PRG Holdings Berhad Annual Report 2019

ANNUAL REPORT 2019 117 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 cont’d 9. INTANGIBLE ASSETS (continued) Goodwill Customers relationship Computer software Total Group RM’000 RM’000 RM’000 RM’000 Accumulated impairment loss At 1 January 2018/1 January 2019 691 - - 691 Impairment loss for the financial year 34,564 - - 34,564 Translation adjustments (776) - - (776) At 31 December 2019 34,479 - - 34,479 Carrying amount At 31 December 2018 1,233 - 95 1,328 At 31 December 2019 27,980 4,943 51 32,974 The carrying amount of goodwill arising from the acquisition of the respective subsidiaries and allocated to the Group’s CGU is as follows: Group 2019 2018 RM’000 RM’000 Malaysia 1,233 1,233 China 26,747 - 27,980 1,233 (a) For the purpose of impairment testing, the recoverable amount of the CGU is determined based on a “value-in-use” calculation. The value-in-use of the CGU is determined by discounting the future cash flows to be generated from continuing use of the CGU. The value-in-use is derived based on management’s cash flow projections for three (3) to six (6) financial years from 2020. The key assumptions used in the value-in-use calculations are as follows: (i) The anticipated average annual revenue growth rates used in the cash flow projections of the CGU ranged from 9% to 12% (2018: 5% to 12%) per annum for the year 2020 onwards. (ii) Profit margins are projected based on the historical profit margin achieved for the products. (iii) Pre-tax discount rates ranged from 11.83% to 12.90% (2018: 16.75%) were applied over the projection periods in determining the recoverable amount of the CGU. The discount rate used is pre- tax and reflects the overall weighted average cost of capital of the CGU. (b) Sensitivity to changes in assumptions The management believes that a reasonably possible change in the key assumptions on which management has based its determination of the CGU’s recoverable amount would not cause the CGU’s carrying amount to further exceed its recoverable amount. (c) During the financial year, the impairment losses on goodwill in Meinaide Holdings Group Limited of RM34,498,000 have been recognised due to the recoverable amounts determined based on the projected cash flows were lower than the carrying amount of the goodwill while impairment losses on goodwill in PRG Active Sdn. Bhd. of RM66,000 have been recognised due to cessation of business operation.