Excel Force MSC Berhad Annual Report 2016

EXCEL FORCE MSC BERHAD ANNUAL REPORT 2016 76 Notes to the Financial Statements 31 December 2016 (cont’d) 8. PRODUCT DEVELOPMENT COSTS (cont’d) (a) Product development costs comprise salaries of personnel involved in the development and design of products prior to the commencement of commercial production. (b) The Group reviews the carrying amounts of product development costs as at the end of the reporting period to determine whether there is any indication of impairment. If any such indications exists, the assets’ 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 8% to 44% (2015: 2% to 75%) per annum for years 2017 to 2021. (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 4.70% (2015: 8.40%) 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 RM67,800 (2015: RM87,135). 9. GOODWILL ON CONSOLIDATION Group 2016 Balance as at 1.1.2016 Impairment loss for the financial year Disposal of subsidiaries (Note 33) Balance as at 31.12.2016 RM RM RM RM Carrying amount Goodwill 32,528 - (32,528) - 32,528 - (32,528) - [------------------------------As at 31.12.2016---------------------------] Cost Accumulated impairment Disposal of subsidiaries Carrying amount (Note 33) RM RM RM RM Goodwill 32,528 - (32,528) - 32,528 - (32,528) -