207 INTEGRATED ANNUAL REPORT 2024 Key Messages Financial Statements Other Information NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024 Overview of Wasco Berhad Value Creation Commitment to Governance Sustainability Journey 6 GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED) Recognition and measurement a) Goodwill Goodwill arising from acquisitions of subsidiaries is measured as the excess of the cost of acquisition of subsidiaries, joint ventures and associates over the fair value of the Group’s share of the identifiable net assets at the date of acquisition. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments. Impairment assessment The Group tests goodwill for impairment annually and whenever events or changes in circumstances indicate that the goodwill may be impaired. For the purposes of assessing impairment, goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose. The recoverable amounts of the CGUs are determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a period of 5 years (2023: 5 years) based on past performance and their expectations of the market development. Terminal value is estimated at the end of the 5-year period. Value-in-use was determined by discounting the future cash flows generated from the CGUs based on certain key assumptions on the premise that there will be no material changes in the Group’s principal activities. The discount rates used reflect the weighted average cost of capital adjusted for specific risks associated with the CGUs of the Group. Due to the uncertainty of the future economic condition, management developed the best case, base case and worst case scenarios of cash flow projections. Probabilities of occurrence were assigned to each scenario to arrive at a single set of cash flow projection. The assumptions used in all three scenarios and the probabilities of occurrence assigned required management’s judgement.
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