MSM Malaysia Holdings Berhad Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 20 INVESTMENTS IN SUBSIDIARIES (CONTINUED) b) Impairment in subsidiaries Investments in subsidiaries have been impaired at the year-end as there is indication that the carrying amount will not be fully recovered due to a change in the Group’s strategy moving forward as a result of rationalisation of its three refinery plants to address the sugar production capacity. The impairment charge has been recognised based on a combination of the value-in-use and fair value less costs to sell methods using the following key assumptions: Value in use Key assumptions 2019 2018 Selling price, RM/MT 2,175 - 2,500 2,131 - 2,630 Raw sugar price, US cents/lbs 13.5 14.0 Sales volume, MT’000 41 323 - 123 Terminal value growth rate % N/A* 2% Pre-tax discount rate % 9% 10.5% * The value-in-use method is based on the assumption that one of the subsidiaries of the Company will cease operations from July 2020 onwards. Fair value less costs to sell Included in the cash generating unit is a piece of land which was written down to its fair value less costs to sell of RM156,000,000 as stipulated in the sale and purchase agreement with the buyer. As at 31 December 2019, the conditions precedent stipulated in the sale and purchase agreement has yet to be fulfilled. The fair value is within Level 1 of the fair value hierarchy as this is the actual transacted price for the asset. Details of subsidiaries, are as follows: Place of business/ Proportion of Proportion of country of Nature of ordinary shares ordinary shares Name of subsidiaries incorporation business directly held by parent held by the Group 2019 2018 2019 2018 % % % % Direct subsidiaries MSM Prai Berhad Malaysia Sugar refining, 100 100 100 100 sales and marketing of refined sugar products MSM Perlis Sdn Bhd Malaysia Sugar refining, 100 100 100 100 sales and marketing of refined sugar products and planting of rubber, oil palm and mango MSMTrading & Malaysia Dormant 100 100 100 100 Distribution Sdn Bhd 183 FINANCIAL STATEMENTS 08