FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 156 FINANCIAL REPORT REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters Goodwill impairment assessment As at 31 December 2016, the Group's carrying value of goodwill of RM1,315.9 million comprised goodwill in relation to sugar business in Malaysia of RM576.2 million and palm upstream operations in Malaysia of RM739.7 million. Goodwill is subject to annual impairment testing. We focused on this area as the determination of recoverable amounts of the assets in the two Cash Generating Units ("CGUs") based on discounted cash flows projections prepared by management involved a significant degree of judgment and assumptions in particular selling price and sales volume, raw sugar price and terminal value growth rate for sugar business and prices of CPO and FFB, average FFB yield and estate replanting fixed costs for palm upstream operations. Refer to Notes 5(iv) and 21 to the financial statements. We have performed the following audit procedures: •We assessed the reliability of management's forecast through the comparison of actual past financial performances against previous forecasted cash flows; •We assessed the reasonableness of the key assumptions below, which were used by management in developing the discounted cash flows projections, by comparing against historical results and market data; Business Assumptions Sugar business Selling price and sales volume, raw sugar price and terminal value growth rate Palm upstream operations CPO price, FFB price, average FFB yield, estate replanting fixed costs •We examined sensitivity analysis performed by management on selling price and sales volume, raw sugar price and discount rate for sugar business, and CPO and FFB price, average FFB yield and estate replanting fixed costs for palm upstream operations to evaluate the impact on the impairment assessment; and •We assessed the adequacy and reasonableness of the 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