FGV Annual Report 2012

45 F i n a n c i a l S t a t e m e n t s 2 0 1 2 P e n y a t a K e w a n g a n 5 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued) (iv) Investments in subsidiaries, associates and jointly controlled entities The Group and Company tests investments in subsidiaries, associates and jointly controlled entities for impairment if there are any indicators of impairment. Management have assessed that the following investments may be impaired due to losses incurred by a subsidiary and jointly controlled entities during the financial year. Investment in Felda Global Ventures Downstream Sdn Bhd (“FGVD”), a subsidiary At 31 December 2012, the Group’s investment in FGVD was tested for impairment due to losses incurred during the financial year. The impairment assessment requires an estimation of the recoverable amount of the cash generating units (“CGU”) to which the investment relates to. The recoverable amount was determined based on the higher of fair value less cost to sell or value in use calculations. As a result of the impairment assessment, the Company has recognised an impairment loss of RM115,356,000. The key assumptions and the sensitivity analysis are as disclosed in Note 21 to the financial statements. Investment in Felda Iffco Sdn Bhd (“FISB”), a jointly controlled entity At 31 December 2012, the Group’s investment in a jointly controlled entity, FISB was tested for impairment due to continuing losses incurred, which is a reassessment of impairment testing performed in the previous financial year. The impairment assessment requires an estimation of the recoverable amount of the cash generating units (“CGU”) to which the investment relates to. The recoverable amount of investment in FISB was determined based on the higher of fair value less cost to sell or value in use calculations. As a result of the impairment assessment, the Group recognised an impairment loss of RM25,000,000. The key assumptions used to determine the recoverable amount of investment in FISB and the sensitivity analysis are as disclosed in Note 23. Investment in Trurich Resources Sdn Bhd (“Trurich”), a jointly controlled entity At 31 December 2012, the Group’s investment in a jointly controlled entity, Trurich was tested for impairment due to losses incurred. The impairment assessment requires an estimation of the recoverable amount of the cash generating units (“CGU”) to which the investment relates to. The recoverable amount was determined based on the higher of fair value less cost to sell or value in use calculations. As a result of the impairment assessment, no impairment was recognised as the recoverable amount of the CGU exceeds the carrying amount. The key assumptions used to determine the recoverable amount of investment in Trurich are as disclosed in Note 23. (v) Deferred tax asset Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. This involves judgment regarding the future financial performance of the particular entity in which the deferred tax asset has been recognised. The amount of deferred tax assets arising from tax losses not recognised amounted to RM83,176,000 (2011: RM171,302,000). Following the improvements in the financial performance of a subsidiary in US, it is now probable that sufficient taxable profits will be available to allow the deferred tax assets in the subsidiary to be utilised. As a result, deferred tax assets amounting to RM47,816,000 was recognised.