105 ANNUAL REPORT 2024 Independent Auditor’s Report to the Members of MEGACHEM LIMITED Report on the audit of the financial statements Opinion We have audited the accompanying financial statements of Megachem Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position of the Group and the statement of financial position of the Company as at 31 December 2024, and the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows of the Group for the reporting year then ended, and notes to the financial statements, including material accounting policy information. In our opinion, the accompanying consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Companies Act 1967 (the “Act”) and the Singapore Financial Reporting Standards (International) (“SFRS (I)s”) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 31 December 2024 and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group for the reporting year ended on that date. Basis for opinion We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority (“ACRA”) Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”), as applicable to the audits of financial statements of public interest entities, together with the ethical requirements that are relevant to audits of the financial statements of public interest entities in Singapore. We have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matter Key audit matter is the matter that, in our professional judgement, was of most significance in our audit of the financial statements of the current reporting year. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Impairment of inventories Refer to Note 2 for the relevant accounting policy and Note 17 for the breakdown of inventories at the reporting year end. Key audit matter The Group’s inventories amounted to $31,742,578 as at 31 December 2024, representing approximately 30% of the Group’s total assets. The Group’s inventory provision policy takes into consideration the inventory aging profiles, as well as the inventories’ sales patterns during the reporting year. Management is of the view that these amounts are realisable, based on their knowledge of the Group’s operations, the industry and their technical assessment of the inventories. Allowance of inventories amounted to $7,227,940 as at the end of the reporting year. Determination of the method to use, years to consider for aging analysis, and percentages to apply to aged inventory requires significant management’s judgement. How we addressed the matter in our audit We have assessed the reasonableness of Group’s policy and management’s judgement for inventory obsolescence based on our understanding of the business environment and our review of the inventories’ sales patterns. We have assessed the accuracy of Group’s inventory aging as at the reporting year end, as well as tested the Group’s computation for inventory obsolescence. We have retrospectively assessed the historical accuracy of management’s assumptions and estimates applied in the provision for inventory obsolescence. We have tested the net realisable value (“NRV”) of inventories by reviewing the subsequent selling prices. For inventories that have been written down to NRV, we have performed procedures to assess whether the write-down was appropriate. We have also assessed the adequacy of the disclosures made in the financial statements.
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