FINANCIAL STATEMENTS (continued) 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 RM1,913,000 in 2023. The anticipated sales growth rate is 2.42% per annum from 2023 to 2027. • The operating expenditure growth was assumed to be 2.42% (2021: 2.00%) per annum. The estimated growth rate was based on the average of historical growth levels experienced over the past 5 years and 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. • Terminal value was based on the fifth year cash flow without incorporating any growth rate. • The unit will continue its operations indefinitely. • A pre-tax discount rate of 11.02% (2021: 14.66%) 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. 90 SASBADI HOLDINGS BERHAD
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