122
ANNUAL REPORT 2016
NOTES TOTHE FINANCIAL STATEMENTS
30 JUNE 2016
(Continued)
9.
INTANGIBLE ASSETS (continued)
(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 RM55,026,000 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 CGU operate and/or global economic conditions. Hence, in computing the value-in-use for
each CGU, the management has applied a discount rate of 6.1% (2015: 8.1%) and growth rates of 5.0% to 10.0% (2015: 7.0% 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
During the financial year 2016, included in the additions of trademarks is a trademark amounting to RM8,818,000 which represents
the rights of using “Braun Buffel” trademark in various countries worldwide (“BB Global Trademark”). The BB Global Trademark has
an indefinite useful life.
As at 30 June 2016, the BB Global Trademark was tested for impairment. The recoverable amount of the BB Global Trademark was
determined based on a value-in-use calculation. The 14-year cash flow forecast and projection (from year 2016 to year 2030) used in
the calculation was based on the following key assumptions:
(i)
The discount rate was estimated based on the subsidiary’s weighted average cost of capital of 10.5%.
(ii)
Growth rate of 1.0% to 2.0% were used based on historical trend of royalty income received.
Based on the assessment, 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 with finite useful life mainly represent the “Braun Buffel” trademark in Asia Pacific Region and the registration cost
of Bonia, Sembonia and Carlo Rino brands.
