FGV Audited Financial Statements 2019

108 FGV HOLDINGS BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 20 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Significant impairment of property, plant and equipment (continued) Financial year ended 31 December 2018 a) Suspended construction of a plant in an indirect subsidiary of the Company, FGV Green Energy (“FGVGE”) was identified as indicator for an impairment test to be performed for FGVGE’s non-current assets. The recoverable amount of the plant was determined based on the offer received from a potential buyer as the Group does not intend to complete the construction nor operate the plant. As at 31 December 2018, the offer had been withdrawn and as a result, the Group had recognised the full impairment of RM113,888,000 which comprised RM103,024,000 for property, plant and equipment and RM10,864,000 for intangible assets (other than goodwill) (Note 23(b)) of FGVGE which was recorded as impairment of non-financial assets of the Group. The amount had been included as part of the impairment loss of Plantation Sector in the Group’s segment reporting (Note 19). b) The recoverable amount of Asian Plantations Limited (“APL”) CGU was determined based on the valuation report obtained from an external valuer using income approach (level 3 fair value computation) with cash flow projections covering a 25 year period. Based on the valuation, the recoverable amount of APL was RM504,800,000, which resulted in the full goodwill being impaired (Note 23(a)(iii)). In addition, a further impairment of RM83,196,000 had been recognised for property, plant and equipment. The impairments had been recognised in the Group’s impairment of non-financial assets and had been included as part of the impairment loss of Plantation Sector in the Group’s segment reporting (Note 19). The key assumptions used in the valuation were as follows: Financial year ended 31 December 2018 (i) CPO price RM2,390/MT (ii) PK price RM1,884/MT (iii) Cost of production RM2,480/ha to RM3,225/ha (iv) FFB yield 11.9 MT/ha to 20.0 MT/ha (v) Discount rate 9.0% (i) CPO and PK price CPO and PK was determined based on the forecast provided by the Group’s trading arm subsidiary, based on historical results and industry trend. (ii) Cost of production and FFB yield The cost of production and FFB yield were based on forecast provided by the Group’s upstream operations management, based on this Group’s approved budget, historical results and industry trend. (iii) Discount rate The post-tax discount rate used reflected specific industry risks relating to the palm plantation operations including consideration of comparison with comparable peer companies in Malaysia.