FGV Audited Financial Statements 2020

23 INTANGIBLE ASSETS (CONTINUED) (a) Impairment test for goodwill (continued) (ii) Palm upstream operations in Malaysia Goodwill of RM226,795,000 (2019: RM226,795,000) for palm upstream operations in Malaysia comprise of RM127,238,000 (2019: RM127,238,000) for PUP and RM99,557,000 (2019: RM99,557,000) for Yapidmas. The Group’s estates in Malaysia are combined for the purposes of goodwill impairment testing as they represent the lowest level within the Group at which goodwill is monitored for internal management purpose. The recoverable amount of the palm upstream operations 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 2020 (i) CPO price RM2,450/MT to RM2,809/MT (ii) PK price RM1,500MT to RM1,800/MT (iii) Average FFB yield 16.3 MT/ha to 26.6 MT/ha (iv) Estate cost Mature estate costs – RM2,761 per hectare to RM3,566 per hectare based on a 25 year cycle for oil palm Immature estate costs – RM4,499 per hectare to RM4,949 per hectare based on a 25 year cycle for oil palm (v) Discount rate 9.5% Financial year ended 31 December 2019 (i) CPO price RM2,450/MT to RM2,500/MT (ii) PK price RM1,450/MT to RM1,850/MT (iii) Average FFB yield 18.1 MT/ha to 26.8 MT/ha (iv) Estate cost Mature estate costs – RM2,795 per hectare to RM3,368 per hectare based on a 25 year cycle for oil palm Immature estate costs – RM4,175 per hectare to RM4,889 per hectare based on a 25 year cycle for oil palm (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) Average FFB yield and estate costs The average 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) Others Included in others is goodwill of RM6,037,000, which arose from the acquisition of cattle and dairy operations and is allocated to FGV Dairy Farm Sdn. Bhd. (Note 24(b)(i)). The amount is not deemed to be material to the Group. 101 Notes to the Financial Statements For The Financial Year Ended 31 December 2020 Audited Financial Statements 2020