamuda Berhad Freehold land,; Long term leasehold land,; Buildings,; Motor
vehicle,; Office equipment, furniture and fittings,; Plant and machines
and; Construction in-progress (7 types)
10. George Kent Freehold land,; Buildings on freehold land,; Building on long-term
(Malaysia) Berhad leasehold land,; Long-term leasehold land,; Plant and machinery, furniture,
equipment and vehicles and; Capital work in progress (6 types)

An asset in entity is a resource with economic value that a corporation owns

or controls with the expectation that it will provide a future benefit. There are 6
categories of PPE which are current assets, non-current assets, tangible assets,
intangible assets, operating assets and non-operating assets. An PPE can belong to
multiple categories. For example, land and building is a fixed and tangible asset.
 PPE shown in table above are mostly non-current assets, tangible assets and
operating assets. However, there are some specialized PPE such as warehouse
building and improvements, containers, pallets, renovation, capital work-in-progress,
bearer plant, barges and dredgers and construction in-progress. (8 ppe)

Warehouse building and improvements are the account to record the large buildings

where products are stored before being exported or distributed for sale and any improvement

related to those buildings. Then, container is anything in which goods are contained or

packed for sale while pallet is a reusable flat wooden structure on which heavy goods can be

moved, stacked, and stored. Next, renovation is the long-term asset in which the cost of

upgrading a component of an asset is recorded and it will be treated separately for

depreciation. Capital work-in progress / construction in-progress is a long-term asset that

records the cost of construction work, where the construction has not yet been completed.

Construction in-progress is not depreciated and will be reclassified after the construction is

completed. Bearer plant is defined as a living plant used in the agricultural activity to produce

agricultural produce and scrapped at the end of its useful life. Whereas barges and dredgers

are the flat-bottomed boat for carrying freight and dredging harbors or other bodies of water,

typically on canals and rivers.

According to MFRS 116, PPE is the assets that are used in production of goods and services,

for rental to others, or for administrative or maintenance purposes and are expected to be used

during more than one period. Land (freehold and leasehold land) is a long-term asset that

records all expenditures made to acquire land and ready it for use. Building (warehouses) is a

fixed asset that covers all expenditures related directly to acquisition or construction.

Whereas equipment (machinery, furniture, tools, fittings, renovation) is the fixed asset that

include all expenditures incurred in acquiring and preparing it for use in office.
Motor vehicles (lorries and trucks) are the transportation asset used to generate economic

benefits to the company. Capital work-in progress / construction in-progress is a long-term

asset that records the cost of construction work, where the construction has not yet been

completed. Then, bearer plant is a living plant used in the agricultural activity to produce

agricultural produce and scrapped at the end of its useful life. While right-of-use asset is an

asset that represents a lessee’s right to use it for the lease term.

SECTION B

5. List and explanation of each types of PPE for the selected companies

GAMUDA BERHAD

(i) Freehold land

Freehold property can be defined as land that is held wholly by its owner. There are

no restrictions and it can be used for any purposes by the company. Freehold land has

an unlimited useful life and is not depreciated.

(ii) Long term leasehold land

Long term leasehold land is a land that a lessee rents from a lessor for an agreed time

in exchange for scheduled payments. The lessee can use the leasehold land to produce

economic benefits as long as the lease is valid.

(iii) Buildings

Building is a fixed asset that covers all expenditures related directly to acquisition or

construction.

(iv) Motor vehicle

 Motor vehicle is a transportation asset owned by a company such as trucks and

automobiles to generate economic benefits to the company.

(v) Office equipment, furniture and fittings

Office equipment, furniture and fittings are movable long-term assets such as

computers and desks that are placed in a building and used in operation to facilitate

daily tasks.

(vi) Plant and machinery

Plant and machinery is the non-current asset used in the production of goods and

services to generate economic benefits to the company.

(vii) Construction in-progress

Construction in-progress is a long-term asset that records the cost of construction

work, where the construction has not yet been completed. Construction in-progress is

not depreciated until the construction is completed. After completion, construction in-

progress account will be reclassified.

GEORGE KENT (MALAYSIA) BERHAD

(i) Freehold land

Freehold property can be defined as land that is held wholly by its owner. There are

no restrictions and it can be used for any purposes by the company. Freehold land has

an unlimited useful life and is not depreciated.

(ii) Building on freehold land

Building is a fixed asset that covers all expenditures related directly to acquisition or

construction on freehold land.

(iii) Building on long-term leasehold land

 Building is a fixed asset that covers all expenditures related directly to acquisition or

construction on long-term leasehold land.

(iv) Long-term leasehold land

Long term leasehold land is a land that a lessee rents from a lessor for an agreed time

in exchange for scheduled payments. The lessee can use the leasehold land to produce

economic benefits as long as the lease is valid.

(v) Plant and machinery, furniture, equipment and vehicles

Plant and machinery

Plant and machinery is the non-current asset used in the production of goods and

services to generate economic benefits to the company.

Furniture and equipment

Furniture and equipment is movable long-term asset such as computer and desk that is

placed in a building and used in operation to facilitate daily tasks.

