KEY AUDIT MATTERS (CONT’D.) Revenue and cost of sales in respect of property development activities A significant proportion of the Group’s revenues and profits are derived from property development contracts which span over more than one accounting period. For the financial year ended 31 December 2025, property development revenue from ongoing projects of RM1,006,390,000 and cost of sales of RM723,211,000 accounted for approximately 67% and 64% of the Group’s revenue and cost of sales respectively. For these property development contracts where revenue is recognised over time, the Group uses the input method in determining the percentage of completion, which is based on the actual cost incurred to date on the property development project over the total budgeted cost for the respective development projects in accounting for the progress towards complete satisfaction of the Group's performance obligation. We identified revenue and cost of sales in respect of property development activities as areas requiring audit focus as significant management’s judgement is involved in estimating the total property development costs to complete the project. The total property development cost estimates form the basis to determine the progress towards complete satisfaction of the Group's performance obligation and henceforth, the estimated gross profit margin of the property development activities undertaken by the Group. How have our audit addressed the matter In addressing the key audit matter, we performed, amongst others, the following procedures: • We obtained an understanding of the internal controls over the accuracy and timing of revenue recognised in the financial statements, including controls performed by management in estimating the total property development cost; • We evaluated the assumptions applied in estimating the total property development costs by examining documentary evidence to support the total budgeted costs; • We considered the historical accuracy of management’s budgets for the similar property development projects in evaluating the estimated total property development costs; • We obtained an understanding of the internal controls over the timeliness of updating the gross development value of each property development project; • We read, on a sample basis, the sale and purchase agreements entered into with customers to obtain an understanding of the specific terms and conditions; • We evaluated the determination of the progress towards complete satisfaction of the Group's performance obligation by examining relevant supporting documents including those of third parties; • We evaluated the mathematical accuracy of the revenue and profit based on the percentage of completion calculations and considered the implications of identified errors and changes in estimates; and • We observed, on a sample basis, the progress of the property developments on by performing site visits. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF TROPICANA CORPORATION BERHAD (INCORPORATED IN MALAYSIA) AR 2025 | FINANCIAL STATEMENT & OTHER INFORMATION 242
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