2018 UEM Edgenta Annual Report

16. INTANGIBLE ASSETS (CONT’D.) (a) Goodwill (cont’d.) The calculation of the value-in-use for the CGUs are most sensitive to the following assumptions: (i) Budgeted gross margin The basis used to determine the value assigned to the budgeted gross margins is the average gross margins and average growth rate achieved in the years before the budgeted year, adjusted for market and economic conditions and internal resource efficiency. (ii) Discount rate The discount rates reflect the current market assessment of the risks specific to each CGU. This reflected the management’s best estimate of return on capital employed required in the Group. (iii) Terminal growth rate Terminal growth rates used to extrapolate cash flows beyond the budget period is based on published industry research for each business. Sensitivity to change in assumption Management believes that no reasonable possible change in any of the above key assumptions would cause the recoverable amount of each of the CGUs to be materially lower than their respective amount, other than the UEMS - Malaysia CGU, as follows: Decrease in profit before tax 2018 RM’000 Increase in 1% of discount rate 6,144 Decrease in 1% of terminal growth rate 5,635 (b) Customer contracts and relationships Customer contracts and relationships arose from the acquisition of KFM and Edgenta UEMS Group in 2016 and are amortised over the range of 5 to 15 years. (c) Software and other development cost Computer software represents licenses and other software assets that are not an integral part of property, plant and equipment assets. Software assets are recorded at cost and have finite useful life based on the term of the license or other contractual basis. The cost is amortised over the estimated asset’s useful life of 3 to 5 years. Other development cost relates to the development of a framework for the application of improved processes, systems and services for servicing expressways. NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2018 Management Discussion & Analysis UEM Edgenta Berhad Annual Report 2018 About UEM Edgenta Chairman’s Statement 202