FGV Annual Report 2013

Felda Global Ventures Holdings Berhad 220 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 4 FINANCIAL RISK MANAGEMENT (Cont’d.) (c) Fair value estimation (Cont’d.) (iii) Financial instruments in Level 3 Instruments included in level 3 comprises LLA liability and unquoted equity securities. The following table present the changes in Level 3 instruments during the financial year: 2013 2012 RM’000 RM’000 LLA liability 1 January 5,664,769 - Fair value at inception of LLA (Note 45) - 5,842,694 Fair value changes (credited)/charged to profit or loss (494,485) 210,178 Repayment during the year (325,894) (388,103) 31 December 4,844,390 5,664,769 Available for sale financial assets - Equity securities 1 January - - Acquisition of a subsidiary 187,302 - 31 December 187,302 - (d) Offsetting financial assets and financial liabilities There are no offsetting of financial assets and financial liabilities during the year for the Group and Company. 5 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated by Directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) LLA liability The fair value of the LLA liability is measured using a discounted cash flow calculation using cash flow projections based on financial budgets approved by the Directors covering a 97 year period. As a result of the fair value assessment, the Group has recognised a LLA liability of RM4,844,390,000 (2012: RM5,664,769,000). The key assumptions and the sensitivity analysis are as disclosed in Note 45 to the financial statements. (ii) Compensation from reclaimed land (net) Compensation receivable is estimated based on areas claimed by FELDA, which is subject to change based on the final area identified by FELDA. The Group also estimates the corresponding impact to the related biological assets, property, plant and equipment, prepaid lease payments, and the LLA liability. In 2013, the Group has recognised compensation receivable amounting to RM 82,938,000, write off of biological assets amounting to RM25,625,000 and reversal of related LLA liability amounting to RM65,500,000.