Excel Force MSC Berhad Annual Report 2015

NOTES TO THE FINANCIAL STATEMENTS 31 December 2015 (cont’d) E X C E L F O R C E M S C B E R H A D • A N N U A L R E P O R T 2 0 1 5 74 8. PRODUCT DEVELOPMENT COSTS Group Company 2015 2014 2015 2014 RM RM RM RM Cost At beginning of financial year 17,021,650 14,898,156 14,066,843 12,725,220 Additions during the financial year 2,903,104 2,574,798 2,194,248 1,792,927 Written off during the financial year - (451,304) - (451,304) At end of financial year 19,924,754 17,021,650 16,261,091 14,066,843 Accumulated amortisation At beginning of financial year (8,469,806) (7,473,687) (7,955,280) (7,176,454) Charge for the financial year (1,429,000) (996,119) (1,055,332) (778,826) At end of financial year (9,898,806) (8,469,806) (9,010,612) (7,955,280) Carrying amount 10,025,948 8,551,844 7,250,479 6,111,563 (a) Product development costs comprise salaries of personnel involved in the development and design of products prior to the commencement of commercial production. (b) For the purpose of impairment testing, the recoverable amount in the Cash Generating Units (‘CGUs’) is determined based on their value in use. The value in use is determined by discounting the future cash flows to be generated from the continuing use of the CGUs based on financial budgets prepared by management covering a five (5) year period. The key assumptions used in the value in use calculations are as follows: (i) The anticipated average annual revenue growth rates used in the cash flow budgets and plans of the CGUs ranged from 2% to 75% (2014: 10% to 57%) per annum for years 2016 to 2020. (ii) Profit margins are projected based on the historical profit margin achieved or predetermined profit margin for the products. (iii) A pre-tax discount rate of 8.40% (2014: 9.70%) per annum has been applied in determining the recoverable amount of the CGUs. Based on these assumptions, the Directors are of the view that no impairment loss is required as the recoverable amount determined is higher than the carrying amount of the CGUs. (c) Sensitivity to changes in assumptions The management believes that a reasonable possible change in the key assumptions on which management has based its determination of the CGUs’ recoverable amount would not cause the CGUs’ carrying amount to exceed its recoverable amount. (d) Included in the product development costs of the Group are Executive Directors’ remuneration of RM87,135 (2014: RM143,413).