Sasbadi Annual Report 2020

SASBADI HOLDINGS BERHAD 144 FINANCIAL STATEMENTS (continued) Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 1. Impairment of intangible assets Refer to Note 5 to the financial statements. The key audit matter How the matter was addressed in our audit Goodwill recognised in the consolidated statement of financial position mainly arose from the Group’s acquisition of Sanjung Unggul Sdn. Bhd. and its subsidiaries, Distinct Motion Sdn. Bhd. and its subsidiary and Pinko Creative Sdn. Bhd. The Group estimated the recoverable amount of the cash generating units containing goodwill based on discounted future cash flow using estimates of profit forecast, discount rate, sales growth rate, terminal growth rate and gross profit margin. There is a risk that the carrying value of this goodwill may not be recovered from future cash flows which may be affected due to the inherent uncertainty involved in forecasting and discounting future cash flows. We performed the following audit procedures, amongst others, around the impairment of goodwill: x We assessed the key assumptions used in the cash flow forecast such as discount rate, sales growth rate, terminal growth rate and gross profit margin by comparing them to externally derived data as well as our own assessments which took into account historical trends; x We tested the sensitivity of the impairment calculations to changes in key assumptions used to evaluate the impact on recoverable amounts for each cash generating unit; and, x We considered the adequacy of the Group’s disclosures in respect of impairment testing, and whether the disclosures in relation to the sensitivity of outcome of the impairment assessment to changes in any assumptions reflected the risks inherent in the valuation.