MISC Integrated Annual Report 2020

16. INTANGIBLE ASSETS (CONT’D. ) Impairment test for goodwill (a) Goodwill has been allocated to the Group’s CGUs identified according to business segment as follows: Group 2020 2019 RM’000 RM’000 Petroleum & Product Shipping 803,902 819,449 Offshore Business 225 225 804,127 819,674 (b) The Group performed a review on the recoverable amount of goodwill during the financial year. Generally, the recoverable amounts are based on the higher of fair value less costs to sell or value-in-use for the CGUs to which the goodwill is allocated. The recoverable amount of a CGU is determined using the value-in-use method, based on cash flow projections derived from financial projections approved by the management covering a five-year period. The discount rate used is based on the pre-tax weighted average cost of capital determined by the management. Goodwill for the Petroleum & Product Shipping segment represents goodwill arising from acquisition of American Eagle Tanker Inc. (“AET”). An impairment review of the carrying amount of the goodwill at the reporting date was undertaken by comparing to the recoverable amount of the CGU, which was derived based on value-in-use calculations. The value-in- use is most sensitive to the following key assumptions: (i) Risk adjusted discount rate used is 6.90% (2019: 6.90%). The discount rate reflects the current market assessment of the risks specific to the Petroleum & Product Shipping segment. This is the benchmark used by the management to assess operating performance and to evaluate future investments. An increase of 1.81% (2019: 0.85%) or 181 (2019: 85) basis points in discount rate would result in recoverable amount that equates to the carrying amount of the CGU. (ii) Terminal value and growth rate - The terminal value is based on expected cash flows for year 2025 into perpetuity with terminal year growth rate of 1.8% (2019: 2.0%). Terminal year charter rates are referenced to ten-year historical market rates. A decrease of 9.66% (2019: 4.66%) or 966 (2019: 466) basis points in the charter rates in deriving at the terminal value would result in recoverable amount that equates to the carrying amount of the CGU. The decrease in terminal growth rate is not sensitive towards the recoverable amount of the CGU. (iii) Spot and time charter rates are estimated based on forecasts by industry research publications. 17. INVESTMENTS IN SUBSIDIARIES Corporation 2020 2019 RM’000 RM’000 At 1 January 14,986,590 18,669,894 Additional investments in subsidiaries (Note a) 292,438 14,000 Liquidation of a subsidiary (Note b) – (3,438,308) Impairment of investment in unquoted subsidiaries (Note 5(a)) (26,627) (92,825) Currency translation differences (270,513) (166,171) At 31 December 14,981,888 14,986,590 Quoted shares 260,459 265,050 Unquoted shares 14,721,429 14,721,540 14,981,888 14,986,590 Included in unquoted shares are preference shares of RM9,031,255,000 (2019: RM9,062,931,000) which bear interest ranging from 5.00% to 6.00% (2019: 3.00% to 6.00%) per annum. (a) Additional investments in subsidiaries: (i) During the current financial year, the Corporation had incorporated a new subsidiary, Magellan X Holdings (L) Pte Ltd (“Magellan X Holdings (L)”), under the Labuan Companies Act, 1990 with a total paid-up capital of RM292,438,000. The principal activities of Magellan X Holdings (L) is investment holding. (ii) In the previous financial year, the Corporation increased its investment in Eaglestar Marine Holdings (L) Pte. Ltd. (“EMH”) by RM14,000,000 in support of the subsidiary’s debt capitalisation exercise via issuance of ordinary shares. (b) In the previous financial year, the Corporation had initiated the liquidation of its wholly owned subsidiary, MTTI Sdn. Bhd. via members’ voluntary winding up pursuant to Section 439(1)(b) of the Companies Act 2016. Subsequent to the liquidation commencement, the Corporation derecognised its investment in MTTI Sdn. Bhd. up to the amount of outstanding loan from MTTI Sdn. Bhd. in the previous financial year. Details of the subsidiaries are disclosed in Note 40. 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS 31 December 2020 NOTES TO THE FINANCIAL STATEMENTS 10 394 10 395 /// Leadership / Governance / Financial Statements / Additional Information / Annual General Meeting ////// /// Leadership / Governance / Financial Statements / Additional Information / Annual General Meeting ////// Section Section MISC Berhad / Integrated Annual Report 2020 MISC Berhad / Integrated Annual Report 2020

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