Page 125 - Demo

DKSH Annual Report 2023 123Page 2 Revenue recognition Risk Total net sales for the business year 2023 amount to CHF 11%u2019066.0 million. Based on its business model, DKSH has different streams of revenues arising from different types of contracts with its customers. This requires contracts to be assessed regarding timing of revenue recognition and regarding gross/net accounting. The corresponding accounting policy is discussed in Note 2 (o) to the consolidated financial statements. Assessing whether an entity acts as a principal and accounts for a sales transaction on a gross basis or whether it acts as an agent of another party and therefore recognizes revenue on a net basis requires an analysis of various factors and involves significant judgment.Our audit responseWe evaluated Management%u2019s controls around the revenue recognition process and performed analytical review procedures in order to identify any material new revenue streams. On a sample basis, we reviewed agreements for unusual contract terms and agreed amounts recognized to underlying customer contracts, focusing on correct timing of revenue recognition and appropriate presentation (gross vs. net) based on Management%u2019s assessment regarding the principal vs. agent definition. Our audit procedures did not lead to any reservations concerning the recognition, measurement and presentation of the net sales.GoodwillRisk As at December 31, 2023, DKSH reported CHF 559.8 million of goodwill. The carrying values of goodwill and other assets allocated to a cash-generating unit (CGU) are dependent on future cash flows. The determination of the recoverable amount is based on these cash flows and other assumptions such as discount rate and growth rate. The annual impairment testing process is complex, contains judgmental elements and includes assumptions that are affected by expected future market conditions. There is a risk that future cash flows may differ from estimated values. The assumptions, sensitivities and results of the impairment tests performed are disclosed in Note 15 to the consolidated financial statements.Our audit responseWe involved our valuation specialists in the audit of significant assumptions and methods that were used by Management, such as discount rates for each CGU and the valuation model applied to determine the recoverable amount of the CGUs. Furthermore, we evaluated DKSH%u2019s controls around the annual impairment test and tested related expected future cash flows and growth rates for each CGU. We assessed whether projected future cash flows were based on the strategic plan of the company as prepared by Management and approved by the Executive Board of the Group. We also assessed whether the disclosures of the assumptions applied and their sensitivity to the results of the impairment test in the notes to the financial statements are in compliance with IFRS Accounting Standards. Our audit procedures did not lead to any reservations relating to goodwill.