FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 194 FGV HOLDINGS BERHAD EXAMINED OUR NUMBERS 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 is measured using a discounted cash flow projections based on financial budgets approved by the Directors covering a 93 year period. As a result of the fair value assessment, the Group has recognised a LLA liability of RM4,328,008,000 (2017: RM4,393,280,000). The key assumptions and the sensitivity analysis are as disclosed in Note 48 to the financial statements. (ii) Goodwill relating to sugar business operations in Malaysia 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 ” ) to which 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 the impairment assessment, the Group did not recognise any impairment loss (2017: Nil) for goodwill relating to sugar business operations in Malaysia during the financial year. The key assumptions and the sensitivity analysis are as disclosed in Note 21(a)(i) to the financial statements. (iii) Impairment of non-financial assets The Group tests its non-financial assets for impairment if there is any objective evidence of impairment. Management have assessed that certain non-financial assets may be potentially impaired or the existing impairment may be reversed. The recoverable amounts of these assets were determined based on the higher of fair value less cost to sell or 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 the assessment, the Group has recognised a net impairment of RM282,727,000 (2017: RM14,417,000) against certain property, plant and equipment, investment properties and intangible assests (other than goodwill) and assets held for sale. The key assumptions and the sensitivity analysis are as disclosed in Note 19 to the financial statements.