9.2
Independent auditor's report

To: the General Meeting of Shareholders and the Supervisory Board of Accell Group N.V.

Report on the audit of the financial statements 2018 included in the annual report

Our opinion

 
In our opinion:

  • the accompanying consolidated financial statements give a true and fair view of the financial position of Accell Group N.V. as at 31 December 2018 and of its result and its cash flows for 2018, in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
  • the accompanying company financial statements give a true and fair view of the financial position of Accell Group N.V. as at 31 December 2018 and of its result for 2018 in accordance with Part 9 of Book 2 of the Dutch Civil Code.

What we have audited


We have audited the financial statements 2018 of Accell Group N.V. (“the company”) based in Heerenveen. The financial statements include the consolidated financial statements and the company financial statements.

The consolidated financial statements comprise:

  1. the consolidated balance sheet as at 31 December 2018;
  2. the following consolidated statements for 2018: the income statement, the statements of comprehensive income, changes in equity and cash flows; and
  3. the notes comprising a summary of the significant accounting policies and other explanatory information.

The company financial statements comprise:

  1. the company balance sheet as 31 December 2018;
  2. the company income statement 2018; and
  3. the notes comprising a summary of the accounting policies and other explanatory information.

 

Basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report.

We are independent of Accell Group N.V. in accordance with the EU Regulation on specific requirements regarding statutory audits of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Audit approach

Summary
 

 

Materiality

Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR 2,0 million (2017: 1,75 million). The materiality is determined with reference to profit before tax (5,6%) (2017: 5,8%). We consider profit before tax as the most appropriate benchmark as the main stakeholders are primarily focused on profit before tax. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the Board of Directors and the Supervisory Board that misstatements in excess of EUR 100,000 which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Scope of the group audit

Accell Group N.V. is at the head of a group of components. The financial information of this group is included in the financial statements of Accell Group N.V.

Based on the size and/or risk profile of the group components or activities, we have performed full scope audit procedures on the financial information for the key group components in the Netherlands, Germany, France, the UK, Turkey and Hungary. We performed audit of specific items for the group components in the United States and specified audit procedures related to inventory in Spain, Sweden, Denmark, Belgium, Finland and the Netherlands. In addition, we have performed specific audit procedures at group level aimed at amongst others goodwill, trademarks, current and deferred taxes and derivatives. Overall, this has resulted in a coverage of 86% of the total revenue and 87% of the balance sheet total. The remaining 14% of the total revenue and 13% of the balance sheet total concern a number of reporting components, each accounting for less than 5% of the total revenue or balance sheet total. For these remaining components, we have performed a number of procedures, including analytical reviews, to substantiate our judgement that there are no relevant risks of material misstatement.

The group audit team provided detailed instructions to all component auditors who were part of the group audit, covering the significant audit areas, including the relevant risks of material misstatement and set out the information required to be reported back to the group audit team. The group audit team has made site visits to the United States, Hungary and Germany and has audited the Dutch group component. Regardless of whether group components were visited, there have been telephone conferences with the local auditors for most group components and, where considered necessary, with local management. During the site visits, the planning of our audit, our risk assessment, our audit approach and the key audit findings and objectives were discussed. In Hungary and Germany file reviews were performed.

By performing the procedures mentioned above at group and local entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the financial statements.

The audit coverage as stated in the section summary can be further specified as follows:

 

Audit scope in relation to fraud

In accordance with the Dutch Standards on Auditing we are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. In determining the audit procedures we will make use of the evaluation of management in relation to fraud risk management (prevention, detection and response), including ethical standards to create a culture of honesty.

 

In our process of identifying fraud risks we assessed fraud risk factors, which we discussed with management and the Supervisory Board. Fraud risk factors are events or conditions that indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud.

We addressed the following fraud risks that were relevant to our audit:

  • fraud risk related to revenue recognition, focusing on manual and revenue increasing adjustments
  • fraud risk in relation to management override of controls.

Our audit procedures related to these fraud risks consisted of:

  • evaluation of the of internal controls relevant to mitigate these risks;
  • data analytics are part of our audit approach to address fraud risks which could have a material impact on the financial statements. This also relates to audit procedures carried out to address the risk of management override of controls.
  • supplementary substantive audit procedures, including test of details and reconciliation of source documentation of journal entries in:
    • revenues;
    • non-routine transactions.

Our audit procedures differ from a specific forensic fraud investigation, which investigation often has a more in-depth character.

