| ANNUAL REPORT 2015
136
NOTES TO THE FINANCIAL STATEMENTS
30 June 2015 (cont’d)
9. INTANGIBLE ASSETS (cont’d)
(a) Goodwill
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating unit (“CGU”) that is
expected to benefit from the business combination. The carrying amount of goodwill of RM38,359,000 had been allocated
mainly to the retailing division as an independent CGU.
Goodwill is tested for impairment on an annual basis by comparing the carrying amount with the recoverable amount.
As the Directors are of the opinion that all the CGU are held on a long-term basis, the value-in-use would best reflect its
recoverable amount. The value-in-use is determined by discounting future cash flows over a three (3) year period. The
future cash flows are based on management’s business plan, which is the best estimate of future performance. The ability
to achieve the business plan targets is a key assumption in determining the recoverable amount for each CGU.
There remains a risk that the ability to achieve management’s business plan will be adversely affected due to unforeseen
changes in the respective economies in which the CGUs operate and/or global economic conditions. Hence, in computing
the value-in-use for each CGU, the management has applied a discount rate of 8.1% (2014: 7.2%) and growth rates of 7.0%
to 13.0% (2014: 4.0% to 13.0%) per annum depending on the products, markets and business plans of the subsidiaries.
The following describes each key assumption on which the management has based its cash flow projections for the
purposes of the impairment test for goodwill:
(i) The discount rate was estimated based on the weighted average cost of capital of the Group.
(ii) Growth rates used are based on historical trends of each segment taking into account industry outlook for that
segment.
(iii) The profit margin applied to the projections are based on the historical profit margin trend for the individual CGU.
With regard to the assessment of value-in-use of the goodwill, the management believes that no reasonably possible
change in any of the above key assumption would cause the carrying values of the CGU to materially exceed their
recoverable amounts.
(b) Trademarks
Trademarks of RM30,596,000 (2014: RM30,199,000) represent the rights of using “Braun Buffel” trademark in various
countries. The addition of RM3,232,000 in the previous financial year represented an extension of the existing Braun Buffel
trademark in China for the period from 1 July 2034 to 30 June 2074.
The management has prepared a 19-year cash flows forecast and projections to support the carrying amounts of the
trademark. The said cash flows forecast and projections are based on 19 years of projected royalty income from year 2016
to year 2034.
The following describes each key assumption on which the management has based on its cash flows projections for the
purpose of impairment test for “Braun Buffel” trademark:
(i) The discount rate was estimated based on the weighted average cost of capital of the Group.
(ii) Growth rate used has been based on historical trend of royalty income received.
As at 30 June 2015, the management assessed that the recoverable amounts of trademark, based on value in use
calculations, exceeded their carrying amounts and thus, no impairment is required.
With regard to the assessment of value-in-use of the trademark, the management believes that no reasonably possible
change in any of the above key assumption would cause the carrying values to materially exceed its recoverable amount.
Other trademarks represent the registration cost of Bonia, Sembonia and Carlo Rino brands.
