FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 232 FGV HOLDINGS BERHAD EXAMINED OUR NUMBERS 21 INTANGIBLE ASSETS (CONTINUED) (a) Impairment test for goodwill (continued) (i) Sugar business operations in Malaysia (continued) 1.1.2017 Key assumptions Sensitivity VIU lower by RM’000 Selling price Reduce by RM50 per metric tonne 1,400,000 Raw sugar price Increase in raw sugar prices by 1 cent per pounds 923,000 Sales volume Reduce by 5% 1,002,000 Discount rate Increase by 1% 553,000 A reduction in selling price of RM37/MT, increase in raw sugar price by 0.6 cents per pounds, reduction in sales volume by 5% and increase in discount rate by 0.95% would, all changes taken in isolation, result in the recoverable amount being equal to the carrying amount. The above sensitivity analysis is based on the movement of individual key assumptions while holding all other assumptions constant. (ii) Palm upstream operations in Malaysia (excluding APL) Goodwill of RM226,795,000 (2017: RM226,795,000) for palm upstream operations in Malaysia comprise of RM127,238,000 (2017: RM127,238,000) for PUP and RM99,557,000 (2017: RM99,557,000) for Yapidmas. In the previous financial year, the Group’s estates in Malaysia are combined for the purposes of goodwill impairment testing as they represent the lowest level within theGroup at which goodwill ismonitored for internal management purpose. The recoverable amount of the palm upstream operations (excluding APL) 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 2018 (i) CPO price RM2,250/MT to RM2,586/MT (ii) PK price RM1,600/MT to RM1,875/MT (iii) Estate cost Mature estate costs – RM3,079 per hectare to RM3,693 per hectare based on a 25 year cycle for oil palm Immature estate costs – RM3,993 per hectare to RM4,331 per hectare based on a 25 year cycle for oil palm (iv) FFB yield 17.8 MT/ha to 27.1 MT/ha (v) Discount rate 9.5%