8 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current financial year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters How our audit addressed the key audit matters Land Lease Agreement (“LLA”) liability assessment As at 31 December 2023, the LLA liability for the Group amounted to RM3.51 billion. We focused on this area as the fair value of the LLA liability is determined based on cash flows projections, which require significant estimates made by management on the assumptions used in the calculations, in particular, discount rate, prices of Crude Palm Oil (“CPO”) and Palm Kernel (“PK”), average Fresh Fruit Bunches (“FFB”) yield, and mature and immature estate costs. Refer to Note 3(i) in the material accounting policies, Note 5(i) in the critical accounting estimates and judgments and Note 45 to the financial statements. We have performed the following audit procedures: • We checked the appropriateness of fair value model used to value the LLA liability. We also assessed the reasonableness of management’s key assumptions used in the cash flows projections comprising discount rate, prices of CPO and PK, average FFB yield, and mature and immature estate costs, by comparing against those used in business plans, historical data and industry trend; • We evaluated the reliability of management’s cash flows projections by comparing the actual past financial performance against previous forecasted results; • We examined sensitivity analysis performed by management on the discount rate, prices of CPO and PK, average FFB yield, mature and immature estate costs to evaluate the impact on the LLA liability; and • We assessed the adequacy of the disclosures in the financial statements. Based on our procedures, we noted no significant exceptions. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF FGV HOLDINGS BERHAD (Incorporated in Malaysia) Registration No. 200701042133 (800165-P)
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