FGV Annual Report 2016

FELDA GLOBAL VENTURES HOLDINGS BERHAD 312 FINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 47 LAND LEASE AGREEMENT ("LLA") LIABILITY (CONTINUED) During the financial year, the cash flow projections model for the valuation of the LLA liability have been updated, taking into consideration factors including the long term growth trend to reflect impact of replanting periods on yield and production, decisions made by management to withdraw from converting palm to rubber for certain areas, changes in replanting hectarage and changes in region concentration mixture according to the updated approved business plans of the Group. The change in estimates had resulted in a reversal of LLA liability of RM335,300,000 during the financial year. The key assumptions used to compute the fair value of the LLA liability are as follows: (i) Implied discount rate 9.47% (2015: 9.47%) based on discount rates applied by relevant comparable companies (ii) CPO price RM2,450/MT to RM2,700/MT (2015: RM2,170/MT to RM2,630/MT) (iii) FFB price RM470/MT to RM570/MT (2015 : RM450/MT to RM550/MT) (iv) Average FFB Yield 16.9 MT/ha to 27.1 MT/ha (2015: 19.2 MT/ha to 27.3 MT/ha) (v) Estate replanting fixed cost • Matured – RM2,580 (2015: RM2,580) per hectare based on a 25 year cycle for oil palm • Immature – RM6,436 (2015: RM6,436) per hectare based on a 25 year cycle for oil palm (vi) Lease term Extension of lease term to 99 years (2015: 99 years) will be obtained for all land in the plantation estates The sensitivity of the LLA liability to changes in key assumptions is as follows: Key assumptions Change in assumption Impact on LLA liability (i) Implied discount rate Increase by 0.5% Decrease by RM239.4 million Decrease by 0.5% Increase by RM149.5 million (ii) CPO price Increase by RM100 per metric tonne Increase by RM149.4 million Decrease by RM100 per metric tonne Decrease by RM154.1 million (iii) Improvement/reduction in FFB yield Increase/decrease by 1% Increase/decrease by RM38.3 million (iv) Change of total planted hectarage under LLA Increase/decrease by 1,000 ha Increase/decrease by RM7.4 million (v) Estate planting costs (matured) Increase/decrease by RM100 per ha Increase/decrease by RM48.1 million (vi) PK price Increase by RM100 per metric tonne Increase/decrease by RM38.7 million