ST Engineering Annual Report 2020

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2020 (CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED) C3 Intangible assets (continued) Aggregate carrying amounts of goodwill allocated to each CGU within the business divisions and the key assumptions used in determining the recoverable amount of each CGU are as follows: Pre-tax discount rate Terminal growth rate Group 2020 2019 2020 2019 2020 2019 $’000 $’000 % % % % Aerospace Aircraft Maintenance & Modification 2,501 13,170 N.A. 12.0 N.A. 2.5 Component/Engine Repair & Overhaul 12,952 13,206 7.0 – 13.5 14.5 1.5 – 3.0 2.5 Engineering & Material Services 64,042 62,983 9.0 – 9.4 12.7 0 – 1.6 2.0 Electronics Communication & Sensor Systems Group* 534,197 544,744 8.7 – 16.9 9.8 – 13.3 3.0 3.0 – 5.0 Software Systems Group 27,368 27,663 11.4 8.8 – 12.7 3.0 2.0 – 3.0 Land Systems Automotive 145,319 152,245 10.5 – 15.2 12.0 – 17.2 2.3 2.3 – 3.0 786,379 814,011 * With effect from 1 January 2020, Miltope Corporation was re-organised from Others into Electronics sector and comparatives were restated in conformance with current year classification Recognition and measurement The recoverable amounts of the CGUs are determined based on value-in-use calculations, using cash flow projections derived from the financial budgets approved by management for the next five to ten years. The key assumptions used in the calculation of recoverable amounts are as follows: • The discount rate used is estimated based on the industry weighted average cost of capital. • The long-term terminal growth rate has been determined based on either the nominal GDP rates for the country in which the CGU is based or the long-term growth rate estimated by management by reference to forecasts included in industry reports and expected market development. • The revenue growth rate and gross profit margins are determined based on the past performance and its expectations of market developments. 19 1 ANNUAL REPORT 2 0 2 0 / CORPORATE OVERVI EW PERFORMANCE REVI EW SUSTAINABI L ITY CORPORATE GOVERNANCE F INANCIAL REPORT