p 225 MISC BERHAD - Annual Report 2014 14. Intangible assets (cont’d.) (c) Key assumptions used in value-in-use calculations (cont’d.) Other Energy Businesses Goodwill for Other Energy Businesses relates to the Group’s interest in Malaysia Marine and Heavy Engineering Holdings Berhad (“MHB”) and Malaysia Offshore Mobile Production (Labuan) Ltd. (“MOMPL”). The recoverable amount of MHB and MOMPL is determined based on value-in-use calculations. Key assumptions used in MHB’s value-in-use calculations The recoverable amount of the CGU is determined based on value-in-use calculations using forecasts on Earnings Before Interests, Taxation, Depreciation and Amortisation (“EBITDA”) based on financial budgets approved by management covering a five-year period. EBITDA forecast beyond the five-year period are extrapolated based on the five-year average figures into perpetuity, assuming growth of 3% and using a pretax discount rate of 10.8%. The calculations of value-in-use for the CGU are most sensitive to the following assumptions: (i) Revenue MHB’s offshore segment revenue are estimated based on existing order book and anticipated future projects. (ii) Budgeted gross margins Gross margins are estimated based on completed projects and budgeted margins of identified future projects. (iii) Growth rates The forecasted growth rates are based on published industry research and do not exceed the long-term average growth rate for the industries relevant to the CGUs. Key assumptions used in MOMPL’s value-in-use calculations The applied discount rate is based on the pre-tax weighted average cost of capital determined by the management. It is the benchmark used by the management to assess operating performance and to evaluate future investments. Since the recoverable amount exceeds the carrying amount of the CGUs, the Directors are of the opinion that there is no impairment to the goodwill of this segment. The Directors believe that there are no reasonable possible changes in key assumptions that would cause the carrying value of MHB or MOMPL to exceed its recoverable amount.
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