DIGI - Annual Report 2021

Notes to the Financial Statements 31 December 2021 171 Integrated Annual Report 2021 Governance Audited Financial Statements Other Information 4. Significant accounting estimates and judgements and key sources of estimation uncertainty There were no significant judgements made in applying the accounting policies of the Group which may have significant effects on the amounts recognised in the financial statements. Management makes key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The following represents a summary of the critical accounting estimates and the associated key sources of estimation uncertainty. 4.1 Useful lives of property, plant and equipment and intangible assets Depreciation and amortisation are based on management’s estimates of the future estimated useful lives and residual values of property, plant and equipment and intangible assets. Estimates may change due to technological developments,modernisation initiatives,expected level of usage,competition,market conditions and other factors, which could potentially impact the average useful lives and the residual values of these assets. This may result in future changes in the estimated useful lives and in the depreciation or amortisation expenses. A 5.0% difference in the expected useful lives of these assets from management’s estimates would result in approximately 3.5% (2020: 1.6%) variance in the Group’s profit for the financial year. The carrying amounts of property, plant and equipment and intangible assets at the reporting date are disclosed in Note 11 and Note 12, respectively. 4.2 Provision for expected credit losses of trade receivables and contract assets The Group uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e. customer type and rating). The provision matrix is initially based on the Group’s historical observed default rates. The Group then adjusts the historical credit loss experience taking into consideration the forward-looking information. For example, if the Group’s view of the forecasted economic conditions (i.e. inflation rate, unemployment rate, interest rate and economic outlook for Malaysia) are expected to significantly deteriorate over the next financial year which may lead to an increase in the unrecoverable rate of the receivables and contract assets. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The Group estimates the relationship between historical observed default rates, forecast economic conditions and ECL which may not be representative of customer’s actual default in the future.The information about the provision matrix on the Group’s trade receivables and contract assets is disclosed in Note 31.2. If the historical observed default rates varies by 5.0% from management’s estimates, the Group’s allowance for expected credit loss on trade receivables and contract assets will cause either a 0.1% (2020: 0.2%) increase or 0.1% (2020: 0.2%) decrease respectively in the Group’s profit for the financial year.

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