FGV Annual Report 2013

Felda Global Ventures Holdings Berhad 294 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 45 LAND LEASE AGREEMENT (“LLA”) LIABILITY (CONT’D.) Fair value of the LLA liability has been measured using a discounted cash flow calculation using cash flow projections based on financial budgets approved by the Directors covering 97 years. The key assumptions used to compute the fair value of the LLA liability are as follows: (i) Implied discount rate 9.47% (2012: 9.47%) based on discount rates applied by relevant comparable companies (ii) CPO price RM2,450/MT to RM2,600/MT (2012: RM2,468/MT to RM3,050/MT) (iii) FFB price RM488/MT to RM524/MT (2012 : RM526/MT to RM634/MT) (iv) Average FFB Yield (MT/ha) 19.4/MT to 27.0/MT (2012: 18.3/MT to 26.9/MT) (v) Estate replanting fixed cost • Matured – RM3,270 (2012: RM2,380) per hectare based on a 25 year cycle for oil palm • Immature – RM9,414 (2012: RM6,346) per hectare based on a 25 year cycle for oil palm (vi) Lease term Extension of lease term to 99 years (2012: 99 years) will be obtained for all lands in the plantation estates The sensitivity of the LLA liability to changes in key assumptions is as follows: Key assumptions Change in assumption Impact on LLA liability (i) Implied discount rate Increase by 0.5% Decrease by RM284,000,000 Decrease by 0.5% Increase by RM323,000,000 (ii) CPO price Increase by RM100 per metric tonne Increase by RM181,000,000 Decrease by RM100 per metric tonne Decrease by RM193,000,000 (iii) Improvement/ reduction in FFB yield Increase/decrease by 1% Increase/decrease by RM79,000,000 (iv) Change of total planted hectarage under LLA # Increase/decrease by 1,000 ha Increase/decrease by RM11,000,000 (v) Estate planting costs Increase/decrease by RM100 per ha Increase/decrease by RM2,000,000 # Changes in land area as a result of adjustment arising from the ongoing land reconciliation exercise to ascertain the accurate land area as provided by the LLA, which was completed in December 2013. This is subject to confirmation by FELDA. Compensation receivable is estimated based on areas reclaimed by FELDA, and calculated at the average profit per hectare based on the numbers of years of planting of the applicable biological assets given up. The Group also estimates the corresponding impact to the related biological assets, property, plant and equipment, prepaid lease payments, and the LLA liability. As a result, the Company (charged)/credited the following amounts to profit or loss: RM’000 Compensation receivable (Note 7) 82,938 Write off of biological assets (Note 29) (25,625) Reversal of related LLA liability 65,500 The land lease agreement has been measured based on significant inputs not observable from market data, and as such is a Level 3 fair value estimation.