RWS Annual Report 2022 web - Flipbook - Page 101
Impairment of goodwill and acquired intangibles (2022: £692.6m goodwill and £366.3m acquired intangibles,
2021: £615.8m goodwill and £351.6m acquired intangibles)
Refer to the Audit Committee Report (page 82); and Notes 12 and 13 of the Consolidated Financial Statements (page 127)
Management applies judgement in assessing the valuation of acquired intangibles and goodwill, particularly in estimating
future cash flows and deriving the appropriate discount rates. There is a risk that impairments are not identified, and the value
of goodwill or acquired intangibles is overstated.
Our response to the risk
Key observations communicated to
the Audit Committee
Our audit procedures comprised the following:
We understood the annual goodwill and acquired intangible impairment
process and assessed the design effectiveness of key controls. We confirmed
that management’s process and methodology meet the requirements of IAS 36
‘Impairment of Assets’.
We reviewed management’s paper identifying the cash generating units (CGUs) to
which impairment should be considered and assessed whether the CGU allocation
is appropriate. This included reviewing management assessment of the integration
of CGU’s resulting in the reduction in the number of CGU’s identified against which
goodwill is allocated and monitored, from 6 to 4.
Based on the final forecast cash flows
and assumptions used, there is sufficient
headroom across all CGUs. As a result
of our independent assessment and
calculation, we conclude that no
impairments should be recorded as at 30
September 2022.
We performed the following procedures for both the current and previous CGU
allocation:
We engaged EY specialists to determine if the discount rates and long-term
growth rates applied for each CGU are within an acceptable range.
We challenged management as to the robustness of the process performed by
discussing potential external and internal sources of indicators of impairment, and
updates made to the cash flow forecast to reflect these.
We corroborated key assumptions included within the forecast through inquiries
of local management, commercial finance and product development teams, as well
as external market data. We ensured consistency of key assumptions (including
revenue growth rates) with forecasts used in other management assessments,
including going concern.
We searched for any contradictory evidence, including whether any indicators of
impairment were omitted from management’s assessment.
We assessed adequacy of sensitivity analysis performed and performed additional
sensitivities.
We assessed the historical accuracy of management’s forecasting process through
reviewing forecast versus actuals analyses for the current year.
We reviewed the Group’s disclosures in relation to impairment made in the
financial statements to confirm the adequacy of disclosure of the Group’s
impairment policy.
Our procedures covered 100% of the Goodwill and Acquired Intangibles risk
amount.
INDEPENDENT AUDITOR’S REPORT
RWS — Annual Report 2022
101
