MISC BERHAD - Annual Report 2014 p 224 14. Intangible assets (cont’d.) (c) Key assumptions used in value-in-use calculations (cont’d.) Energy Related Shipping Goodwill for this segment represents goodwill arising from acquisition of American Eagle Tanker Inc (“AET”), a company involved in petroleum shipping business. An impairment review of the carrying amount of the goodwill at the reporting date was undertaken by comparing to the recoverable amount of the CGU, which was based on value-in-use calculations. The recoverable amount exceeds its carrying amount by RM531,164,000. The value-in-use is most sensitive to the following key assumptions: 1. Spot charter rates to increase based on forecasts by industry research publications. 2. Risk adjusted discount rate used is 7.8% (2013: 7.41%) which reflects the current market assessment of the risks specific to AET. In determining the discount rate for AET, reference has been made to the yield on a 10 years (2013: 30 years) US Treasury Bills at reporting date. An increase of 0.38% or 38 basis points in discount rate would result in recoverable amount equal to the carrying amount of the goodwill. 3. Terminal value and growth rate - The terminal value is based on expected cash flows for year 2019 into perpetuity with terminal year growth rate of 0% (2013: 0%). Terminal year charter rates are based on ten-year average historical market rates. A decrease of 2.25% or 225 basis points in the charter rates in deriving at the terminal value would result in recoverable amount equal to the carrying amount of the goodwill. 4. Expenses to increase by an annual average rate of 2% (2013: 1.5%). The Directors are of the opinion that the underlying key assumptions used in the estimation of the recoverable amount are reasonable. Based on the above assumptions, there is no impairment to the goodwill of AET. NOTESTOTHE FINANCIAL STATEMENTS - 31 December 2014
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