FGV Annual Report 2017

FELDA GLOBAL VENTURES HOLDINGS BERHAD FINANCIAL STATEMENTS 216 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 20 INTANGIBLE ASSETS (CONTINUED) (a) Impairment test for goodwill (continued) (ii) Palm upstream operations in Malaysia (continued) 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 2017 (i) CPO price RM2,500/MT to RM2,600/MT (ii) PK price RM1,752/MT to RM2,300/MT (iii) Estate cost Mature estate costs – RM1,140 per hectare to RM3,957 per hectare based on a 25 year cycle for oil palm Immature estate costs – RM3,000 per hectare to RM4,268 per hectare based on a 25 year cycle for oil palm (iv) FFB yield 17.3 MT/ha to 27.1 MT/ha (v) Discount rate 9.5% Financial year ended 31 December 2016 (i) CPO price RM2,450/MT to RM2,700/MT (ii) PK price RM1,752/MT to RM2,900/MT (iii) Estate cost Mature estate costs – RM3,028 per hectare to RM3,825 per hectare based on a 25 year cycle for oil palm Immature estate costs – RM3,782 per hectare to RM4,175 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% The Group’s review includes an impact assessment of changes in key assumptions. Based on the sensitivity analysis performed, the Directors concluded that no reasonable change in any of the base case assumptions would cause the carrying amount of the CGU to exceed the recoverable amount. (i) CPO and PK price CPO and PK is determined based on the forecast provided by the Group's trading arm subsidiary, based on historical results and industry trend. (ii) FFB yield and estate costs The FFB yield and estate costs are based on forecast provided by the Group's upstream operations management, based on this Group's approved budget, historical results and industry trend. (iii) Discount rate The post-tax discount rate used reflects specific industry risks relating to the palm plantation operations including consideration of comparison with comparable peer companies in Malaysia.