14. Intangible assets (cont’d.) (c) Key assumptions used in value-in-use calculations (cont’d.) Petroleum Goodwill for this segment represents goodwill arising from acquisition of American Eagle Tanker Inc (“AET”). 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 valuein-use is most sensitive to the following key assumptions: (i) Risk adjusted discount rate used is 7.55% (2015: 8.25%). The discount rate reflects the current market assessment of the risks specific to the Group. This is the benchmark used by the management to assess operating performance and to evaluate future investments. In determining the discount rate for the Group, reference has been made to the yield of a 10 years (2015: 10 years) US Treasury Bills as at reporting date. An increase of 0.31% (2015: 1.29%) or 31 (2015: 129) basis points in discount rate would result in recoverable amount that equates to the carrying amount of the goodwill. (ii) Terminal value and growth rate - The terminal value is based on expected cash flows for year 2021 into perpetuity with terminal year growth rate of 2.0% (2015: 1.5%). Terminal year charter rates are based on ten-year average historical market rates. A decrease of 1.51% (2015: 3.10%) or 151 (2015: 310) basis points in the charter rates in deriving at the terminal value would result in recoverable amount that equates to the carrying amount of the goodwill. (iii) Expenses are estimated to increase by an annual average rate of 2.0% (2015: 1.5%). (iv) Spot charter rates are estimated based on forecasts by industry research publications. Heavy Engineering In the previous financial year, an impairment loss amounting to RM117,709,000 was recognised to write down the entire carrying amount of goodwill relating to the Group’s interest in Malaysia Marine and Heavy Engineering Holdings Berhad (“MHB”). Offshore In the previous financial year, the Group also recognised an impairment loss amounting to RM42,467,000 to write down the entire carrying amount of goodwill for Malaysia Offshore Mobile Production (Labuan) Ltd. (“MOMPL”). Financial Statements 235
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