197 ANNUAL REPORT 2025 MST GOLF GROUP BERHAD 3. PROPERTY, PLANT AND EQUIPMENT (CONT’D) Material accounting policy information (cont’d) Impairment tests for property, plant and equipment (cont’d) Key assumptions used in VIU calculation The calculation of VIU for the CGUs are most sensitive to the following assumptions: Revenue : The bases used to determine the future potential earnings are historical sales and expected growth rates of the relevant industry. Gross margins : Gross margins are based on the average gross margin achieved in the past few years. Operating expenses : The bases used to determine the value assigned are the cost of inventories purchase for resale, staff costs, depreciation and amortisation, rental expenses and other operating expenses. The value assigned to the key assumption reflects past experience and management’s commitment to maintain the operating expenses to an acceptable level. Growth rates : The forecasted growth rates are based on published industry research and do not exceed the long term average growth rate for the industries relevant to the CGUs. Discount rates : Discount rates reflect management’s estimate of the risk specific to these entities. In determining appropriate discount rates for each unit, consideration has been given to the applicable weighted average cost of capital for each unit. Sensitivity to change in assumptions With regard to the assessment of VIU of the respective CGU, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value, including property, plant and equipment, of the unit to materially exceed its recoverable amount. 4. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES Right-of-use assets The Group has lease contracts for various items of motor vehicles, retail outlets and premises used for its operations purposes. Leases of motor vehicles generally have lease terms between 2 to 5 years (2024: 2 to 5 years), retail outlets generally have lease term about 2 to 15 years (2024: 2 to 15 years) and premises generally about 3 to 6 years (2024: 3 to 6 years). The Group also has certain leases of retail outlets and premises with lease term of 12 months. The Group applies the ‘short-term lease’ recognition exemptions for these leases.
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