207 MISC BERHAD Annual Report 2015 14. Intangible assets (cont’d.) Impairment test for goodwill (a) Impairment loss recognised The Group performed a review on the recoverable amount of goodwill during the financial year. Generally, the recoverable amounts are based on the higher of market value of quoted share or value-in-use for the CGUs to which the goodwill is allocated. In determining value-in-use for the CGUs, the cash flows were discounted at rates determined by management on a pre-tax basis. Based on this review, impairment loss of RM160,176,000 (2014: RM Nil) was recognised by the Group. (b) Allocation of goodwill Goodwill has been allocated to the Group’s CGUs identified according to business segment as follows: Group 2015 2014 RM’000 RM’000 Energy related shipping 857,521 697,859 Other energy businesses 223 152,492 Non-shipping and others 870 870 858,614 851,221 (c) Key assumptions used in value-in-use calculations The recoverable amount of a CGU is determined using value-in-use method based on cash flow projections derived from financial projections approved by the management covering a five-year period. The discount rate used is based on the pre-tax weighted average cost of capital determined by the management. 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 RM1,639,116,000. The valuein-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 8.25% (2014: 7.8%) 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 (2014: 10 years) US Treasury Bills at reporting date. An increase of 1.29% or 129 basis points in discount rate would result in recoverable amount equal to the carrying amount of the goodwill.
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