Wah Seong Corporation Berhad Annual Report 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 FINANCIAL STATEMENTS WAH SEONG CORPORATION BERHAD ANNUAL REPORT 2017 137 9 INVESTMENT IN JOINT VENTURES Group 2017 RM’000 2016 RM’000 Unquoted shares 159,367 166,443 Share of post-acquisition results and reserves (4,141) (2,151) 155,226 164,292 Less: Accumulated impairment loss (8,780) (9,774) 146,446 154,518 Share of net assets of joint ventures 146,446 154,518 During the financial year, the Group reviewed the recoverable amount of its investment in a joint venture, Alam-PE Holdings (L) Inc. The recoverable amount was determined using value-in-use calculations. The calculations are based on discounted cash flows expected to be generated from the investment based on past performance and management’s business plan. The value-in-use calculations are mainly driven by the revenue growth rate, terminal value growth rate and discount rate. The discount rate reflects the current market assessment of the risks specific to the industry and is based on the cost of equity. The revenue growth rate takes into consideration the secured contracts as at 31 December 2017 and historical performance. The growth rate assumed for terminal value considers external macroeconomic sources of data and industry specific trends. The following table presents the key assumptions used to determine the value-in-use. 2017 2016 Revenue growth rate for 5 years <0%* – 7.5% 3.3% Discount rate 13.0% 11.1% Growth rate for terminal value 2.5% 2.0% * Negative growth is due to end of ongoing project. The value-in-use is above the carrying value of the Group’s investment in a joint venture. As such, no impairment loss is deemed necessary to be recognised during the financial year. Sensitivity The recoverable amount of the investment in a joint venture would equal its carrying amount if the key assumptions were to change as follows: 2017 2016 From To From To Revenue growth rate for 5 years 7.5% 6.2% 3.3% 2.4% Discount rate 13.0% 13.5% 11.1% 11.4% Growth rate for terminal value 2.5% 1.8% 2.0% 1.6%