Eng - IOI Group

Notes To The Financial Statements cont’d19. GOODWILL ON CONSOLIDATION cont’dFor the purpose of impairment testing, goodwill is allocated to the Group’s Cash-generating Units (“CGUs”) identified accordingto the business segments as follows:Group2007 2006RM’000 RM’000Plantation 93,025 90,999Property development 80,108 73,373Resource-based manufacturing 337,528 251,458510,661 415,830Goodwill is tested for impairment on an annual basis by comparing the carrying amount with the recoverable amount of the CGUsbased on value-in-use. Value-in-use is determined by discounting the future cash flows to be generated from the continuing use ofthe CGUs based on the following assumptions:i. Cash flows are projected based on the management’s three-year business plan.ii.Discount rates used for cash flows discounting purpose are the management’s estimate of return on capital employed requiredin the respective segments. The discount rates applied for cash flow projections are ranging from 10.03% to 10.28%.iii.Growth rate for the plantation segment are determined based on the management’s estimate of commodity prices, palmyields, oil extraction rates and also cost of productions whilst growth rates of other segments are determined based on theindustry trends and past performances of the segments.iv.Profit margins are projected based on the industry trends, historical profit margin achieved or predetermined profit marginfor property projects.The management is not aware of any reasonably possible change in the above key assumptions that would cause the carryingamount of the CGUs to materially exceed their recoverable amounts.IOI Corporation BerhadANNUAL REPORT 2007 180