Wah Seong Corporation Berhad Annual Report 2021 150 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021 10 INVESTMENT IN ASSOCIATES (CONTINUED) Sensitivity The recoverable amount of the investment would equal its carrying amount if the key assumptions were to change as follows: 2021 2020 From To From To Pre-tax discount rate 15.1% 16.0% 15.0% 16.2% Growth rate for terminal value 1.0% (0.7%) 2.0% 0.7% There are no reasonably possible changes in the key assumptions that would have changed the carrying amount of the investment. Unquoted shares – Evraz Wasco Pipe Protection Corporation (“EWPPC”) Due to the uncertainty of the future economic condition, management developed the base case and worst case scenario 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 both scenarios and the probabilities of occurrence assigned required management’s judgement. The key assumptions used in the cash flow projections to determine the recoverable amount for the investment under the base case and worst case scenarios are as follows: (a) The revenue forecast is supported by management’s expected projects, which is in line with past performance records, future market outlook and management’s expectation of market developments. A reduction to the revenue forecast was applied for the worst case scenario; (b) Discount rate of 14.7% (2020: 13.0%) was applied for both scenarios, benchmarked against comparable companies at the date of assessment; and (c) No terminal growth rate was applied across both scenarios (2020: 2.0% was applied for base case and no terminal growth rate applied for the worst case). Based on the assessment performed by management during the current financial year, the Group recognised an impairment loss of USD3,500,000 (equivalent to approximately RM14,511,000) on investment in EWPPC based on the recoverable amount. Sensitivity As at 31 December 2021, there are no reasonably possible changes in the key assumptions that would have further changed the carrying amount of the investment in an associate. Impairment of investment in associates The movements for allowance for impairment losses on investment in associates during the financial year are as follows: Group 2021 2020 RM’000 RM’000 At 1 January - - Impairment loss recognised 14,511 - Effect of exchange rate changes 95 - At 31 December 14,606 -
RkJQdWJsaXNoZXIy NDgzMzc=