FGV Annual Report 2017

ANNUAL INTEGRATED REPORT 2017 FINANCIAL STATEMENTS 185 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 4 FINANCIAL RISK MANAGEMENT (CONTINUED) (d) Offsetting financial assets and financial liabilities There are no offsetting of financial assets and financial liabilities during the financial year for the Group and Company. 5 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated by Directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) LLA liability The fair value of the LLA liability ismeasured using a discounted cash flow calculation using cash flowprojections based on financial budgets approved by the Directors covering a 94 year period. As a result of the fair value assessment, the Group has recognised a LLA liability of RM4,393,280,000 (2016: RM4,407,564,000). The key assumptions and the sensitivity analysis are as disclosed in Note 45 to the financial statements. (ii) Goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units (“CGU”) towhich the goodwill is allocated. Estimating the recoverable amount requires management to make an estimate of the expected future cash flows from the CGUs and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The recoverable amounts of CGUs were determined based on the higher of fair value less cost to sell or value in use (“VIU”) calculations. The fair value less cost to sell or VIU is the net present value of the projected future cash flows derived from the CGU discounted at an appropriate discount rate. Projected cash flows are estimates made based on historical and industry trends, general market and economic conditions and other available information. As a result of these impairment assessments, the Group did not recognise any impairment loss (2016: Nil) during the financial year. The key assumptions and the sensitivity analysis are as disclosed in Note 20 to the financial statements. (iii) Deferred tax assets Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. This involves judgment regarding the future financial performance of the particular entity in which the deferred tax asset has been recognised. As at 31 December 2017, the Group has deferred tax assets of RM199,277,000 (2016: RM219,088,000) in respect of unused tax losses of certain loss making subsidiaries of the Group. The key assumptions for taxable profit projections for the loss making subsidiaries include CPO price of RM2,500/MT, FFB yield of up to 21.5MT/ha, and mature estate costs of between RM1,240/ha to RM1,290/ha for its plantation subsidiaries, and commission rate of 0.35% of palm product sales arranged and yearly sales quantity arranged of between 2.1 million MT to 2.5 million MT for its marketing subsidiary. In evaluating whether it is probable that future taxable profits will be available in future periods, all available evidence was considered, including approved budgets, business plans and analysis of historical operating results. These forecasts are consistent with those prepared and used internally for business planning and impairment testing purposes.