Axactor Annual Report 2016

Key audit matter How our audit addressed the Key audit matter Valuation of the credit portfolios Reference to Notes 2, 3, 4 and 16 in the annual report During the year, the group acquired credit portfolios at significant amounts in Spain, Italy and Germany. The valuation of the group’s credit portfolios is based on estimates of forecasted future cash flows produced by the group. The valuation of the credit portfolios comprises a key audit matter in our audit against the background of the significance of these assets and the inherent uncertainty in the associated estimations and judgements. We have evaluated the group’s calculation models and have assessed whether these are consistent with generally accepted valuation techniques. We have tested the reasonability of the assumptions applied in the model for the credit portfolios and which are described in Notes 2 and 4. In our evaluation of the assumptions regarding future cash flows, we have compared these with the business plans and other information regarding expected future developments. We have evaluated the company’s analysis of the sensitivity of the valuation to changes in significant assumptions and the risk of such changes giving rise to an impairment requirement. Business combinations Reference to Notes 2 and 29 During 2016, the group has been in a strong phase of expansion, undertaking acquisitions in Spain, Norway, Italy and Germany. All of the acquisitions were proceeded by strategic analysis work including due diligence and valuation of the potential acquisitions. The business combinations comprise a key audit matter for our audit considering the importance of these large amounts to the group as a whole, including consideration of the surplus values reported as a result of the acquisitions. Our audit procedures regarding the business combinations include an evaluation of the methods used by the group in preparing the acquisition analysis and subsequent consolidation of the respective acquisitions. In addition, we have examined the acquisition analyses including any possible excess values and whether these agree with IFRS and we have, to the relevant degree, tested the acquisition’s initial values as reported in the group against underlying documentation. Accrued solicitor expenses in Spain Reference to Note 4 The group reports provisions, on an ongoing basis, for estimated solicitor expenses in the Spanish operations referring to contracted legal representatives working in the daily operations. The provisions for these accrued legal expenses are included in the group’s reporting on its financial position in the item, Other current liabilities. Accrued expenses in the Spanish operations comprise a key audit matter considering the assumptions and estimations that company management undertake in order to determine the amount of non- invoiced fees. Our audit procedures regarding accrued costs in the Spanish operations have included an evaluation of the methods used by the company to calculate the amount of liabilities in the yearend closing as at 31 December 2016. Our audit procedures have also included discussions with management regarding the relevant assumptions applied in reporting provisions. In addition, we have controlled, on a random sample basis, the recorded costs against the relevant documentation received from the company and external parties. We have also executed analyses to assess the risk of the need of further provisions. Axactor AB | Annual report 2016 73