FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 246 FINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 21 INTANGIBLE ASSETS (CONTINUED) (a) Impairment test for goodwill (continued) (i) Sugar business operations in Malaysia (continued) Financial year ended 31 December 2016 Key assumptions Sensitivity VIU lower by RM'000 Selling price Reduce by RM100 per metric tonne 1,400,000 Raw sugar price Increase in raw sugar prices by 1 cent per pounds 923,000 Sales volume Reduce by 10% 1,002,000 Discount rate Increase by 1% 553,000 The recoverable amount calculated based on VIU exceeded the carrying value by RM524 million. A reduction in selling price of RM37 per metric tonne, increase in raw sugar price by 0.6 cents per pounds, reduction in sales volume by 5% and increase in discount rate by 0.95% would, all changes taken in isolation, result in the recoverable amount being equal to the carrying amount. Financial year ended 31 December 2015 Management believes that there is no reasonable possible change in any of the above key assumptions which would cause the carrying amount of the CGU to succeed the recoverable amount. The above sensitivity analysis is based on a change in assumption while holding all other assumptions constant. (ii) Palm upstream operations in Malaysia Goodwill of RM739,741,000 for palm upstream operations in Malaysia comprise of RM512,946,000 for APL, RM127,238,000 for PUP and RM99,557,000 (Note 22(b)(i)) for Yapidmas. The Group's estates in Malaysia are combined for the purposes of goodwill impairment testing as they represent the lowest level within the Group at which goodwill is monitored for internal management purpose. The recoverable amount of the CGU is determined using a fair value less cost to sell calculation (Level 3 fair value computation) using cash flow projections covering a 25 year period. The key assumptions are as follows: Financial year ended 31 December 2016 (i) CPO price RM2,450/MT to RM2,700/MT (ii) FFB price RM470/MT to RM570/MT (iii) Estate replanting fixed cost Matured – RM2,580 per hectare based on a 25 year cycle for oil palm Immature – RM6,436 (per hectare based on a 25 year cycle for oil palm (iv) FFB yield 13.9 MT/ha to 27.1 MT/ha (v) Discount rate 9.5%