16. INTANGIBLE ASSETS Group Other intangible Goodwill assets Total RM’000 RM’000 RM’000 Cost At 1 January 2020 982,175 212,557 1,194,732 Currency translation differences (15,547) – (15,547) At 31 December 2020/1 January 2021 966,628 212,557 1,179,185 Reclassification from property, plant and equipment (Note 14) – 231,238 231,238 Deconsolidation of a subsidiary (225) – (225) Currency translation differences 31,862 1,421 33,283 At 31 December 2021 998,265 445,216 1,443,481 Accumulated amortisation and impairment At 1 January 2020 162,501 191,578 354,079 Amortisation for the year (Note 5) – 5,884 5,884 At 31 December 2020/1 January 2021 162,501 197,462 359,963 Amortisation for the year (Note 5) – 22,603 22,603 At 31 December 2021 162,501 220,065 382,566 Net carrying amount At 31 December 2021 835,764 225,151 1,060,915 At 31 December 2020 804,127 15,095 819,222 Goodwill (a) Allocation of goodwill Goodwill has been allocated to the Group’s CGUs identified according to business segment as follows: Group 2021 2020 RM’000 RM’000 Petroleum & Product Shipping 835,764 803,902 Offshore Business – 225 835,764 804,127 16. INTANGIBLE ASSETS (CONT'D.) (b) Impairment test for goodwill 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 (“VIU”) for the CGUs to which the goodwill is allocated. The recoverable amount of a CGU is determined using the VIU 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 VIU calculations. The VIU is most sensitive to the following key assumptions: (i) Risk adjusted discount rate used is 6.15% (2020: 6.90%). The discount rate reflects the current market assessment of the risks specific to the Petroleum segment. This is the benchmark used by the management to assess operating performance and to evaluate future investments. An increase of 0.80% (2020: 1.81%) or 80 (2020: 181) 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 1.80% (2020: 1.80%). Terminal year charter rates are referenced to ten-year historical market rates. A decrease of 5.30% (2020: 9.66%) or 530 (2020: 966) 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. Other intangible assets The other intangible assets relate to the fair value, at the date of acquisition, of long term customer contracts from acquisition of a subsidiary which is amortised over the remaining contract periods. The addition in the current financial year relates to digital products, measured at cost which comprises the development costs and all costs that can be directly attributed to preparing the asset for its intended use. The intangible assets on digital products are amortised on a straight-line basis over its estimated useful life of 7 years. NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 MISC Berhad 372 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 373 FINANCIAL STATEMENTS FINANCIAL STATEMENTS
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