Vehicles

Vehicle is a transportation asset owned by a company such as trucks and automobiles

to produce economic benefits to the company.

(vi) Capital work in progress

Capital work in progress is a long-term asset that records the cost of construction

work, where the construction has not yet been completed. Capital work in progress

account is not depreciated until the construction is completed. After completion,

capital work in progress account will be reclassified.

6. Sector that has more types of PPE and more carrying amount for PPE

CONSTRUCTION

GAMUDA BERHAD (7, RM1,063,066,000)

GEORGE KENT (MALAYSIA) BERHAD (6, RM366,000)

7. Depreciation method used by the companies

GAMUDA BERHAD

Gamuda Berhad is using the straight-line method to determine the depreciation expense of its

long-term assets. Straight-line method is calculated by dividing the difference between the

cost of the asset and its expected residual value by the estimated useful lives of the asset. This

depreciation method assumes that the asset is used up evenly over the number of years it is

expected to be used. However, straight-line method is not suitable for the assets that are used

extensively in its earlier years or later years because this method does not reflect the real

depreciation amount. For this case, freehold land has an unlimited useful life and therefore is

not depreciated. Construction in progress included in property, plant and equipment are not

depreciated as these assets are not yet available for use. Whereas other PPE such as buildings,

plant and machinery, office equipment, furniture and fittings and motor vehicles are

depreciated by its annual rates respectively.

GEORGE KENT (MALAYSIA) BERHAD

George Kent (Malaysia) Berhad is using the straight-line method to determine the

depreciation expense of its long-term assets. Straight-line method is calculated by dividing

the difference between the cost of the asset and its expected residual value by the estimated

useful lives of the asset. This depreciation method assumes that the asset is used up evenly

over the number of years it is expected to be used. However, straight-line method is not

suitable for the assets that are used extensively in its earlier years or later years because this

method does not reflect the real depreciation amount. For this case, Freehold land and long-
term leasehold land is not depreciated. Capital work in progress is not depreciated as those

assets are not yet available for use. Whereas other PPE such as building on freehold land,

building on long-term leasehold land and plant and machinery, furniture, equipment and

vehicles are depreciated by its annual rates respectively.

9. Identify the subsequent measurement model applied by the companies to record their PPE

in accordance with MFRS 116 Property, Plant and Equipment.

GAMUDA BERHAD – property, plant and equipment except for freehold land are using cost

model

GEORGE KENT (MALAYSIA) BERHAD - property, plant and equipment except for land

and buildings are using cost model

10. Determine whether there is any difference in application of subsequent measurement

model between companies.

All companies are using cost model for subsequent measurement of property, plant and

equipment (PPE). However, there are some companies using revaluation model for

subsequent measurement of land and building. Cost model requires PPE to be stated at its

cost less accumulated depreciation and any accumulated impairment losses. Whereas under

revaluation model, the PPE (land and building) need to be measured at its fair value at the

date of the revaluation less accumulated depreciation and any impairment losses. The

company made revaluation every few years to ensure the carrying amount of lang and

building does not differ materially from the value that would be determined using fair value

at the end of the reporting period.

13. Report the amount of impairment loss of PPE for the selected companies.

GAMUDA BERHAD – RM148,100,000

GEORGE KENT (MALAYSIA) BERHAD – RM366,000

14. Compare and explain the impairment loss of PPE incurred by the selected companies.

For the construction sector, Gamuda Berhad’s impairment loss is higher than the two other

construction companies, which are Benalec Holdings Berhad and George Kent (Malaysia)

Berhad. Gamuda Berhad has carried out the impairment test by estimating the recoverable

amount applying the value-in-use method. Estimating the value in use requires Gamuda

Berhad to estimate the expected future cash flows from the cash-generating unit and also to

choose a suitable discount rate to calculate the present value of those cash flows. The

impairment loss is recognised when the recoverable amount of CGU is estimated to be less

than its carrying amount.

15. Briefly discuss impairment of financial assets (e.g trade receivables) in accordance with

MFRS 9 Financial Instruments practiced by the selected companies.

16. Identify and explain the factors as reported/disclosed in the financial statements that lead

the companies to recognize the impairment loss.

The factor that leads Gamuda Berhad to recognise the impairment loss is the decline in the

market value of PPE. The continued decline in demand for products has led to a decrease in

production volume, excess capacity and hence, the under-utilisation of PPE. This gives rise to

impairment indications for the carrying amounts of its PPE.

Changes in the expected useful life or the expected pattern of consumption of future

economic benefits embodied in the asset are accounted for by changing the amortisation

period or method, as appropriate, and are treated as changes in accounting estimates.

(111,117,118,122)

APPENDICES

GAMUDA BERHAD

1. List of PPE
2. Subsequent measurement & accounting policies for depreciation of PPE
3. Accounting policies for impairment of PPE

4. Impairment of financial assets

George Kent (Malaysia) Berhad
1. List of PPE
2. Subsequent measurement & accounting policies for depreciation of PPE
3. Accounting policies for impairment of PPE
4. Impairment of financial assets