Annual Financial Statements for the year ended 30 June 2021 0 - Book - Page 17
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of property, plant and
equipment and investments in subsidiaries
Identification of CGUs within the Southern African and
North American value chains.
This key audit matter relates to both the consolidated and separate
We assessed the appropriateness of management’s defined CGUs
within the Southern African and North American integrated value
chains with reference to whether active markets exist for the
output produced by the assets or groups of assets, the markets’
ability to absorb products produced and access to the markets.
The Company’s and Group’s financial performance for the year
ended 30 June 2021 improved compared to the prior year, mainly
due to higher Brent crude oil and chemical prices, offset by a
stronger rand/US dollar exchange rate, the continued impact of the
COVID-19 pandemic and adverse weather events in North America.
Continued macroeconomic, hydrocarbon and chemical price
volatility, as well as higher long-term natural gas cost resulted in
impairment indicators and impacted the Company and Group’s
assessment of the recoverable amounts of its assets.
A significant part of the Group’s operations and plants in Southern
Africa and North America are, by design, integrated. Significant
processes throughout the value chain, from feedstock to end
products, are interdependent and linked.
Amongst others, management performed impairment
assessments for the South African Integrated Value Chain
(“SAIVC”) cash-generating units (“CGUs”) and the Sasol North
American Operations (“SNAO”) CGUs, as disclosed in note 10 to the
consolidated financial statements. Impairments of R33 413 million
were recognised in total for the SAIVC CGUs, while a reversal of
impairment of R4 934 million was recognised on the Ethylene
Oxide/Ethylene Glycol (“EO/EG”) CGU in the SNAO.
In the separate financial statements, no impairments or
impairment reversals were recognised as disclosed in note 12 to
the separate financial statements.
The impairment of property, plant and equipment and investments
in subsidiaries was considered to be a matter of most significance
to the current year audit for the following reasons:
• The identification of CGUs within the Southern African and
North American value chains and the related active market
assessments as outlined in the Group’s principal accounting
policies in note 10 to the consolidated financial statements
incorporate significant judgement;
• The assets (and/or CGUs) and their related recoverable amounts
are impacted by their own operational performance and the main
assumptions and estimates used by management (such as crude
oil prices, gas prices, chemical prices, growth rates, exchange
rates and weighted average cost of capital (“WACC”)), global
economic conditions and market trends;
• The impact of assets sold during the year or classified as a
disposal group held-for-sale on the recoverable amount of the
• The magnitude of the current year’s impairment charges and
impairment reversals recognised.
Impairment assessments of property, plant and equipment
for all CGUs and investments in subsidiaries.
We benchmarked management’s main assumptions used in the
impairment calculations against external market and third party
data and found management’s assumptions to be comparable with
Management engaged external and internal experts to assess the
reserves and resources used in the impairment calculations for
reasonability. Through inspection of CVs, membership certificates
from professional bodies and competent persons reports,
we assessed the objectivity, competence and experience of
Making use of our corporate finance and financial modelling
• we assessed the Company and Group’s valuation models used
in management’s impairment assessments and found they were
materially consistent with best practice; and
• we independently recalculated management’s WACC
with reference to relevant third party sources and found
management’s WACC to be within an acceptable range.
We assessed the mathematical accuracy of the cash flow models
and agreed relevant data to the latest long-term business plans
used by management to manage and monitor the performance of
the business, whilst also performing a retrospective comparison
of forecasted cash flows to actual past performance and previous
forecasts. Furthermore, we assessed the impact of assets sold
during the year or classified as disposal groups held-for-sale on the
latest long-term business plans. We noted no material differences.
We tested the operating effectiveness of internal controls relating
to management’s impairment of property plant and equipment and
investments in subsidiaries. These procedures included, amongst
others, controls over:
• management’s budgeting process to prepare, review and
approve the long-term business plans; and
• management’s impairment trigger assessment and the
preparation, review and approval of the impairment calculation.
In addition to our overall response to impairment risk described
above, we performed the following additional procedures over the
Company’s investments in subsidiaries:
• Following a similar approach as described above, we assessed
the appropriateness of management’s identification of CGUs and
which legal entities these form part of, and noted no exceptions.
SASOL LIMITED COMPANY
At 30 June 2021, the consolidated statement of financial
position includes property, plant and equipment amounting
to R198 021 million, while the statement of financial position
within the separate financial statements includes investments in
subsidiaries amounting to R128 260 million.
We discussed the significant processes throughout the value
chains with management in each of the business units to assess
whether the markets available for feedstock and end products
were consistent with our understanding of the business. We
assessed the changes in regulatory environment, interdependence
and integration of units within the SNAO, which formed the basis
of management’s reassessment of CGUs within the SNAO in the
current year. Based on the work that we performed, we accepted
management’s defined CGUs within the Southern African and
North American integrated value chains.
Sasol Annual Financial Statements 2021
Refer to note 10 (Remeasurement items affecting operating profit)
and note 20 (Property, plant and equipment) to the consolidated
financial statements, and to note 1 (Investments) and note 12
(Remeasurement items affecting operating profit) to the separate
SASOL LIMITED GROUP
CONSOLIDATED FINANCIAL STATEMENTS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and
separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and
separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
NOTES TO THE FINANCIAL STATEMENTS
Key audit matters