Page 53 - Beeks Financial Cloud Group Annual Report 2021

Beeks Financial Cloud Group PLC
Independent Auditors’ Report to the members of Beeks Financial Cloud Group PLC For the year ended 30 June 2021

Impairment of goodwill In responding to the key audit matter, we performed
in Velocimetrics Limited the following audit procedures:

We identified the impairment of goodwill in We obtained the impairment model and challenged
Velocimetrics Limited as one of the most significant the core assumptions within these management
assessed risks of material misstatement due to fraud approved cashflows, specifically looking into forecast
and error. v actual and the historic accuracy of management’s
In the prior year, the acquisition of Velocimetrics Limited forecasting;
resulted in goodwill of £1.8m. We obtained management’s assessment of CGUs
Due to the performance of the newly acquired business and the allocation of cashflows and assets, including
falling below expectation, evidenced by the fact that corporate assets, to these CGUs;
£2.0m of previously accrued contingent consideration Revenue growth within the forecasts was specifically
was not paid out in the current year, there is a risk that challenged given the underperformance of
the goodwill value is impaired. Velocimetrics Limited since acquisition. The key
The process for assessing whether an impairment revenue driver in the model, being the pipeline of future
exists under International Accounting Standard (IAS) sales opportunities, was challenged and corroborating
36 ‘Impairment of Assets’ is complex. Calculating the evidence, such as contracts won post year end and
value in use, through forecasting cash flows related proposals issued at the tender stage, were obtained
to CGUs and the determination of the appropriate and agreed back into the forecasts. We further
discount rate and other assumptions to be applied, is challenged the inputs into the run-rate, specifically
highly judgemental and as a result of the subjectivity those values impacting the terminal value year; GOVERNANCE
of selecting the assumptions, can be subject to Costs and the allocation of sufficient corporate
management bias. The selection of certain inputs into assets were considered and challenges made to
the cashflow forecast can significantly impact the management with regards to the reasonableness of
result of the impairment review. overheads incorporated;
The key inputs impacting the model are considered to be: Our internal experts reviewed the reasonableness
/ The pipeline of future sales opportunities; of the discount rate applied including the workings
/ The discount rate; behind this discount rate;
/ The allocation of costs and corporate assets; and Sensitivities were performed on the cashflows to bring
/ The growth rate. together all evidence to identify a potential undetected
impairment; and
As a result of this process management identified an Assessed whether group disclosures with respect to the
impairment of £994,000 within the goodwill in relation carrying value of the Group’s goodwill and intangible
to Velocimetrics Limited. assets are adequate and the key assumptions have
been disclosed, including management’s impairment
methodology being in line with IAS 36.

Relevant disclosures in the Annual Report 2021 Our results

/ Financial statements: Note 1 – Summary of Overall, our testing did not identify any evidence of
significant accounting policies, Intangible assets an additional material impairment charge against
and amortisation and Impairment; goodwill being required.
/ Financial statements: Note 2 – Critical accounting
judgements and key sources of estimation
uncertainty, Goodwill and other indefinite life
intangible assets;
/ Financial statements: Note 10 – Intangible assets;
and
/ Report of the Audit Committee: Areas of estimates.

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