FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 222 FGV HOLDINGS BERHAD EXAMINED OUR NUMBERS 19 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Significant impairment of property, plant and equipment Financial year ended 31 December 2018 (a) FGV Green Energy ( “ FGVGE ” ) Suspended construction of a plant in an indirect subsidiary of the Company, FGV Green Energy Sdn. Bhd. ( “ FGVGE ” ) was identified as indicator for an impairment test to be performed for FGVGE’s non-current assets. The recoverable amount of the plant is determined based on the offer received from a potential buyer as the Group does not intend to complete the construction nor operate the plant. As at 31 December 2018, the offer had been withdrawn and as a result, the Group has recognised the full impairment of RM113,888,000 which comprise RM103,024,000 for property, plant and equipment and RM10,864,000 for intangible assets (other than goodwill) (Note 21(b)) of FGVGE which is recorded in impairment of non-financial assets of the Group. The amount has been included as part of the impairment loss of Plantation Sector in the Group’s segment reporting (Note 18). (b) Asian Plantations Limited ( “ APL ” ) The recoverable amount of APL CGU is determined based on the valuation report obtained from an external valuer using income approach (level 3 fair value computation) with cash flow projections covering a 25 year period. Based on the valuation, the recoverable amount of APL is RM504,800,000, which resulted in the full goodwill being impaired (Note 21). In addition, a further impairment of RM83,196,000 is recognised for property, plant and equipment. The impairments are recognised in the Group’s impairment of non-financial assets and have been included as part of the impairment loss of Plantation Sector in the Group’s segment reporting (Note 18). The key assumptions used in the valuation are as follows: Financial year ended 31 December 2018 (i) CPO price RM2,390/MT (ii) PK price RM1,884/MT (iii) Cost of production RM2,480/ha to RM3,225/ha (iv) FFB yield 11.9 MT/ha to 20.0 MT/ha (v) Discount rate 9.0% Financial year ended 31 December 2017 (i) CPO price RM2,500/MT (ii) PK price RM1,750/MT (iii) Cost of production RM2,840/ha to RM3,040/ha (iv) FFB yield 11.5 MT/ha to 21.5 MT/ha (v) Discount rate 9.0%