FGV Annual Report 2012

81 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 23 INTERESTS IN JOINTLY CONTROLLED ENTITIES (continued) Details of the jointly controlled entities, which are incorporated in Malaysia and have financial year ending 31 December, are as follow (continued): Impairment loss on investment in jointly controlled entities (a) Felda Iffco Sdn Bhd (“FISB”) At 31 December 2012, the Group’s investment in a jointly controlled entiti-entitiy, FISB was tested for impairment due to continuing losses incurred, which is a reassessment of impairment testing performed in 2011. Investment in FISB is included within Downstream segment.The impairment assessment requires an estimation of the recoverable amount of the investment in FISB. The recoverable amount of the investment in FISB was computed using fair value less cost to sell (2011: fair value less cost to sell) method based on cash flow projections of the various CGUs within FISB Group, expected to be attributable to the equity holder. The key assumptions used to determine the recoverable amount of investment in FISB are as follows: 2012 2011 Gross margin 1.6% – 9.5% 2% – 3% Terminal value growth rate 3% – 5% 3% Discount rate 9% – 16% 9% As a result of the impairment assessment, the Group recognised an impairment loss of RM25,000,000 (2011: RM14,700,000) which is recorded in profit or loss against the investment in jointly controlled entity. Based on sensitivity analysis performed by the Group, the impact of 1% increase in the discount rate used, which is a key assumption will result in additional impairment loss of approximately RM27,286,000. A 1% decrease in the terminal value growth rate will result in additional impairment loss of approximately RM22,781,000. (b) Trurich Resources Sdn Bhd (“Trurich”) At 31 December 2012, the Group’s investment in a jointly controlled entiti-entitiy, Trurich was tested for impairment due to losses incurred. The impairment assessment requires an estimation of the recoverable amount of the investment in Trurich. The recoverable amount of the investment in Trurich was computed using value in use method based on twenty five years cash flow projections in accordance with one palm oil plantation cycle expected to be attributable to the equity holder. The key assumptions used to determine the recoverable amount of investment in Trurich are as follows: 2012 Gross margin 29% – 46% Discount rate 10% As a result of the impairment assessment, no impairment was recognised as the recoverable amount of the CGU exceeds the carrying amount. Management believes that there is no reasonably possible change in any of the above key assumptions which would cause the carrying amount of the CGU to exceed the recoverable amount.