KENANGA ANNUAL REPORT 2017

18. INTANGIBLE ASSETS (CONT’D.) (f) Impairment test on intangible assets The intangible assets consist of: (cont’d.) All of the above intangible assets have an indefinite useful life and an annual impairment review has been carried out on all the intangible assets with an indefinite useful life in accordance with MFRS 136: Impairment of Assets and MFRS 138: Intangible Assets. Key assumptions used in value-in-use calculations For annual impairment testing purposes, the recoverable amounts of the CGUs, which are reportable business segments, are determined based on their value-in-use. The value-in-use is computed by discounting the future cash flows of the unit, which is based on financial budget and projections approved by the Board. The following describes key assumptions on which management has based its cash flow projections to undertake impairment testing of intangible assets: (i) Cash flow projections and growth rates Cash flow projections for the first to third years are based on the most recent three years financial budget and business plan approved by the Board, taking into account projected regulatory capital requirements. Cash flows for the fourth to fifth years are extrapolated using growth rates that approximate the long term average growth rate for the market in which the business operates. Cash flows beyond the fifth year are projected to remain constant and estimated as a terminal value by discounting future cash flows to present value. (ii) Discount rates The discount rate used is based on the business units’ pre-tax weighted average cost of capital plus an appropriate risk premium at the date of assessment at 8.5% (2016: 9.0%) per annum. (g) Sensitivity to changes in assumptions Management believes that a reasonably possible change in any of the above key assumptions would not cause the recoverable amounts of the intangible assets to be lower than carrying values of the CGUs. Annual Report 2017 31 December 2017 143 notes to the financial statements