199801018294

Independent auditors’ report to the members of

Top Glove Corporation Bhd.
(Incorporated in Malaysia)

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Top Glove Corporation Bhd., which comprise the
statements of financial position as at 31 August 2020 of the Group and of the Company, and
statements of profit or loss and other comprehensive income, statements of changes in equity
and statements of cash flows of the Group and of the Company for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies, as set
out on pages 19 to 152.

In our opinion, the accompanying financial statements give a true and fair view of the financial
position of the Group and of the Company as at 31 August 2020, and of their financial
performance and their cash flows for the year then ended in accordance with Malaysian
Financial Reporting Standards, International Financial Reporting Standards and the
requirements of the Companies Act 2016 in Malaysia.

Basis for opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and
International Standards on Auditing. Our responsibilities under those standards are further
described in the Auditors’ responsibilities for the audit of the financial statements section of
our report. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.

Independence and other ethical responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on
Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By
Laws”) and the International Code of Ethics for Professional Accountants (including
International Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical
responsibilities in accordance with the By-Laws and the IESBA Code.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the Group and of the Company for the
current year. We have determined that there are no key audit matters to communicate in our
report on the financial statements of the Company. The key audit matters for the audit of the
financial statements of the Group are described below. These matters were addressed in the
context of our audit of the financial statements of the Group as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. For each matter
below, our description of how our audit addressed the matter is provided in that context.
199801018294

Independent auditors’ report to the members of

Top Glove Corporation Bhd. (cont'd.)
(Incorporated in Malaysia)

Key audit matters (cont'd.)

We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of
the financial statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial statements. The results of our
audit procedures, including the procedures performed to address the matters below, provide
the basis of our audit opinion on the accompanying financial statements.

Review of costing of inventories

(Refer to Note 4.16, 7.2(a) and Note 25 to the financial statements)

As at 31 August 2020, the Group held RM531 million of inventories which represented 6% of
total assets of the Group. Total cost of inventories charged to the consolidated income
statement for the year ended 31 August 2020 amounted to RM4,387 million, accounting for
86% of total expenditure of the Group.

Inventories are carried at the lower of cost and net realisable value. The cost of production
comprises the cost of purchase of raw materials, labour costs, plus conversion costs such as
variable and fixed overhead costs. Significant estimates are involved in determining the basis of
allocating the costs of production to the products produced by the Group. The Group relies
heavily on the information technology system ("IT system") to ensure that the costs of raw
materials, labour costs and overhead costs are correctly allocated to the respective products.
Due to the significant estimation involved in the valuation of inventories, we considered this a
key area of audit focus.

Our audit procedures include, amongst others, the following:

a) Obtained an understanding of the Group’s current inventories valuation policy, production

processes and the types of costs included in the valuation of inventories.

b) Evaluated the general and logical access controls surrounding the data input process to the
IT system by involving our IT audit professionals.

c) Obtained an understanding of and tested the internal controls over the IT system in respect
of the allocation of costs of raw materials, labour costs, and overhead costs to the
respective products.

d) Agreed, on a sampling basis, the costs of raw materials to suppliers' invoices.

199801018294

Independent auditors’ report to the members of

Top Glove Corporation Bhd. (cont'd.)
(Incorporated in Malaysia)

Key audit matters (cont'd.)

Annual impairment test of goodwill arising from the acquisition of Aspion Sdn. Bhd.
("Aspion")
(Refer to Note 4.1, 7.2(b) and Note 24 to the financial statements)

As at 31 August 2020, the Group recorded a goodwill of RM934 million arising from the
acquisition of Aspion, which represented 11% of the Group’s total assets. The goodwill amount
has been allocated to cash generating unit (“CGU”) for impairment testing purposes. The Group
estimated the recoverable amount of the CGU to which the goodwill is allocated based on value
in-use (“VIU”).

Given its magnitude and the significant judgement involved in the impairment assessment, we
consider this to be an area of audit focus.

Our audit procedures include, amongst others, the following:

a) Evaluated management’s key assumptions used in the cash flows projection, focusing on
projected revenue, profit margins and terminal growth rates, taking into consideration the
current and expected future economic conditions. We compared the projected revenue to
the past trends and compared expected revenue growth rates to relevant future market
demand.

b) Together with EY valuation specialists, we evaluated the discount rate used to determine
the present value of the cash flows and assessed whether the rate used reflects the current
market assessment of the time value of money and the risk specific to the asset is the return
that the investors would require if they were to choose an investment that would generate
cash flows of amounts, timing and risk profile equivalent to those that the entity expects to
derive from the asset.

c) Assessed the sensitivity of the cash flows to changes in the key assumptions to understand
the impact that reasonable alternative assumptions would have on the overall recoverable
amount.

d) Evaluated the adequacy of the Group’s disclosures in the financial statements concerning
those key assumptions to which the outcome of the impairment assessment is most
sensitive.
199801018294

Independent auditors’ report to the members of

Top Glove Corporation Bhd. (cont'd.)
(Incorporated in Malaysia)

Information other than the financial statements and auditors’ report thereon

The directors of the Company are responsible for the other information. The other information
comprises the information included in the annual report, but does not include the financial
statements of the Group and of the Company and our auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the
other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our
responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements of the Group and of the
Company or our knowledge obtained in the audit or otherwise appears to be materially
misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this
regard.

Responsibilities of the directors for the financial statements

The directors of the Company are responsible for the preparation of financial statements of the
Group and of the Company that give a true and fair view in accordance with Malaysian Financial
Reporting Standards, International Financial Reporting Standards and the requirements of the
Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as
the directors determine is necessary to enable the preparation of financial statements of the
Group and of the Company that are free from material misstatement, whether due to fraud or
error.

In preparing the financial statements of the Group and of the Company, the directors are
responsible for assessing the Group’s and the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
199801018294

Independent auditors’ report to the members of

Top Glove Corporation Bhd. (cont'd.)
(Incorporated in Malaysia)

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements of
the Group and of the Company as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
approved standards on auditing in Malaysia and International Standards on Auditing will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and

International Standards on Auditing, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Group
and of the Company, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s and of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s or the
Company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditors’ report to the related disclosures in
the financial statements of the Group and of the Company or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditors’ report. However, future events or conditions may cause the
Group or the Company to cease to continue as a going concern.
199801018294

Independent auditors’ report to the members of

Top Glove Corporation Bhd. (cont'd.)
(Incorporated in Malaysia)

Auditors’ responsibilities for the audit of the financial statements (cont'd.)

As part of an audit in accordance with approved standards on auditing in Malaysia and

International Standards on Auditing, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also (cont'd.):

 Evaluate the overall presentation, structure and content of the financial statements of the
Group and of the Company, including the disclosures, and whether the financial statements of
the Group and of the Company represent the underlying transactions and events in a manner
that achieves fair presentation.
 Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial statements of the
Group. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of
most significance in the audit of the financial statements of the Group and of the Company for
the current year and are therefore the key audit matters. We describe these matters in our
auditors’ report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the
subsidiaries of which we have not acted as auditors are disclosed in Note 20 to the financial
statements.
199801018294
Independent auditors’ report to the members of
Top Glove Corporation Bhd. (cont'd.)
(Incorporated in Malaysia)

Other matters

This report is made solely to the members of the Company, as a body, in accordance with
Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not
assume responsibility to any other person for the content of this report.

Ernst & Young PLT Ng Kim Ling

202006000003 (LLP0022760-LCA) & AF 0039 No. 03236/04/2022 J
Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia

3 November 2020