UEM EDGENTA BERHAD ANNUAL REPORT 2021 1 2 3 4 5 6 7 239 238 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FINANCIAL STATEMENTS 15. INTANGIBLE ASSETS (CONTD.) (a) Goodwill (contd.) Key assumptions used in VIU calculation The discount rates applied to the cash flow projections and the forecasted growth rates used to extrapolate cash flows beyond the projection period are as follows: Projection period Years Discount rate Terminal growth rate 2021 % 2020 % 2021 % 2020 % Asset consultancy: Opus Group Berhad 5 11.0 13.0 1.0 1.0 Healthcare support: EMS 13 8.6 12.0 * * Edgenta UEMS Group: - Malaysia 5 8.6 11.0 1.0 1.0 - Singapore 5 8.6 8.5 1.0 1.0 - Taiwan 5 8.6 8.5 1.0 1.0 Property and Facility Solutions: EGT Group 5 7.9 11.5 1.0 1.0 Infrastructure services: Edgenta PROPEL Berhad 5 7.3 11.0 1.0 1.0 * For EMS, the VIU is determined by discounting cash flows for a period of 13 years (2020: 14 years) with no terminal value. The calculation of the VIU for the CGUs are most sensitive to the following assumptions: (i) Budgeted gross margin The basis used to determine the value assigned to the budgeted gross margins is the average gross margins and average growth rate achieved in the years before the budgeted year, adjusted for market and economic conditions and internal resource efficiency. (ii) Discount rate The discount rates reflect the current market assessment of the risks specific to each CGU. This reflected the management’s best estimate of return on capital employed required in the Group. 15. INTANGIBLE ASSETS (CONTD.) (a) Goodwill (contd.) The calculation of the VIU for the CGUs are most sensitive to the following assumptions: (contd.) (iii) Terminal growth rate Terminal growth rates used to extrapolate cash flows beyond the budget period is based on published industry research for each business. Sensitivity to change in assumption Management believes that no reasonable possible change in any of the above key assumptions would cause the recoverable amount of each of the CGUs to be materially lower than their respective amount. In previous financial year, management believes that no reasonable possible change in any of the above key assumptions would cause the recoverable amount of each of the CGUs to be materially lower than their respective amount other than Edgenta UEMS - Malaysia’s CGU, as follows: Decrease in profit before tax 2021 RM’000 2020 RM’000 Increase in 1% (2020: 1%) of discount rate - 3,623 Decrease in 1% (2020: 1%) of terminal growth rate - 689 (b) Customer contracts and relationships Customer contracts and relationships arose from the acquisition of EGT Group and Edgenta UEMS Group in 2016 and are amortised over the range of 5 to 15 years. (c) Software and other development cost Computer software represents licenses and other software assets that are not an integral part of property, plant and equipment assets. Software assets are recorded at cost and have finite useful life based on the term of the license or other contractual basis. The cost is amortised over the estimated asset’s useful life of 3 to 10 years (2020: between 3 to 10 years). Other development cost relates to the development of a framework for the application of improved processes, systems and services for servicing expressways.
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