FGV Annual Report 2012

76 Felda Global Ventures Holdings Berhad 21 INVESTMENT IN SUBSIDIARIES (continued) (e) Disposal of subsidiaries in the previous financial year On 30 September 2011, the investment in Felda Global Ventures Middle East Sdn Bhd (“FGVME”) (including the interest in the subsidiary of FGVME, Felda Global Ventures Arabia Ltd) was disposed off to FELDA for a total consideration of RM1 which resulted in a gain on disposal of RM68,220,000 for FGVH. The effect of the disposal of the subsidiaries on the financial position of the Group as at financial year end is as follows: 2011 RM’000 Net assets disposed Prepaid lease payments 17,966 Property, plant and equipment 583 Inventories 32 Receivables 5,360 Cash and cash equivalents 12,325 Payables (1,825) Non-controlling interests 945 Gain on disposal 68,220 Sales consideration 103,606 Less: Redemption of RCCPS from FELDA (103,660) Sales proceeds* 0 Cash and cash equivalents disposed (12,325) Net cash outflow from disposal (12,325) * RM1 (f) Impairment loss on investment in a subsidiary Financial year ended 31 December 2012 The Group’s investment in a subsidiary, Felda GlobalVentures Downstream Sdn Bhd (“FGVD”) was tested for impairment due to losses incurred during the financial year by the indirect entities held by FGVD. The impairment assessment requires an estimation of the recoverable amount of the cash generating units (“CGU”) owned by FGVD, in respect of the fatty acid business operation in USA, refined food oil business operation in Canada and investment in a jointly controlled entity, Felda Iffco Sdn Bhd (“FISB”). The recoverable amount was computed using fair value less cost to sell, with key assumptions that are consistent with the key assumptions used by management to assess the impairment of the CGUs in respect of the fatty acid business operations in USA, refined food oil business operations in Canada as disclosed in Note 20 to the financial statements and investment in a jointly controlled entity, FISB as disclosed in Note 23 to the financial statements, other than adjustment for discount rate to reflect equity risk and cash flows being assessed on a profit after interest and tax basis. As a result of the impairment assessment, the Company has recognised an impairment loss of RM115,356,000 which is recorded as an impairment loss in profit or loss. Based on sensitivity analysis performed by the Company, the impact of 1% increase in the discount rate used, which is a key assumption, will result in additional impairment loss of approximately RM69,411,000. Notes to the Financial Statements for the financial year ended 31 December 2012