Professional Documents
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Company Analysis
Company Analysis
3. Name of companies
CONSTRUCTION
Gamuda 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
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
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,
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
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,
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
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
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
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
(iii) Buildings
Building is a fixed asset that covers all expenditures related directly to acquisition or
construction.
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.
Plant and machinery is the non-current asset used in the production of goods and
work, where the construction has not yet been completed. Construction in-progress is
not depreciated until the construction is completed. After completion, construction in-
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
Building is a fixed asset that covers all expenditures related directly to acquisition or
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
Plant and machinery is the non-current asset used in the production of goods and
Furniture and equipment is movable long-term asset such as computer and desk that is
Vehicles
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
CONSTRUCTION
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
George Kent (Malaysia) Berhad is using the straight-line method to determine the
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
9. Identify the subsequent measurement model applied by the companies to record their PPE
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
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
13. Report the amount of impairment loss of PPE for the selected companies.
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
15. Briefly discuss impairment of financial assets (e.g trade receivables) in accordance with
16. Identify and explain the factors as reported/disclosed in the financial statements that lead
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
economic benefits embodied in the asset are accounted for by changing the amortisation
(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