Audit scope in relation to laws and regulations

We have identified laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general and sector experience as well as based on discussions with management. We have discussed the policies and procedures of Accell Group N.V. regarding compliance with laws and regulations. We communicated identified laws and regulations within our audit team and remained alert to any indications of non-compliance with these laws and regulations throughout the audit.

The effect of these laws and regulations on the financial statements varies considerably.

Firstly, Accell Group N.V. is subject to laws and regulations that directly affect the financial statements, including the financial reporting standards. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statements items.

In addition Accell Group N.V. is subject to other, sector specific, laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures and in the financial statements, for instance through the imposition of fines or litigation. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to inquiry with management and inspection of (board) minutes and regulatory and legal correspondence, if any. These are part of our procedures on the financial statements items.

Our key audit matter

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matter to the Board of Directors and the Supervisory Board. The key audit matter is not a comprehensive reflection of all matters discussed.

This matter is 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 this matter.
 

Goodwill and trademarks amount to EUR 82,3 million and EUR 47,1 million respectively as at 31 December 2018. Under EU-IFRS, the Company is required to test the amount of goodwill and trademarks with an indefinite life for impairment at least annually. The impairment tests performed by management were significant to our audit due to the complexity of the assessment process and judgements and assumptions involved which are somewhat subjective.

At Accell Group N.V. goodwill is allocated to the cash generating units (CGUs) which are similar as the operating segments. For trademarks an impairment test has been performed for each trademark, in which Accell used the expected revenue development and royalty income for the respective trademark.

 

The Company uses assumptions with respect to future market and economic circumstances which are based on the budget 2019 and the strategic plan 2020-2022. For our audit we assessed and tested management’s key assumptions, the weighted average cost of capital (‘WACC’) and the model used by the Company.
We compared the assumptions with historical and external data, such as expected inflation percentages, growth percentages for specific markets and royalty percentages, and by analysing sensitivities in the group’s valuation model.
We included a valuation specialist in our team to assist us with our audit procedures. We specifically focused on the sensitivity in the available headroom (difference between the recoverable amount and the carrying amount) for the cash generating units and trademarks for which we evaluated whether a reasonably possible change in assumptions could cause the carrying amount to exceed its recoverable amount. We also assessed whether the Company's disclosures as included in note 9 and 10 in the financial statements are adequate based on EU-IFRS.

Based on our procedures performed we consider the Company’s key assumptions used in the annual impairment test to be reasonable and the outcome within the acceptable range. In addition we determined that the Company’s disclosures meet the requirements of EU-IFRS.

Report on the other information included in the annual report

In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists of:

  • Board report contains chapters:
  1. Accell Group in 2018;
  2. Strategy ‘Lead Global. Win Local’;
  3. Report of the Board of Directors;
  4. Corporate Governance;
  5. Report of the Supervisory Board;
  • 7. Other information;
  • 8. Additional disclosures.

Based on the following procedures performed, we conclude that the other information:

  • is consistent with the financial statements and does not contain material misstatements; and
  • contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.

We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.

The Board of Directors is responsible for the preparation of the other information, including the Board report in accordance with Part 9 of Book 2 of the Dutch Civil Code and the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.
 

Report on other legal and regulatory requirements

Engagement

We were engaged by the General Meeting of Shareholders as auditor of Accell Group N.V. on 26 April 2016, as of the audit for the year 2016 and have operated as statutory auditor ever since that financial year.

No prohibited non-audit services

We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audits of public-interest entities.

Description of responsibilities regarding the financial statements

Responsibilities of the Board of Directors and the Supervisory Board for the financial statements

The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Board of Directors is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the Board of Directors is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, 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 operations, or has no realistic alternative but to do so. The Board of Directors should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the company’s financial reporting process.

Our responsibilities for the audit of the financial statements

Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.

Misstatements can arise from fraud or error and are 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 financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

A further description of our responsibilities for the audit of the financial statements is included in the appendix of this auditor's report. This description forms part of our auditor’s report.

Amstelveen, 11 March 2019
KPMG Accountants N.V.

T. van der Heijden RA

 

 

 

 


Appendix: Description of our responsibilities for the audit of the financial statements

Appendix

We have exercised professional judgement and have maintained professional scepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others:

  • identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than the risk resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
  • obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control;
  • evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors;
  • concluding on the appropriateness of the Board of Directors’ use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern;
  • evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and
  • evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group components. Decisive were the size and/or the risk profile of the group components or operations. On this basis, we selected group components for which an audit or review had to be carried out on the complete set of financial information or specific items.

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audits of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.

We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.