19. BIOLOGICAL ASSETS (continued) (a) The fair value of the biological assets is stated at Level 3 of the fair value hierarchy. (b) The biological assets of the Group comprise of teak and mahogany plantation. In prior years, PRG Agro Sdn. Bhd., an indirectly wholly-owned subsidiary of the Company, had acquired two parcels of agriculture land planted with teak and mahogany trees in Kelantan. (c) The current age of teak and mahogany trees ranges from 19 to 22 years (2020: 17 to 20 years), which are ready to be harvested as agricultural produce. (d) During the financial year, the Group harvested approximately 1,865.18m³ (2020: 1,645.81m³) of teak trees. (e) The valuation of biological assets is determined by income approach which considers the net present value of all directly attributable net cash flows based on Directors’ estimation by reference to inputs used in valuation report performed by independent valuers. Significant unobservable inputs are used by Directors in determining the fair value of the asset, which include the discount rate used in the discounted cash flow model and adjustment factors to account for the discounted cash flow methods. The resulting fair value based on the income approach is therefore sensitive to these unobservable inputs, and changes to these inputs may result in a significantly higher or lower fair value measurement. Fair value measurements using significant unobservable inputs The following table summarises the quantitative information about the significant unobservable inputs used in Level 3 fair value measurement: 2021 2020 Selling price per m3 of teak trees RM1,500 RM1,200 Selling price per m3 of mahogany trees RM3,200 - Discount rate 16% 16% Sensitivity analysis With all other variables held constant, the Group’s profit/(loss) after taxation for the year would have been impacted as follows: 2021 2020 RM’000 RM’000 Selling price - increase by 1% 878 (1,151) - decrease by 1% (606) 934 Discount rate - increase by 1% (904) 2,067 - decrease by 1% 1,203 (2,379) NOTES TO THE FINANCIAL STATEMENTS P R G H O L D I N G S B E R H A D A N N U A L R E P O R T 2 0 2 1 150 31 December 2021 (cont’d)
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