Axiata Group Berhad - Annual Report 2016

FINANCIAL STATEMENTS

Axiata Group Berhad | Annual Report 2016

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29. 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 fair value. No additional impairment loss was required for the carrying amount of Idea as at

31 December 2016 as its recoverable amount exceeded its carrying amount.

Key assumptions used

The recoverable amount was determined based on VIU calculation, which apply a discounted cash flowmodel 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

Cost of equity

Terminal growth rate

Blended Earnings Before Interest, Tax, Depreciation and Amortisation

(“EBITDA”) margin

Effective tax rate

Capital expenditure

2017-2021 (2015: 2016-2020) years cash flow forecast is used.

13.40% (2015:16.40%) was used in line with market analysis.

Long term terminal growth rate is estimated to be 4.50% (2015: 3.00%)

applied beyond the fifth (5

) year cash flows to perpetuity.

Ranging from 27.00% in 2018 to 35.00% in 2021 (2015: ranging from

33.70% in 2017 to 36.86% in 2021).

34.60% (2015: 34.00%).

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.

Based on the sensitivity analysis performed, the Directors concluded that no reasonable change in the base case assumptions would cause the

carrying amount of the investment in Idea to exceed its recoverable amount.