9 AUDITED FINANCIAL STATEMENTS 2021 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters Key audit matters How our audit addressed the key audit matters Goodwill impairment assessment As at 31 December 2021, the Group’s carrying value of goodwill of RM809.1 million comprised goodwill in relation to sugar business in Malaysia of RM576.2 million, palm upstream operations in Malaysia of RM226.8 million and other operations of RM6.1 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 judgement in determining the following key assumptions: Business Key assumptions Sugar business Selling price and sales volume, raw sugar price and refining costs, exchange rate and terminal value growth rate. Palm upstream operations CPO price, PK price, FFB yield and mature and immature estate costs. The goodwill on other CGU of RM6.1 million is not material to the Group. Refer to Note 3(d) in the significant accounting policies, Note 5(ii) in the critical accounting estimates and judgements 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 listed in the above table 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. Impairment assessments of non-financial assets with impairment indicators Management performed impairment assessments of the non-financial assets of the Group, which had impairment indicators. As a result, impairment losses of RM59.6 million for FGV Group’s property, plant and equipment and right-of-use assets were recognised during the financial year ended 31 December 2021. We focused on this area as the recoverable amounts of the non-financial assets are determined based on discounted cash flows projections, which require judgement on the part of management on the future financial performance and the business plan of those businesses. Refer to Note 3(o) in the significant accounting policies, Note 5(iii) in the critical accounting estimates and judgements and Notes 20 and 21 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 listed above 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 the above procedures performed, we noted no significant exceptions. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF FGV HOLDINGS BERHAD (Incorporated in Malaysia) (Company No. 200701042133 (800165-P))
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