REC Silicon Annual Report 2019

REC Silicon Annual Report 2019 100 REC Silicon ASA 3 Impairment on investment in Yulin JV Refer to page 11 in the Board of Director's report, the accounting policies on page 38, the critical accounting judgments and key sources of estimation uncertainty described in Note 4 on page 43, and Note 9 on page 53 in the consolidated financial statements. The Key Audit Matter How the matter was addressed in our audit The impairment assessment of the investment in Yulin JV with a total carrying value of USD 18.0 million is considered a risk area due to the size of the balances, recent impairment and the current economic environment in the solar material market, including the ongoing trade war. The fair value is determined based on value in use calculations which rely on external factors, managements’ assumptions, and estimated future performance. Key assumptions applied in management's assumptions are future market development and conditions, discount rates applied for cash flow forecast, future long-term sales prices, cash flow growth assumptions, and estimated timing of cash flows. Significant auditor judgment is required when evaluating whether management's assessment is reasonable and supportable. Impairment charges of USD 43.6 million have been recognised during the year. Our audit procedures in this area included, among others: - We evaluated the historical accuracy of management's budgets and forecasts and on that background challenged management on the current year cash flow forecasts as well as the timing of future cash flows; - We assessed the growth assumptions and management's future business plan assumptions with reference to current market conditions; - We used KPMG valuation specialists to assess the mathematical and methodological integrity of management's impairment models and the discount rates applied with reference to market data; - We obtained and evaluated management’s sensitivity analysis to determine the impact of reasonably possible changes; and - We considered whether the disclosures regarding key assumptions and sensitivities adequately reflected the underlying assets impairment assessments. From the audit evidence obtained, we consider management's assessment of the carrying value of other investments to be in accordance with the requirements under the relevant accounting standards. Other information Management is responsible for the other information. The other information comprises information in the annual report, except the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Auditor’s report