Page 121 - Loomis Annual Report 2017

Loomis Annual Report 2017 Auditor’s report 117
Key audit matter
How our audit addressed the Key audit matter
Accounting and assessments relating to investiga- tions from authorities
Loomis description and disclosure regarding the above mentioned matter are included in Note 4, Note 14 and Note 34. Subsidiaries within the group are at times involved in di erent
types of disputes. Signi cant disputes are for example the ongo- ing tax process in Spain and the investigation by the Spanish competition authority who decided to impose a ne of EUR 7 million on Loomis. The Company has in these cases consulted external legal advisors and tax advisors. Matters of this nature is often complex and may take time before being solved. The future development is by nature not possible to foresee. As a conse- quence the accounting is to a larger extent based on estimates.
Risks in these areas are mainly refer to valuation, as the amounts accounted for is inherently uncertain since the future outcome may deviate from the current assessments if the com- pany.
We have in our audit performed certain main activities inclu- ding, though not limited to, the following:
• Taken part of correspondence between the Company and
the authorities in these matters
• Collected statements from the Company’s external legal ad-
visors and tax advisors regarding these matters
• Evaluated the assessments and estimates made by manage- ment with regards to the current and potential future im-
pact.
• Examined how the above mentioned judgements and as-
sumptions have been re ected in the accounting and when assessing these we have also considered both the companies and our knowledge from historical outcomes in similar situ- ations.
No observations of signi cance has been reported to the Audit Committee as a result of our audit in this area.
Valuation of goodwill
The Company’s description and disclosure regarding the above mentioned matter are included in Note 4 and Note 15. In Note 15, information regarding the sensitivity analysis performed with regards to which adjustment of assumptions made would trigger an impairment of goodwill.
Loomis growth has historically been partly driven by acquisi- tions. Acquisitions leads to goodwill. Loomis goodwill amounts to MSEK 5,615. The amount is a signi cant part (37%) of total assets. The valuation of goodwill is based on management esti- mates. The Company annually prepares an impairment test of goodwill. The test will show if an impairment need (if book va- lue of the asset tested exceeds its recoverable amount) of good- will exists or not. The calculation of the impairment test is ba- sed on assumptions and assessments considering for example revenue growth, margin development and discount (WACC) rate. The test is performed for each Cash Generating Unit (de - ned by Loomis as a country). Although a unit may pass the test, a development which deviates negatively from the assumptions included in the test can trigger a need for impairment.
Loomis impairment test shows that the goodwill valuation can be defended and that no need for impairment exists.
We have in our audit performed for example the following key audit activities:
• Audited Loomis model for impairment testing in order to
conclude on the mathematical accuracy and reasonability in assumptions applied. Valuation specialists within the PwC network has been involved in this part of the work.
• On a sample basis veri ed data used in the impairment test calculation versus the Company’s long term plans per country, focusing on assessed revenue growth rates, opera- ting margin and discount rate
• On a sample basis veri ed data included in the impairment test model versus external sources.
• Performed sensitivity analysis were the e ects of changes in assumptions and assessments are analysed to identify such variables which are particularly sensitive.
• Examined that disclosure requirements according to IAS 36 Impairment has been included in the annual report.
Assumptions which form the basis for Loomis impairment test is deemed to be within a reasonable range.