FGV Annual Report 2014

24 Interests in Joint Ventures (continued) Impairment loss on investment in joint ventures (a) Felda Iffco Sdn. Bhd. (“FISB”) At 31 December 2014, the Group’s investment in a joint venture, FISB was tested for reversal of impairment due to improvement in the operating conditions. The recoverable amount of the investment in FISB was computed using 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 and adjustment to the discount rate to reflect equity risk and cash flows being assessed on a profit after interest and tax basis. The key assumptions used to determine the recoverable amount of investment in FISB are as follows: 2014 2013 – Gross margin 7% – 18% 1.3% – 11.5% – Terminal value growth rate 2.5% 2.5% – 5% – Discount rate 10% 12% As a result of the impairment assessment, the impairment provision of RM68,657,000 made in prior years is no longer required and recorded as a reversal of impairment in a joint venture within other operating income. The reversal to the carrying amount at fair value less cost to sell is a Level 3 fair value computation. The Group’s review includes an impact assessment of changes in key assumptions. Based on the sensitivity analysis performed, the Directors concluded that no reasonable change in any of the base case assumptions would cause the carrying amount of the CGU to exceed the recoverable amount. (b) An impairment of RM9.86 million was recorded in respect of a joint venture, FPG Oleochemicals Sdn. Bhd. relating to the decision to discontinue a component of the business. Introduction Performance Highlights About FGV Reports Financial Statements Others Strategy and Value Creation Performance Review & Progress Foreword to Shareholders Annual General Meeting Annual Report 2014 pg 275