Directors - Boustead Holdings Berhad

Notes to the Financial Statements
18. ASSOCIATES (cont’d.)
114
Negative
Goodwill Goodwill Total
RM’000 RM’000 RM’000
Cost
At 1 January 2005 103,024 (1,062) 101,962
Arising from investment in Associates 167,088 –– 167,088
At 31 December 2005 and 1 January 2006 270,112 (1,062) 269,050
Effects of adopting FRS 3 (68,006) 1,062 (66,944)
Arising from investment in Associates 65,330 –– 65,330
At 31 December 2006 267,436 –– 267,436
Accumulated amortisation
At 1 January 2005 64,836 (1,040) 63,796
Amortisation 3,170 (22) 3,148
At 31 December 2005 and 1 January 2006 68,006 (1,062) 66,944
Effects of adopting FRS 3 (68,006) 1,062 (66,944)
At 31 December 2006 –– –– ––
Net carrying amount at 31 December 2006 267,436 –– 267,436
Net carrying amount at 31 December 2005 202,106 –– 202,106
The carrying amount of the Group’s goodwill on acquisition of the Associate Boustead Naval Shipyard
Sdn Bhd totalling RM229 million was assessed for impairment during the year.
Goodwill is allocated for impairment testing purposes to the individual entity which is also the CGU. The
recoverable amount is determined based on a value in use calculation using cash flow projections
approved by the entity’s board of directors covering a four-year period. Cash flows beyond the fourth
year are extrapolated, and a pre-tax discount rate of 8.5% per annum was applied to the cash flow
projections, after taking into consideration the Group’s cost of borrowings, the expected rate of return
and various risks.
The value in use calculation is highly dependent on the assumption that the contract to construct the
offshore patrol vessels will be awarded according to plan. Management believes that any change on the
other key assumptions in the computation of the recoverable amount of the goodwill would not cause its
carrying amount to exceed its recoverable amount.