FGV Annual Report 2016

ANNUAL INTEGRATED REPORT 2016 153 FINANCIAL REPORT REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters How our audit addressed the key audit matters Land Lease Agreement ("LLA") Liability assessment As at 31 December 2016, the LLA liability for the Group amounted to RM4.4 billion. We focused on this area as the fair value of the LLA liability is determined based on cash flows projections, which require judgment on the part of management on the assumptions used in the calculations, in particular, prices of Crude Palm Oil ("CPO") and Fresh Fruit Bunch ("FFB"), average FFB yield, estate replanting costs and land lease term. Refer to Notes 3(i), 5(i) and 47 to the financial statements. We have performed the following audit procedures: •We checked the fair value model and assessed the reasonableness of management's key assumptions used in the cash flows projections comprising discount rate, prices of CPO and FFB, average FFB yield, estate replanting costs and land lease term, by comparing against business plans, historical results and industry data; •We evaluated the reliability of management's cash flows projections by comparing the actual past financial performance against previous forecasted results; and •We assessed the adequacy of sensitivity analysis and related disclosures in the financial statements. Based on our procedures, we noted no significant exceptions. INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF FELDA GLOBAL VENTURES HOLDINGS BERHAD