WindarPhotonics AnnualReport 2018 All - Flipbook - Page 39
KEY AUDIT MATTERS
In addition to the matter described in the material uncertainty related to going concern section, key audit
matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
KEY AUDIT MATTER
OUR AUDIT RESPONSE
Valuation of intangible assets – capitalisation and
impairment
As set out in note 4 the group recognises an internally
generated intangible asset arising from development
(or from the development phase of an internal project)
if all of the criteria per accounting standards can be
demonstrated. This includes the ability to measure
reliably the expenditure attributable to the intangible
assets during its development. Costs are allocated
between the capitalised project and other projects
based on directors’ judgement.
Once capitalised, the directors make an assessment
of the recoverability of these costs.
We have determined this to be a key audit matter due
to the level of judgement involved in this area.
See also notes 6 and 17.
Our audit procedures included a consideration of
whether the capitalisation criteria were met for the
capitalised project.
Costs capitalised consist of payroll costs and other
costs. Other costs have been agreed to external
documentation. Payroll costs have been agreed to a
schedule prepared by the directors splitting payroll
costs between the capitalised project and other
projects, and this split has been tested by confirmation
with the employees working on the capitalised project.
We have also reviewed the projected revenue and
income streams against the capitalised projects to
evaluate management’s judgement that the carrying
value is recoverable.
Based on our work we consider that the costs
capitalised satisfy the criteria of the relevant
accounting standards and did not identify indications
that an impairment was required.
Carrying value of investments in subsidiary
undertakings and receivables from subsidiary
undertakings at a parent company level
Refer to notes 16 and 20.
We obtained the directors’ impairment review model
and each of the key inputs to the impairment model
At the end of each reporting period, the directors are
were reviewed by reference to historical trends and
required to assess whether there is any indication that
secured future orders. We challenged management
the investment in subsidiary undertakings and amounts
on their forecasts for revenue, costs and earnings
receivable from subsidiary undertakings as shown in
before interest, tax, depreciation and amortisation
the parent company may be impaired.
included in the impairment model, particularly due
The directors identified an indicator of impairment in
to the loss in the year. In addition, we performed our
relation to the investment value for the subsidiary
own additional sensitivity analysis in respect of the key
undertaking, Windar Photonics A/S, and as a result
assumptions which included assessing the impact if
carried out an impairment review. This area was
management’s forecasts were not met. We considered
significant to our audit because the directors’
the appropriateness of the discount rate used by the
exercised judgement in determining the underlying
directors by considering the inputs into this calculation
assumptions used in this calculation.
with reference to companies of a similar size.
For the receivables from the subsidiary we further
considered the assumptions made in the expected
credit loss approach including the business model
applied, the consideration of significant increases in
credit risk and the weighting of possible scenarios.
Based on the evidence obtained, we did not identify
any indications that an additional impairment
adjustment was required.
Windar Photonics - Annual Report and Accounts 2018
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