FGV HOLDINGS BERHAD | AUDITED FINANCIAL STATEMENTS 2023 105 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023 19 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Significant impairment of property, plant and equipment (continued) Financial year ended 31 December 2022 a) FGV Plantations (Malaysia) Sdn. Bhd. (“FGVPM”) An impairment assessment was performed due to continuing loss making on the rubber operations in FGVPM, as well as significant reduction in planted rubber hectarage in the previous financial year as certain plantation areas were destroyed by elephants attacks in March 2022. Based on the impairment assessment, the recoverable amount of the rubber plantation in FGVPM was RM66,659,000, which resulted in the impairment loss of RM59,798,000 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 2023 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 7,159 hectares ^ (ii) Rubber price RM6.00 per kg to RM6.48 per kg (iii) Rubber yield 1,090 kg/ha to 1,250 kg/ha per annum ** (iv) Mature cost RM4.73 per kg to RM5.99 per kg (v) Final replanting year 2025 (vi) Discount rate 9.5% ^ Reduction in planted rubber hectarage in the previous financial year from 7,562 hectares in 2021 arising from elephant attack in the previous financial year. ** Reduction in long term rubber yield to reflect the impact of lower upkeep and manuring activities due to labour shortages as well as management’s revised plans on maintaining the rubber trees. The sensitivity of the rubber plantation recoverable amount to changes in key assumptions is as follows: Key assumptions Sensitivity Recoverable amount lower by RM ‘000 Rubber price Reduce by RM0.25 cents per kg (11,771) Rubber yield Reduce by 100 kg/ha per annum (10,991) Mature cost per hectare Increase by 5% (11,354)
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