Sasol Form 20-F for the year ended 30 June 2021 - Book - Page 115
Impairment assessment of property, plant and equipment (“PPE”)
As described in Note 20 to the consolidated financial statements, the Company’s consolidated PPE at 30 June 2021
amounted to R198 021 million. Furthermore, as described in Note 10 to the consolidated financial statements,
management recognised a net impairment charge of R28 732 million for the year ended 30 June 2021, mainly related to
further impairments to cash generating units (“CGUs”) within the South African integrated value chain to the amount of
R33 413 and a reversal of impairment of the Ethylene Oxide / Ethylene Glycol CGU within its Sasol North American
operations to the amount of R4 934. Management assesses non-financial assets for impairment indicators and indicators
for the reversal of impairment at each reporting date or whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Recoverable amounts are estimated for individual assets or, where an individual
asset cannot generate cash inflows independently, the recoverable amount is determined for the larger CGU to which it
belongs. Management judgement is applied in identifying CGUs. The recoverable amount of the assets assessed for
impairment is determined based on the higher of the fair value less costs to sell or value-in-use calculations. Future cash
flow assumptions relating to this valuation are estimated based on financial budgets which reflect the long term plans for
the Company. The determination of future cash flows include significant management judgement and assumptions,
including crude oil prices, gas prices, chemical prices, exchange rates, growth rates and weighted average cost of capital
(“WACC”) rates.
The principal considerations for our determination that performing procedures relating to the impairment assessment of
PPE is a critical audit matter are (i) significant judgements by management when identifying CGUs, as well as in
developing their assessment of the recoverable amount for all CGUs where impairment indicators or indicators for the
reversal of impairment were identified; (ii) a high degree of auditor judgement, subjectivity and effort in evaluating
management’s identification of CGUs and main assumptions, including crude oil prices, gas prices, chemical prices,
exchange rates, growth rates and WACC rates; and (iii) the audit effort involved the use of professionals with specialised
skill and knowledge. As described in the “Opinions on the Financial Statements and Internal Control over Financial
Reporting” section, a material weakness was identified related to this matter.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to management’s budgeting process and impairment calculations, including controls relating to the main
assumptions used in these calculations. These procedures also included, among others, an assessment of the
appropriateness of the CGUs identified by management, testing management’s process for determining the recoverable
amount of the CGUs where impairment indicators or indicators of impairment reversal were identified, evaluating the
appropriateness of the methodology used in the impairment models, testing the completeness, accuracy, and relevance of
underlying data used in the impairment models, and evaluating the main assumptions used by management. Evaluating
the reasonableness of management’s assumptions involved (i) evaluating key market-related assumptions (including
crude oil prices, gas prices, chemical prices, exchange rates, growth rates and WACC rates) used in the models to
external market and third party data, (ii) evaluating the impact to long term business plans of assets sold during the year
or classified as held for sale, (iii) performing a retrospective comparison of forecasted cash flows to actual past
performance and previous forecasts, and (iv) performing sensitivity analyses. Professionals with specialised skill and
knowledge were used to assist in evaluating the appropriateness of the methodology applied in the impairment models
and evaluating the reasonableness of the WACC rates assumption.
/s/ PricewaterhouseCoopers Inc.
Johannesburg, Republic of South Africa
22 September 2021
We have served as the Company’s auditor since 2013.
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