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B A K E R T E C H N O L O G Y
L I M I T E D
Key audit matters (cont’d)
Accounting for business combination
In July 2018, BT Investment Pte. Ltd., a fully owned subsidiary of the Company acquired 52.72% of the total
issued and paid-up capital of CH Offshore Ltd. An additional 2.26% were acquired through a mandatory
general offer to the remaining shareholders of CH Offshore Ltd which was completed on 7 September
2018. The total purchase consideration of the Group was $47.1 million for 54.98% of the issued and paid-
up capital of CH Offshore Ltd.
The Group conducted a purchase price allocation (“PPA”) exercise by allocating the purchase price to the
various identifiable assets and liabilities of CH Offshore Ltd group, and recognised a bargain purchase of
$24.7 million. Given the materiality of this acquisition and the amount of bargain purchase recognised, we
considered the accounting for business combination to be a key audit matter.
Our audit procedures included, amongst others, reviewing the purchase agreement to obtain an
understanding of the transactions, the key terms, the purchase consideration and the rationale for the
bargain purchase. We enquired with the management on the identification of identifiable assets and
liabilities. Management has engaged an external valuation expert to assist them with the PPA exercise.
We assessed the competence, capabilities and objectivity of the external expert engaged by management.
We reviewed and assessed the reasonableness of the assumptions used by the management in
the estimation of the fair values of the acquired identifiable assets and liabilities. We reviewed this
identification based on our discussion with management and our understanding of the business of the
acquired group and involved our internal specialists in reviewing the management’s assessment of the fair
values of the acquired identifiable assets and liabilities. We also reviewed management’s assessment on
the identification of any intangible assets for this acquisition. In addition, we also checked the arithmetic
computation of the bargain purchase and assessed the adequacy of the related disclosures in Note 12 to
the financial statements.
Impairment assessment of vessels
As at 31 December 2018, the Group owned 14 vessels with an aggregate carrying value of $215,461,000.
Due to the presence of impairment indicators, impairment testing was conducted by comparing the carrying
amount of the vessels to their recoverable amounts, determined based on the value-in-use calculation.
This area was significant to our audit as the carrying value of the vessels represented 89% of the Group’s
total non-current assets as at 31 December 2018 and significant judgement and estimates were involved
in determination of the recoverable amount of the vessels.
Our audit procedures included, amongst others, obtaining an understanding of management’s impairment
assessment process, including the identification of cash generating units and indicators of impairment.
We involved our internal valuation specialist in reviewing the appropriateness of management’s valuation
against comparable market data, considering the specifications and the age of the vessels. For other key
assumptions used in the valuation, such as residual values and dry-docking expenditure, we compared to
available industry and historical data applicable to the Group. In addition, we also reviewed the adequacy
of disclosures on the key sources of estimation used in determining the recoverable amounts and carrying
value of vessels set out in Note 3 and Note 10 to the consolidated financial statements respectively.
Independent
auditor’s report
For the financial year ended 31 December 2018