NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2024 3. Significant accounting estimates and judgements (cont’d) 3.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period are discussed below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. (a) Allowance for ECL of plasma receivables The ECL allowance is based on the credit losses expected to arise over the life of the asset (lifetime ECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months’ ECL. The Group primarily determined a receivable from individual plasma project has significant increase in credit risk when the actual development cost per hectare is exceeding the agreed development cost per hectare as stated in the credit agreement between the cooperatives and the creditor. At this point, the Group estimates the impairment loss using lifetime ECLs. The Group calculates lifetime ECL based on the expected cash shortfalls, discounted at an approximation of the original effective interest rate (“EIR”). A cash shortfall is the difference between the cash flows that are due to the Group in accordance with the contract and the cash flows that the Group expects to receive. The Group measures the cash flows expected to receive from each plasma project based on the estimated revenues from the plasma plantations deducted with the costs of sales, principal and interest payments to the bank. The key inputs applied for this estimation are the selling price of FFB, production costs, production yield for each planting year of the plasma plantations and inflation rate. These provisions are re-evaluated and adjusted as additional information is received at each reporting date. The gross carrying amount of the Group’s plasma receivables before the allowance for ECL and the adjustments of EIR amortisation as at 31 December 2024 is Rp1,318.9 billion (2023: Rp2,388.5 billion). Further details are disclosed in Notes 32(a) and 35(d). (b) Goodwill impairment Application of acquisition method requires extensive use of accounting estimates to allocate the purchase price to the fair market values of the assets and liabilities acquired, including intangible assets. Certain business acquisitions of the Group have resulted in goodwill, which is not amortised but subject to impairment testing, and whenever circumstances indicate that the carrying amount of the CGU where the goodwill was allocated into may be impaired. Group Overview Financials Other information Sustainability and Governance Operation and Financial Review Annual Report 2024 97
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