AUDITED FINANCIAL STATEMENTS 2022 9 REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED) Key audit matters (continued) Key audit matters How our audit addressed the key audit matters Goodwill impairment assessment As at 31 December 2022, the Group’s carrying value of goodwill of RM809.1 million comprised goodwill in relation to sugar business in Malaysia of RM576.2 million and palm upstream operations in Malaysia of RM226.8 million and other operations of RM6.1 million. Goodwill is subject to annual impairment testing. We focused on this area as the determination of recoverable amounts of the assets in the Cash Generating Units (“CGUs”) based on discounted cash flows projections prepared by management, involved a significant degree of judgement in determining the following key assumptions: Business Key assumptions Sugar business Selling price, raw sugar price, sales volume, freight charges, landed cost, natural gas price, terminal value growth rate and discount rate. Palm upstream operations CPO price, PK price, average FFB yield, mature and immature estate costs and discount rate. The goodwill on other operations of RM6.1 million is not material to the Group. Refer to Note 3(d) in the significant accounting policies, Note 5(ii) in the critical accounting estimates and judgments and Note 22 to the financial statements. We performed the following procedures on the cash flow projections to support the impairment assessment of goodwill prepared by the management and approved by the Board of Directors of the Company: • We assessed the reliability of management’s projections through the comparison of actual past financial performances against previous forecasted results; • We assessed the reasonableness of the key assumptions, which were used by management in developing the discounted cash flows projections, by comparing against historical data and industry trends; • We examined the sensitivity analysis performed by management on the key assumptions for the respective businesses and also the discount rates used to evaluate the impact on the impairment assessment; and • We assessed the adequacy and reasonableness of the disclosures in the financial statements. Based on our procedures, we noted no significant exceptions. Impairment assessments of non-financial assets with impairment indicators Management performed impairment assessments of the non-financial assets of the Group, which had impairment indicators. As a result, net impairment losses of RM63.1 million for FGV Group’s property, plant and equipment and assets held for sale were recognised during the financial year ended 31 December 2022. We focused on this area as the recoverable amounts of the non-financial assets are determined based on discounted cash flows projections, which require judgement on the part of management on the future financial performance and the business plan of those businesses. Refer to Note 3(o) in the significant accounting policies, Note 5(iii) in the critical accounting estimates and judgements and Notes 19 and 36 to the financial statements. We have performed the following audit procedures: • We assessed the reliability of management’s projections through the comparison of actual past financial performances against previous forecasted results; • We assessed the reasonableness of the key assumptions, which were used by management in developing the discounted cash flows projections, by comparing against historical data and industry trends; • We examined the sensitivity analysis performed by management on the key assumptions and also the discount rates used to evaluate the impact on the impairment assessment; and • We assessed the adequacy and reasonableness of the disclosures in the financial statements. Based on the above procedures performed, we noted no significant exceptions. We have determined that there are no key audit matters to report for the Company. INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF FGV HOLDINGS BERHAD (Incorporated in Malaysia) (Company No. 200701042133 (800165-P))
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