Page 100 - Beeks Financial Cloud Group Annual Report 2021

98 Beeks Financial Cloud Group PLC For the year ended 30 June 2021

Independent Auditors’ Report to the members of Beeks Financial Cloud PLC

Independent

Auditors’ Report

Key Audit Matter How our scope addressed the matter
Impairment of investment in Velocimetrics Limited In responding to the key audit matter, we performed the
We identified the impairment of the investment in following audit procedures:
Velocimetrics Limited as one of the most significant
assessed risks of material misstatement due to We obtained management’s impairment assessment
fraud and error. and challenged the assumptions within this, including:
checking how these forecasts were replicated within
In the prior year, the acquisition of Velocimetrics the going concern forecasting; and considering
Limited resulted in an investment in shares in group management’s assessment of CGUs and the allocation
undertakings with a carrying value of £4.083m on the to assets (including corporate assets) against these
company’s balance sheet. There is a risk that these CGUs. We also confirmed the cashflows have been
values are now impaired which is further evidenced management approved;
by the release of £2.0m of accrued contingent
consideration in the year. The process for assessing Revenue growth within the forecasts was specifically
whether an impairment exists under International challenged given the underperformance of Velocimetrics
Accounting Standard (IAS) 36 ‘Impairment of Assets’ post acquisition. The key revenue driver in the model, being
is complex and requires calculating the value in the pipeline of sales opportunities, was challenged and
use through forecasting cash flows related to cash corroborating evidence, such as contracts won post
FINANCE
generating units (CGUs) and the determination of year end and proposals out at the tender stage, were
the appropriate discount rate and other assumptions obtained and agreed back into the forecasts. We also
to be applied is highly judgemental and subject to challenged the inputs into the run-rate specifically
management bias. The selection of certain inputs into those values impacting the terminal value year;
the cashflow forecast can significantly impact the
result of the impairment review. Costs were considered and challenges made to
management with regards to the reasonableness
The key inputs impacting the model of overheads incorporated;
are considered to be:
/ The pipeline of future sales opportunities; Our internal experts reviewed the reasonableness of the
/ The discount rate; discount rate applied to the impairment model including
/ The allocation of costs and corporate assets; and the workings behind this discount rate;
/ The growth rate. Sensitivities were performed on the cashflows to bring
together all evidence to identify a potential undetected
As a result of this process, management identified impairment; and
an impairment of £784,000 within the Investment in
relation to Velocimetrics Limited. We reviewed the disclosures and accounting policies
relating to the impairment assessment and investment
balances to assess whether these were in accordance
with FRS 101.

Relevant disclosures in the Annual Report 2021 Our results
/ Financial statements: Note 2, Investments Overall, our audit testing did not identify any evidence
of a further material impairment charge being required
against the carrying value of investments.