67 / 152
65
A N N U A L R E P O R T
2 0 1 8
Key audit matters (cont’d)
Recoverability of trade receivables
As at 31 December 2018, the carrying amount of the Group’s trade receivables, net of allowance for expected
credit losses of $329,000 amounted to $21,323,000, which represented 35% of its current assets.
Due to the inherent risk surrounding the oil and gas industry which the Group operates in, the credit
quality of the Group’s customers may have deteriorated, giving rise to increased risks in collection of
trade receivables. The Group determines the expected credit loss (“ECL”) of trade receivables by making
debtor-specific assessment of expected impairment loss for overdue trade receivables and using a
provision matrix for remaining trade receivables that is based on its historical credit loss experience,
debtors’ ability to pay and forward-looking information specific to the debtors and economic environment.
This assessment requires management to exercise significant judgement. Accordingly, we determined this
as a key audit matter.
Our audit procedures included, amongst others, obtaining an understanding of the Group’s processes
and key controls relating to the monitoring of trade receivables and considered their aging to identify
collection risks. We performed audit procedures including, amongst others, reviewing the reasonableness
of significant judgement used by the management in assessing the recoverability of trade receivables
and reviewing management’s assessment of the recoverability of long outstanding and overdue trade
receivables. We tested the reasonableness of management’s assumptions and inputs used in the ECL
model by comparing to historical credit loss rates, and reviewed data and information that management
has used, including consideration of forward-looking information based on specific economic data. We
checked the arithmetic accuracy of management’s computation of ECL. We reviewed the debtor ageing
analysis and checked to subsequent receipts from major debtors. We obtained documentary evidence,
representation and explanations from management to assess the recoverability of long outstanding debts,
where applicable. In addition, we reviewed the adequacy of the disclosures relating to impairment of trade
receivables and credit risk in Note 18 and Note 27(c) to the consolidated financial statements respectively.
Other information
Management is responsible for other information. The other information comprises the information included
in the annual report, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, 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.
Independent
auditor’s report
For the financial year ended 31 December 2018