Etex-AR2017-WEBSITE

6.1
Financial report
Consolidated financial statements
Etex Annual Report 2017
Financial report
Consolidated financial statements
Summary of audit procedures performed
We assessed the Group‘s process for identifying and
monitoring significant adverse developments arising
from contingencies and where appropriate, legal,
regulatory and political developments.
For the claims, we made inquiries of group
management and in-house legal counsel, reviewed
the legal reports prepared by group management,
obtained external lawyer confirmations, evaluated
management’s assessment of the likely outcome and
potential exposures and reviewed the appropriateness
of the accruals for litigations.
For health claims, we also assessed the compensations
schemes including the used key assumptions and the
impact of the local legislations.
We performed group level analytical reviews
procedures on provisions by comparing the movements
of the provisions compared to prior year.
We assessed the reasonableness of the assumptions
used by management to estimate the provisions
by comparing those assumptions to historical
observations.
We inspecting the meeting minutes of the board of
directors and the audit committee, in which these
claims and litigations are discussed.
• Goodwill and specific asset impairment
Description of the matter
The Group’s assessment of impairment of Goodwill
and certain assets disclosed as Property, Plant and
Equipment is a judgmental process which requires
estimates concerning the projected future cash flows
associated with the Cash Generating Unit (“CGU”),
the weighted average cost of capital (“WACC”) and
the growth rate of revenue and costs to be applied in
determining the value in use.
For goodwill, the Group reviews the carrying amounts
of its cash generating units annually of more frequently
if impairment indicators are present. For Property,
Plant and Equipment, the Group reviews the carrying
amounts of its capital employed with the recoverable
amount if impairment indicators are present (hereafter
the “specific assets”).
The impairment assessment involves a comparison
of the estimated fair value of the CGU and specific
assets to its carrying amount. Additional information
is provided in note 7 and 8 of the Consolidated
Financial Statements.
Summary of audit procedures performed
We have assessed the design and implementation
of the Group‘s controls relating to Management‘s
impairment review of goodwill and specific assets.
We have tested the accuracy of the underlying model
to assess whether the processes are applied to the
correct input data.
We challenged each of the key assumptions
employed in the annual impairment test. These key
assumptions include the WACC, the growth rates and
projected cash flows. We have involved our internal
valuation specialists to assess and benchmark those
assumptions, to assess the used methodology and
constituent inputs.
We have made comparisons of the used cash flows
to independent market forecasts of revenue and cost
growth and we have assessed the Group's historic
forecasting accuracy.
We have assessed management’s sensitivity
analyses and have assessed the appropriateness and
completeness of the sensitivity disclosure.
We have assessed the appropriateness and
completeness of the disclosures in accordance with
IAS 36 as included in note 8 and 9 of the Consolidated
Financial Statements.
• Risk in relation to the decentralized group structure
Description of the audit matter
Etex is a group with more than 150 legal entities. The
geographical decentralized structure and the relatively
small size of some of these entities to the group as
a whole, increase the complexity of the company's
control environment and as group auditor to obtain an
appropriate level of understanding these entities.
We have evaluated the Company’s entity level
controls that address these risks, including centralized
monitoring controls at level of the group and at the
level of each division.
Summary of audit procedures performed
We have sent audit instructions to subsidiaries for the
performance and reporting of local audit procedures. In
determining the group audit scope, we have taken into
account the relative weight of subsidiaries, the risk of
subsidiaries and a rotation of insignificant subsidiaries.
We have read and assessed the reporting documents
by the local auditors and have discussed their findings
with group management. We organized meetings and
conference calls with components auditors in our group
audit scope.
During our audit, we have specifically focused on risks
in relation to the decentralized structure by extending
our involvement in local audit work performed by the
component auditors.
We have also requested component auditors to
specifically address certain risks and attention
areas defined at group level, by requiring all teams
to complete specific risk-based questionnaires and
detailed audit programs in order to ensure a consistent
approach in areas that were deemed most relevant
from a group audit perspective.
Responsibilities of the Board of Directors for the
preparation of the Consolidated Financial Statements
The Board of Directors is responsible for the
preparation of the Consolidated Financial Statements
that give a true and fair view in accordance with
the International Financial Reporting Standards as
adopted by the European Union (“IFRS”) and with
applicable legal and regulatory requirements in
Belgium as well as internal controls relevant to the
preparation of the Consolidated Financial Statements
that are free from material misstatement, whether due
to fraud or error.
As part of the preparation of the Consolidated
Financial Statements, the Board of Directors is
responsible for assessing the Company s ability
to continue as a going concern, and provide, if
applicable, information on matters impacting going
concern, The Board of Directors should prepare the
financial statements using the going concern basis
of accounting, unless the Board of Directors either
intends to liquidate the Company or to cease business
operations, or has no realistic alternative but to do so.
Our responsibilities for the audit of the
Consolidated Financial Statements
Our objective is to obtain reasonable assurance
whether the Consolidated Financial Statements
are free from material misstatement, to express an
opinion on these Consolidated Financial Statements
based on our audit. Reasonable assurance is a high
level of assurance, but not a guarantee that an audit
conducted in accordance with the ISAs will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error and
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
Consolidated Financial Statements.
As part of an audit, in accordance with ISAs, we
exercise professional judgment and we maintain
professional skepticism throughout the audit. We also
perform the following tasks:
• Identification and assessment of the risks of
material misstatement of the Consolidated Financial
Statements, whether due to fraud or error, the
planning and execution of audit procedures to
respond to these risks and obtain audit evidence
which is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting material
misstatements is larger when these misstatements
are due to fraud, since fraud may involve collusion,
forgery, intentional omissions, misrepresentations,
or the override of internal control;
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