REC Silicon Annual Report 2019

REC Silicon Annual Report 2019 99 REC Silicon ASA 2 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were 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 these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Asset Impairment Refer to page 10 in the Board of Director's report, the accounting policies on page 37, the critical accounting judgments and key sources of estimation uncertainty described in Note 4 on page 43, and Note 8 on page 50 in the consolidated financial statements. The Key Audit Matter How the matter was addressed in our audit The impairment assessment of the Solar Materials CGU with a total carrying value of USD 38.6 million is considered a risk area due to the size of the balances, recent impairments and the current economic environment in the Group’s operating segment and jurisdictions, including the ongoing trade war. The recoverable amount 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 judgement is required when evaluating whether management's assessment is reasonable and supportable. Impairment charges of USD 20.0 million have been recognised during the year. Our audit procedures in this area included,: - We assessed management's process and results for identification and classification of cash generating units (CGUs) to evaluate whether they were appropriate and in accordance with IAS 36; - We evaluated the historical accuracy of management's budgets and forecasts and challenged management on the current year cash flow forecasts as well as the timing of future cash flows; - We evaluated 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 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 property, plant and equipment to be in accordance with the requirements under the relevant accounting standards. Auditor’s report