PRG Holdings Berhad Annual Report 2017

• Annual Report 2017 107 8. INTANGIBLE ASSETS (CONT’D) (a) For the purpose of impairment testing, the recoverable amount of the CGU is determined based on a “value-in-use” calculation. The value-in-use of the CGU is determined by discounting the future cash flows to be generated from continuing use of the CGU. The value-in-use is derived based on management’s cash flow projections for three (3) financial years from 2018 to 2020. 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 projections of the CGU ranged from 5% to 10% (2016: 12% to 18%) per annum for the years 2018 to 2020. (ii) Profit margins are projected based on the historical profit margin achieved for the products. (iii) Pre-tax discount rate of 13.96% (2016: 8.39%) was applied over the projection periods in determining the recoverable amount of the CGU. The discount rate used is pre-tax and reflects the overall weighted average cost of capital of the CGU. (b) Sensitivity to changes in assumptions The management believes that a reasonably possible change in the key assumptions on which management has based its determination of the CGU’s recoverable amount would not cause the CGU’s carrying amount to further exceed its recoverable amount. 9. INVESTMENTS IN SUBSIDIARIES Company 2017 2016 RM’000 RM’000 Unquoted equity shares - at cost 74,655 56,289 Less: Impairment losses - (2,545) 74,655 53,744 (a) Incorporation of subsidiaries (i) During the financial year, the Company incorporated the following subsidiaries: • On 3 March 2017, the Company incorporated and subscribed for 1,000,000 ordinary shares representing 100% equity interest in Furniweb Holdings Limited (“FHL”), a company incorporated in the Cayman Islands, as an exempted company with limited liability. On 21 September 2017, 19,000,000 new ordinary shares of FHL were allotted and issued, credited as fully paid, together with 1,000,000 shares which were allotted and issued earlier on, credited as fully paid, to the Company as a consideration to dispose its entire equity interest in FIPB International Limited (“FIPB”) to FHL. • On 13 April 2017, the Company incorporated and subscribed for one (1) ordinary share representing 100% equity interest in Premier International Marketing Sdn. Bhd., a company incorporated in Malaysia, for a total consideration of RM1.00. The one (1) ordinary share was transferred to PRG Agro Sdn. Bhd. (“PRG Agro”) (formerly known as PRG Global Sdn. Bhd.) for a total consideration of RM1.00 on 11 July 2017. • On 22 May 2017, the Company incorporated and subscribed for one (1) ordinary share representing 100% equity interest in PRG Agro, a company incorporated in Malaysia, for a total consideration of RM1.00. • On 6 June 2017, the Company incorporated and subscribed for one (1) ordinary share representing 100% equity interest in PRG Asset Sdn. Bhd., a company incorporated in Malaysia, for a total consideration of RM1.00. • On 28 June 2017, the Company incorporated and subscribed for one (1) ordinary share representing 100% equity interest in PRG Construction Sdn. Bhd. (“PRGCSB”), a company incorporated in Malaysia, for a total consideration of RM1.00. N O T E S T O T H E F I N A N C I A L S T A T E M E N T S 3 1 D E C E M B E R 2 0 1 7 ( C O N T ’ D )