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NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2013
106 INDOFOOD AGRI RESOURCES LTD • ANNUAL REPORT 2013
15. GOODWILL (CONT’D)
The above goodwill was tested for impairment as at 31 October 2013 and 2012, except for goodwill arising from business
combination in the current year which was only tested as at 31 October 2013.
No impairment loss was recognised as at 31 October 2013 and 2012 as the recoverable amounts of the goodwill were in excess
of their respective carrying values. The summary of impairment testing on the goodwill is disclosed in the succeeding paragraphs.
Except for goodwill allocated to the plantation estates of Lonsum, the recoverable value of the goodwill allocated to all other
plantation estates as at 31 October 2013 was determined based on fair value less costs to sell (“FVLCTS”), using discounted
cash flow method. The recoverable value of the goodwill allocated to the plantation estates of Lonsum had been determined
based on value-in-use calculations.
The following key assumptions had been used:
Cash generating units Goodwill as at
31 October 2013
Discount rate
(pre-tax)
Terminal
growth rate
Rp million
Integrated plantation estates of Lonsum 2,909,757 11.13% 5.50%
Plantation estates of PT GS 8,055 11.51% 5.50%
Plantation estates of PT MPI 2,395 11.35% 5.50%
Plantation estates of PT SBN 234 11.31% 5.50%
Plantation estates of PT KGP 29,140 11.79% 5.50%
Integrated plantation estates of PT CNIS 7,712 11.76% 5.50%
Plantation estates of PT LPI 37,230 11.20% 5.50%
Plantation estates and research facility of PT SAIN 113,936 11.87% 5.50%
Plantation estates of PT RAP 3,388 11.79% 5.50%
Plantation estates of PT JS 1,533 11.27% 5.50%
Integrated plantation estates of PT MISP 34,087 11.79% 5.50%
Plantation estates of PT IBP 8,319 11.20% 5.50%
Plantation estates of PT SAL 86,996 8.61% 5.50%
Plantation estates of PT WKL 4,750 8.73% 5.50%
Total 3,247,532
The recoverable value calculation of the above CGU applied a discounted cash flow model based on cash flow projections
covering a period of 10 years for plantation estates. The projected price of the CPO is based on the consensus of the World Bank
and reputable independent forecasting service firms for the short-term period and the World Bank forecasts for the remainder
projection period. The projected selling prices of RSS1 and other rubber products of the Group over the projection period are
based on the extrapolation of historical selling prices and the forecasted price trend from the World Bank. While the sugar prices
used in the projection are based on the extrapolation of historical selling prices and the forecasted price trend from the World
Bank or the minimum sugar price imposed by the Ministry of Trade of Indonesia, whichever is higher.
The cash flows beyond the projected periods are extrapolated using the estimated terminal growth rate indicated above. The
terminal growth rate used does not exceed the long-term average growth rate of the industry in country where the entities operate.
The discount rate applied to the cash flow projections is derived from the weighted average cost of capital of the respective CGUs.
Changes to the assumptions used by the management to determine the recoverable value, in particular the discount and terminal
growth rate, can have significant impact on the results of the assessment. Management is of the opinion that no reasonably
possible change in any of the key assumptions stated above would cause the carrying amount of the goodwill for each of the CGU
to materially exceed their recoverable value.