94 FGV HOLDINGS BERHAD NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 19 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Significant impairment and write off of property, plant and equipment (continued) Financial year ended 31 December 2021 (continued) d) FGV Plantations (Malaysia) Sdn. Bhd. (“FGVPM”) In the previous financial year, an impairment assessment was performed due to delay in maturity of the rubber trees as well as deterioration of results being compounded by workers shortages at the estates level. Based on the impairment assessment, the recoverable amount of the rubber plantation in FGVPM was RM124,200,000, which resulted in the impairment loss of RM11,385,000 for property, plant and equipment. The impairment loss had been recognised as the Group’s impairment of non-financial assets and had been included as impairment loss within the Plantation Sector in the Group’s segment reporting (Note 18). The recoverable amount is determined using fair value through cost to sell calculation (Level 3 fair value calculation) using cash flow projections covering a 20 year period. The cash flow projection was based on 2022 approved financial budgets by the Board of Directors of the Company plus the projection for the remaining period reflective of the forecasted operational results. The key assumptions used in the valuation were as follows: (i) Planted rubber hectarage 7,562 hectares (ii) Rubber price RM5.80 per kg (iii) Rubber yield 1,000 kg/ha to 1,550 kg/ha per annum (iv) Mature cost per kg RM5.00 per kg to RM6.20 per kg (v) Final replanting year 2027 (vi) Discount rate 9.5% e) FGV Palm Industries Sdn. Bhd. (“FGVPI”) In the previous financial year, certain FGVPI mills were in continuing loss position for three consecutive years which had been identified as indicator for impairment of the assets. Based on the impairment assessment, one of the mill’s recoverable amount of RM28,200,000 resulted in a shortfall of RM9,100,000 and this had been recognised as part of the Group’s impairment of non-financial assets and included as impairment loss within the Plantation Sector in the Group’s segment reporting (Note 18). The recoverable amount was determined using value-in-use calculation based on cash flow projections. The key assumptions on the assessment were as follows: Parameters Assumptions Projection period (years) 10 Utilisation factor (%) 16 - 65 Processed quantity (‘000 MT) 46 - 182 Processing cost (RM/MT) 66 - 175 Tolling rate (RM) 53 - 65 Discount rate (%) 8.5 f) MSM Malaysia Holdings Berhad (“MSMH”) In the previous financial year, MSMH, a subsidiary of the Group had received an offer to purchase certain plant and machinery from a scrap metal purchaser. These plant and machinery were part of assets impaired in financial year ended 31 December 2019 following cessation of refinery operations in its previous subsidiary, MSM Perlis Sdn. Bhd.. Following this offer, the Group had reversed the impairment made of RM11,300,000 based on the recoverable amount of the assets which is equivalent to the offer price. Subsequently, the assets have been reclassified to assets held for sale from plant, property and equipment.
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