Sasbadi Annual Report 2020

SASBADI HOLDINGS BERHAD 98 FINANCIAL STATEMENTS (continued) 5. Intangible assets (continued) 5.3 Impairment testing for cash-generating units containing goodwill (continued) Sanjung Unggul Group The recoverable amount of the business unit is higher than its carrying amount and was based on its value in use. Value in use was determined by discounting future cash flows to be generated from the continuing operation of the business as a book publisher and education and supplement material provider and was based on the following key assumptions: x Cash flows were projected based on actual operating results and financial budget approved by management covering a 5-year business plan. x The anticipated sales in 2021 includes approximately RM480,000 of sales from new product line. The anticipated sales growth rate is 1.11% per annum from 2021 to 2025. x The operating expenditure growth was assumed to be 1.95% per annum. The estimated growth rate was based on the average of historical growth levels experienced over the past 5 years and the forecasted inflation rate. x The projected gross margins which reflects the average historical gross margin, adjusted for projected market and economic conditions and internal resource efficiency. x The unit will continue its operations indefinitely. x A pre-tax discount rate of 11.84% (2019: 11.50%) was applied in determining the recoverable amount of the CGU. The discount rate applied was estimated based on the Group’s weighted average cost of capital. The values assigned to the key assumptions represent management’s assessment of future trends in the industries and are based on both external sources and internal sources. Sensitivity analysis Management believe that any reasonably possible change in the key assumptions would not cause the carrying amount of goodwill to exceed the recoverable amount of the CGU. Based on their review, there is no evidence of impairment on the goodwill allocated to the Sanjung Unggul Group.