Sasbadi Annual Report 2021

88 SASBADI HOLDINGS BERHAD FINANCIAL STATEMENTS (continued) 88 7. INTANGIBLE ASSETS (continued) (d) Impairment testing for cash-generating units containing goodwill (continued) Pinko Creative 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 was based on the following key assumptions: • Cash flows were projected based on actual operating results and financial budget approved by management covering a 5-year business plan. • The anticipated sales is approximately RM943,000 in 2022. The anticipated sales growth rate is 2.00% per annum from 2022 to 2026. • The operating expenditure growth was assumed to be 2.00% per annum. The estimated growth rate was based on the forecasted inflation rate. • The projected gross margins which reflects the average historical gross margin, adjusted for projected market and economic conditions and internal resource efficiency. • The unit will continue its operations indefinitely. • A pre-tax discount rate of 14.66% (2020: 11.84%) 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 and reflect the current market assessment of the risks specific to the CGU. 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 Pinko Creative. Due to the inherent uncertainties arising from the COVID-19 pandemic, the Group has adopted the Expected Cash Flow approach in performing its annual impairment assessment of goodwill on consolidating during the current financial year. The cash flow projections used in determining the value-in-use calculations were probability weighted based on the following scenarios: Scenario Weighting Assumptions Base case 80% Based on the key assumptions above. Best case 10% Revenue annual growth rates forecasted to be at around 2% - 66%. Worst case 10% Revenue annual growth rates forecasted to be at around 0% - 5%. The above key assumptions are determined based on management’s assessment of future trends in the respective business units, which are, among others, dependent on forecasted economic conditions affected by COVID-19 pandemic. Any differences in expectations from the original estimates might impact the impairment losses amount in respect of the goodwill of the Group.