DESTINI Annual Report 2020

Development costs Development costs related to the boats production which consist of license fees, certification fees, review fee on design, interests and workshop costs have an average remaining amortisation period of 1 year (2019: 2 years). One of the development costs was fully impaired in the financial year ended 2019 when the recoverable amount arising from value in use determined by discount future cash flows is lower than the carrying amount. (b) Impairment testing for cash generating units (“CGU”) containing goodwill For impairment testing, goodwill is allocated to the Group’s subsidiaries which represent the lowest level of CGU level within the Group at which the goodwill is monitored for internal management proposes. The goodwill allocated to each CGU is impaired during the financial year when the recoverable amount from value in use is higher than the carrying amount. The aggregate carrying amount of goodwill allocated to each subsidiary is as follows: Group 2020 2019 RM RM Destini Oil Services Sdn. Bhd. ("DOSSB") 67,158,888 67,158,888 Destini Shipbuilding And Engineering Sdn. Bhd. (“DSESB”) - 38,255,132 67,158,888 105,414,020 The recoverable amount of the goodwill allocated to each CGU is determined based on a value-in-use, determined by discounted future cash flows. The impairment of goodwill is recognised when the recoverable amount is estimated at lower than the cost of investment. During the financial year, the full impairment loss on goodwill allocated to subsidiaries namely DSESB amounted to RM38,255,132 due to persistent losses incurred by the CGU were recognised in the profit of loss. The recoverable amount for the abovewas based on its value-in-use andwas determined by discounting the future cash flows generated from the continuing use of those units and was based on the following key assumptions: (i) Cash flows were projected based on actual operating results and three to five years business plan; (ii) Revenue was projected at anticipated annual revenue growth of approximately 5% to 15% per annum; (iii) Expenses were projected at annual increase of approximately 1.5% to 5% per annum; and (iv) A pre-tax discount rate of 8% to 10% was applied in determining the recoverable amount of the respective CGU. The discount rate was estimated based on the weighted average cost of capital of individual CGU. With regards to the assessments of value-in-useof theseCGUs, management believes that no reasonably possible changes in any of the key assumptions would cause the carrying values of these units to differ materially from their recoverable amounts except for the changes in prevailing operating environment which is not ascertainable. 10. Intangible Assets (Cont’d) (a) Description of the intangible assets (Cont’d) ANNUAL REPORT 2020 DESTINI BERHAD Notes to Financial Statements 147