FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 233 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 EXAMINED OUR NUMBERS 21 INTANGIBLE ASSETS (CONTINUED) (a) Impairment test for goodwill (continued) (ii) Palm upstream operations in Malaysia (excluding APL) (continued) 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% 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. (a) 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. (b) 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. (c) 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. (iii) Asian Plantation Limited ( “ APL ” ) During the financial year, the goodwill from the acquisition of APL was assessed separately because management has re-organised its reporting structure to review APL operations separately from the other palm upstream operations. The re-organisation was done as APL continues to be loss making since acquisition, despite efforts undertaken to improve its performance due to several challenges faced by APL in particular due to its geographical location, labour shortages and weather. In addition, certain planted areas have been identified as no longer harvestable resulting in significant reduction in overall hectarage of planted areas. Based on the assessment, the full goodwill of RM512,946,000 had been fully impaired. Refer to Note 19(b)(iii) for the key assumptions used in the valuation of APL.