NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 11 INVESTMENT IN JOINT VENTURES Group 2022 2021 RM’000 RM’000 Unquoted shares 167,977 166,697 Share of post-acquisition results and reserves (113,619) (100,620) 54,358 66,077 Less: Accumulated impairment loss (21,658) (12,139) 32,700 53,938 Share of net assets of joint ventures 32,700 53,938 Unquoted shares – Alam-PE Holdings (L) Inc. For the financial year ended 31 December 2022 and 2021, the Group reviewed the recoverable amount of its investment in a joint venture, Alam-PE Holdings (L) Inc. The Group has determined the recoverable amount of the investment using discounted cash flows expected to be generated from the investment. The discounted cash flows are derived using pre-tax cash flow projections based on financial budgets approved by the Group covering a period of 5 years (2021: 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. 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 for the investment under the base case and worst case scenarios are as follows: (a) An average vessel utilisation rate for 5 years of 51.0% (2021: 77.0%) was applied to the base case scenario while 51.0% (2021: 75.0%) average vessel utilisation rate for 5 years was applied to the worst case scenario. The average utilisation rate is affected by the timing of vessels completing their dry docking. Three vessels have completed their dry docking during the financial year ended 31 December 2022; (b) Pre-tax discount rate of 12.1% (2021: 12.0%) was applied for both scenarios, benchmarked against comparable companies at the date of assessment; and (c) In the current financial year, no terminal growth rate was applied to both scenarios. In the previous financial year, a terminal growth rate of 3.0% was applied to the base case scenario while 2.0% terminal growth rate was applied to the worst case scenario. Based on management’s value-in-use calculation, the Group recognised an impairment loss of RM8,989,000 (2021: RM3,000,000). 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: 2022 2021 From To From To Pre-tax discount rate 12.1% 12.6% 12.0% 11.6% Growth rate for terminal value - - 2.0% 3.5% Annual Report 2022 Wah Seong Corporation Berhad 159
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