182 F INANC IAL Statements 05 Sect ion Ranhi ll Ut i l i t i es Berhad NOTES TO THE F INANC I AL STATEMENTS For the year ended 31 December 2022 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (contd.) (a) Critical judgement in applying the accounting policies (contd.) (iv) Accrued water revenue The Ministry of Environment and Water (currently known as NRECC), on the recommendation of National Water Services Commission (“SPAN”), had made amendments on the water tariff in the Water Services Industry Act 2006 (Rates for Water Supply Services) which was gazetted by the federal government with effect from 1 August 2022. Amongst the amendments are increase in tariff rates for water consumption on non-domestic consumers and upsurge minimum charges on consumers other than domestic (new water tariff). RanhillSAJ, a subsidiary of the Company, decided to implement the water tariff hike in year 2023 and notified to the consumers accordingly. The management has exercised judgement on the extent of revenue to be recognised in the current financial year. (v) Recognition of government grant on meeting year 2021 NRW target During the year, the Group qualified and applied for a government grant under the National Non-Revenue Water (“NRW”) Rate Reduction Programme announced through the 12th Malaysia Plan (Year 2021-2025). Under this programme, entities that meet the NRW target are entitled to claim for a government grant for the reimbursement of relevant expenses incurred based on the established terms and conditions. The Group has recognised RM142,285,000 as other income and other receivables and the related estimated tax expense of RM13,892,000 in this respect in the current financial year. On 19 September 2022, the National Water Services Commission (“SPAN”) informed RanhillSAJ, a subsidiary of the Company, that the Ministry of Environment and Water (currently known as NRECC) has agreed with RanhillSAJ on their achievement of the NRW target for the year 2021. RanhillSAJ then submitted supporting documents relevant to the NRW expenses for SPAN’s review on 29 November 2022. Upon completion of SPAN’s review of the supporting documents, RanhillSAJ received a confirmation letter from SPAN dated 19 January 2023 awarding a government grant amounting to RM142,285,000. On 2 March 2023, RanhillSAJ received a further confirmation letter from SPAN that NRECC has also concurred with the awarding of the grant. The Group determined that the government grant as disclosed in Note 24(d) is related to income and also applied judgement that the recognition criteria of the government grant was fulfilled in the current financial year. The management determined that the confirmation letters from SPAN and NRECC that were received after the end of the current financial year were administrative in nature considering, among others, the availability of funds allocated under the 12th Malaysia Plan (Year 2021-2025) by the Government of Malaysia, the accuracy of their estimated grant amount at year end when compared to the final confirmatory letters and that the 2021 NRW target was met. In addition, management had applied significant estimates to determine the related tax expenses arising from this grant according to the nature of the relevant NRW expenses. (b) Key source of estimation uncertainty The 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 are discussed below. (i) Useful lives of property, plant and equipment The estimate of the useful lives of property, plant and equipment are based on expected usage, physical wear and tear, technical and commercial obsolescence are reviewed annually and are updated if expectations differ from previous estimates. Any change to the estimate of the useful lives will affect future depreciation charges. The directors have relied upon past experience and industry practices in exercising their judgement. The carrying amount of the Group’s property, plant and equipment at the reporting date is disclosed in Note 14.
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