FGV Audited Financial Statements 2019

10 FGV HOLDINGS BERHAD INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF FGV HOLDINGS BERHAD (Incorporated in Malaysia) (Registration No. 200701042133 (800165-P)) REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters Goodwill impairment assessment As at 31 December 2019, the Group’s carrying value of goodwill of RM803.0 million comprised goodwill in relation to sugar business in Malaysia of RM576.2 million and palm upstream operations in Malaysia of RM226.8 million. Goodwill is subject to annual impairment testing. We focused on this area as the determination of recoverable amounts of the assets in the Cash Generating Units (“CGUs”) based on discounted cash flows projections prepared by management, involved a significant degree of judgment in determining the following key assumptions: Business Key assumptions Sugar business Selling price, raw sugar price, sales volume, terminal value growth rate, discount rate and exchange rate. Palm upstream operations CPO price, PK price, average FFB yield, mature and immature estate costs and discount rate. Refer to Note 3(d) in the significant accounting policies, Note 5(ii) in the critical accounting estimates and judgments and Note 23 to the financial statements. We have performed the following audit procedures: • We assessed the reliability of management’s projections through the comparison of actual past financial performances against previous forecasted results; • We assessed the reasonableness of the key assumptions, which were used by management in developing the discounted cash flows projections, by comparing against historical data and industry trends; • We examined the sensitivity analysis performed by management on the key assumptions for the respective businesses and also the discount rates used to evaluate the impact on the impairment assessment; and • We assessed the adequacy and reasonableness of the disclosures in the financial statements. Based on our procedures, we noted no significant exceptions.