SOPRA_STERIA_REGISTRATION_DOCUMENT_2017
2017 CONSOLIDATED FINANCIAL STATEMENTS Statutory Auditors’ report on the consolidated financial statements
3.2 VALUATION AND IMPAIRMENT OF GOODWILL (Note 8.1 to the consolidated financial statements) 3.2.1 Risk identified As at 31 December 2017, the net value of goodwill in the Group’s consolidated financial statements was €1,590.6 million, equal to 42% of total assets. As set in out in Notes 8.1.2 and 8.1.3 to the consolidated financial statements, goodwill is allocated to cash-generating units for the purposes of impairment tests. The Group’s segmentation into CGUs is consistent with the operating structure of its businesses, its management and reporting system, and its segment reporting. Such tests are performed each time there is an indication of impairment, and in any event at the balance sheet date of 31 December. These tests consist of comparing the CGU’s net carrying amount with its recoverable amount, which corresponds to the higher of its fair value less costs of disposal and its value in use. An impairment loss is recognised whenever the recoverable amount of goodwill is lower than the net carrying amount. To determine the value in use of the CGU, management uses primarily the discounted cash flow method (or DCF method), which involves the use of key assumptions relating to each asset category, including in particular the rate of perpetual growth and the discount rate based on the weighted average cost of capital. Determining the recoverable value of goodwill, which represents a particularly significant amount relative to total assets, is based primarily on management’s judgment as regards in particular the rate of perpetual growth used to forecast cash flows and the discount rate applied. We therefore considered the valuation of goodwill and implementation of impairment testing to be a key audit matter. 3.2.2 Our response Our work consisted primarily of: p reviewing the compliance of the methodology used by the Group with applicable accounting standards; p assessing whether the allocation of assets to CGUs is exhaustive and complies with applicable accounting standards; p assessing the reasonable nature of assumptions used to determine future cash flows in relation to operating data, with regard to the business and financial context for the Group’s operations, and their consistency with the most recent estimates presented to the Board of Directors within the framework of budgetary processes; p assessing, with the help of our valuation experts, the consistency of the perpetual growth rate and the weighted average unit cost of capital in all components; p analysing the sensitivity of the value in use determined by management to a change in the main assumptions made. Lastly, we verified that Note 8.1 to the consolidated financial statements provided appropriate information.
3.3 POST-EMPLOYMENT BENEFIT LIABILITIES (Note 5.3 to the consolidated financial statements) 3.3.1 Risk identified
Post-employment benefits arise mainly from the Group’s obligations towards its employees to provide retirement benefits in France and defined-benefit pension plans in the United Kingdom, Germany and other European countries (Belgium, Norway). The actuarial value of accumulated benefits as at 31 December 2017 was €373.8 million. The net liability in respect of retirement benefits and similar obligations was calculated at the balance sheet date based on the most recent valuations available. As these liabilities are covered by plan assets with a fair value of €1,501.4 million, net liabilities as at 31 December 2017 totalled €358.9 million. The most significant plan assets concern the United Kingdom and France. Valuing pension scheme assets and liabilities, as well as the actuarial cost for the year, requires a high level of judgment by management to determine appropriate assumptions to be made such as the discount rate and the rate of inflation, future pay rises, staff turnover and mortality tables. The change in some of these assumptions may have a material impact on determining net liabilities recognised as well as on the Group’s profit. In view of the amounts represented by these liabilities and associated plan assets, as well as the technical skill required to evaluate these amounts, we considered this type of liability relating to post- employment benefits to be a key audit matter. 3.3.2 Our response We familiarised ourselves with the process for valuing post-employment benefit liabilities implemented by the Group. A review of actuarial assumptions was performed by means of: p assessing discount rates and rates of inflation in order to evaluate their consistency with market conditions; p assessing the reasonable nature of assumptions relating to pay rises, staff turnover and mortality in order to evaluate their consistency with the specific characteristics of each pension scheme and, if applicable, with national and sector benchmarks; p a review of calculations made by the Group’s external actuaries, in particular those supporting the sensitivity of debt to changes in the discount rate. As regards plan assets, we also assessed whether the assumptions made by management to value these assets and the documentation provided by management to justify the recognition of net plan assets were appropriate. Lastly, we verified the appropriateness of the information provided in Note 5.3.1 to the consolidated financial statements.
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SOPRA STERIA REGISTRATION DOCUMENT 2017
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