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152 KPJ Healthcare Berhad

(Company No. 247079 M)

Annual Report 2010

notes to the

financial statements

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 (cont’d)

23 INTANGIBLE ASSETS

GOODWILL

Group 2010 2009 RM’000 RM’000

Cost

At 1 January 115,591 110,244 Acquisitions of subsidiary companies (Note 20) 20,726 5,347

At 31 December 136,317 115,591

24 IMPAIRMENT OF ASSETS

Impairment tests for goodwill

The carrying amounts of goodwill allocated to the Group’s Cash Generating Units (CGUs) are as follows:

Group 2010 2009 RM’000 RM’000

Hospitals

- Malaysia 131,139 113,992 - Indonesia 1,060 1,060 Support services 4,118 539

136,317 115,591

Recoverable amount based on value-in-use

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash fow projections based on fnancial budgets approved by the Directors covering a fve-year period. Cash fows beyond the fve-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the relevant CGUs.

The key assumptions used in the value-in-use calculations are as follows:

2010 2009 % %

Gross margin 1 29 28 Growth rate 2 7 7 Discount rate 3 12 12 Terminal growth rate 5 5

Assumptions: 1 Budgeted gross margin

2 Weighted average growth rate used to extrapolate cash fows beyond the budget period 3 Pre-tax discount rate applied to the cash fow projections

The Directors have determined budgeted gross margin based on past performance and its expectations of market development. The discount rates used are pre-tax and refect specifc risks relating to the relevant segments.