PRG Holdings Berhad Annual Report 2018

8. INTANGIBLE ASSETS (continued) (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 2019 to 2021. 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 12% (2017: 5% to 10%) per annum for the years 2019 to 2021. (ii) Profit margins are projected based on the historical profit margin achieved for the products. (iii) Pre-tax discount rate of 16.75% (2017: 13.96%) 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 2018 2017 RM’000 RM’000 Quoted equity shares - at cost 58,510 69,655 Unquoted equity shares - at cost 5,250 5,000 63,760 74,655 (a) Incorporation of subsidiaries During the financial year, the Company incorporated the following subsidiaries: (i) On 9 March 2018, the Company incorporated and subscribed for one (1) ordinary share representing 100% equity interest in PRG Asset Holdings Sdn. Bhd., a company incorporated in Malaysia, for a total consideration of RM1.00. (ii) On 16 March 2018, a wholly-owned subsidiary of the Company, PRG Asset Holdings Sdn. Bhd. incorporated and subscribed for one (1) ordinary share representing 100% equity interest in PRG Land Sdn. Bhd., a company incorporated in Malaysia, for a total consideration of RM1.00. (iii) On 11 April 2018, a subsidiary of the Company, Furniweb Holdings Limited ("FHL") incorporated and subscribed for one (1) ordinary share representing 100% equity interest in PP Retail Pte. Ltd., a private company limited by shares in Singapore under the Companies Act (Chapter 50 of the Laws of Singapore) for a total consideration of SGD1.00. (b) Acquisition of subsidiary On 9 April 2018, a subsidiary of the Company, FHL acquired one (1) ordinary share representing 100% equity interest in Premier Management International Limited, a limited liability company incorporated in Hong Kong on 25 November 2016 under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), from Liew Ching Hoong for a cash consideration of HKD1.00. 2018 A N N U A L R E P O R T 112 notes to the financial statements 31 December 2018 (continued)