axiata group berhad | annual report 2015
213
28. ASSOCIATES (CONTINUED)
Impairment test
During the financial year, the Group had undertaken the test of impairment of its investment in Idea following an impairment indicator arising from the
shortfall between the carrying value and adjusted market value. No additional impairment loss was required for the carrying amount of Idea as at 31
December 2015 as its recoverable amount was approximate to its carrying amount. The investment in Idea is defined as the Group’s CGU.
Key assumptions used in the VIU
The recoverable amount was determined based on VIU calculation, which apply a discounted cash flow model based on the forecasts and projections
approved by the management. These forecasts and projections reflect management’s expectations based on the current assessment of market share,
expectations of market growth and industry growth as benchmarked with external sources.
The key assumptions used in determining the VIU are:
Assumptions
Basis of determination
Projection period
Five (5) [2014: Five (5)] years cash flow forecast is used.
Cost of equity
16.40% (2014:13.90%) was used in line with market analysis.
Terminal growth rate
Long term terminal growth rate is estimated to be 3.00% (2014: 3.00%) applied
beyond the fifth (5
th
) year cash flows to perpetuity.
Blended Earnings Before Interest, Tax, Depreciation and Amortisation
(“EBITDA”) margin
Ranging from 33.70% in 2017 to 36.86% in 2021 (2014: ranging from 31.42% in
2016 to 35.90% in 2020).
Effective tax rate
34.00% (2014: 34.00%).
Capital expenditure
The cash flow forecasts for capital expenditure are based on past experience
and include the on-going capital expenditure required to continue to roll out
networks in emerging markets to provide voice and data products and services
and to meet the population coverage requirements of certain licenses of Idea.
Capital expenditure forecasted includes assumption on the level of renewal
fees to be paid for licenses expiring during the projection period.
Management believes that no reasonably possible change in any of the key assumptions would cause the carrying value of Idea to exceed its recoverable
amount.
