FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 158 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 Purchase price allocation for acquisition of Yapidmas group of companies The Group completed its acquisitions of 100% of equity in Yapidmas Plantation Sdn Bhd ("YPSB"), Sri Kehuma Sdn Bhd ("SKSB"), Ladang Kluang Sdn Bhd ("LKSB") and Tanah Emas Oil Palm Processing Sdn Bhd ("TEOPP") on 14 March 2016 for a combined consideration of RM655.0 million. Goodwill arising from the acquisition of the above companies amounted to RM99.6 million. Management performed a Purchase Price Allocation ("PPA") exercise in accordance with FRS 3 "Business Combination", which requires the Group to recognise the fair values of identifiable assets acquired and liabilities assumed, with the excess of the cost of acquisition over the fair values recognised as goodwill. We focus on this area because of management's judgment involved in the identification and valuation of the assets acquired and liabilities assumed. Refer to Notes 5(vii), 21 and 22(b)(i) to the financial statements. We have performed the following audit procedures: •We assessed management's identification and valuation of identifiable assets acquired and liabilities assumed by way of understanding the rationale of the acquisition and benchmarking to other acquisitions of plantation operations; •We checked the valuation of the identifiable assets acquired and liabilities assumed as follows: - We evaluated the appropriateness of the methodology adopted by management to determine the fair values of identifiable assets acquired and liabilities assumed; - We assessed the reasonableness of the fair value model and key assumptions used, in particular, CPO price, FFB price, estate costs, and average FFB yield, used by an independent external valuer engaged by management in determining the fair value of bearer plants and PPE, by comparing against historical results of the acquired businesses and market data on certain key assumptions; •We read Share Purchase Agreements ("SPAs") for the acquisitions and board minutes to agree the purchase consideration; and •We checked the adequacy of the 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