Frontken Berhad Annual Report 2016

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99 Frontken Corporation Berhad (651020-T)
ANNUAL REPORT2016
13. GOODWILL ON CONSOLIDATION (CONT’D)
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be
impaired.
The recoverable amount of the CGU is determined from value in use calculation. The key assumptions for the value in
use calculation are those regarding the expected changes to pricing and direct costs, growth rates and discount rates
during the period.
2016 2015
% %
Budgeted gross margin 18 to 39 20 to 36
Growth rates
- Year 1 -25 to 3 2 to 5
- Year 2 to 5 1 to 5 2 to 5
Pre-tax discount rates 12 to 14 10 to 13
The calculation of value-in-use for CGU are most sensitive to the following assumptions:
(i) Budgeted gross margin Management determines budgeted gross margin based on past performance and its
expectations of market development.
(ii) Growth rates The growth rates are based on industry growth forecasts. Changes in selling prices
and direct costs are based on past practices and expectations of future changes in the
market. These calculations use pre-tax cash flow projections based on financial budgets
approved by management and extrapolated cash flows for a five-year period based on
growth rates consistent with the long-term average growth rate for the industry.
(iii) Discount rates Management estimates discount rate using pre-tax rate that reflect current market
assessments of the time value of money and the risk specific to the CGU. The rate used
to discount the forecasted cash flows reflects specific risks and expected returns relating
to the industry.
(iv) Terminal value Terminal value is based on zero growth of projected present value of particular subsidiaries
from year 2021 until infinity.
The management believes that there is no reasonable change in the above key assumptions which would cause the
carrying amount of the goodwill to exceed its recoverable amounts.
14. DEFERRED TAX ASSETS/LIABILITIES
The Group
2016 2015
RM RM
Deferred tax assets
At beginning of year 1,405,844 1,062,816
Transfer from profit or loss (Note 8) - 37,141
Transfer to other comprehensive expenses 95,966 105,318
Foreign currency translation differences 100,994 200,569
At end of year 1,602,804 1,405,844
Deferred tax liabilities
At beginning of year 3,446,164 2,571,891
Transfer (to)/from profit or loss (Note 8) (1,775,922) 486,043
Foreign currency translation differences 1,297 388,230
At end of year 1,671,539 3,446,164
Notes To The Financial Statements
(cont’d)