UNBOUNCE - EXAMPLE PAGE-REPORT-ENTERPRISE DOCUMENT-KINGSPAN - Flipbook - Page 104
Primary areas
of judgement
Committee activity
Adequacy
of warranty
provisions
The committee reviewed the judgements applied by management in assessing both specific
and risk based warranty provisions at 31 December 2021. The committee reviewed and
discussed with management the monthly reports presented to the Board which set out,
for each of the Group’s divisions, warranty provisions and warranty costs and analyse these
costs as a percentage of divisional sales. Warranty provisions are reviewed on an ongoing
basis throughout the year in conjunction with the internal audit process. The committee was
satisfied that such judgements were appropriate and the risk had been adequately addressed.
Recoverability of
trade receivables
and adequacy of
provision
The committee reviewed the judgements applied by management in determining the
provision for expected credit loss at 31 December 2021. The committee reviewed and discussed
with management the monthly board report which sets out aged analysis of gross debtor
balances and associated provisions for expected credit loss and reviewed security (including
credit insurance) that is in place. Expected credit loss provisions are reviewed on an ongoing
basis throughout the year in conjunction with the internal audit process. The committee was
satisfied that such judgements were appropriate and the risk had been adequately addressed.
Accounting for
acquisitions
Total acquisition consideration in 2021 amounted to €552.3m. The committee discussed
with management and the external auditors the accounting treatment for newly acquired
businesses, and the related judgements made by management, and were satisfied that the
treatment in the Group’s financial statements was appropriate.
Consideration
of impairment
of goodwill
The committee considered the annual impairment assessment of goodwill prepared by
management for each Cash Generating Unit (“CGU”) using a discounted cash flow analysis
based on the strategic plans approved by the Board, including a sensitivity analysis on key
assumptions. The primary judgement areas were the achievability of the long term business
plans and the key macroeconomic and business specific assumptions. In considering
the matter, the committee discussed with management the judgements made and the
sensitivities performed. Further detail of the methodology is set out in Note 9 to the financial
statements.
EY also provided the Committee with their evaluation of the impairment review process and of
the impairment review process.
Kingspan completed 17 acquisitions during the financial year. The measurement of goodwill is
not yet finalised for all acquisitions but the methodology of the assessments of such items of
goodwill was presented to the committee and the results were deemed appropriate.
Valuation of
inventory and
adequacy
of inventory
provision
The committee reviewed the valuation and provisioning for inventory at 31 December 2021.
The main area of judgement was the level of provisioning required for slow moving and
obsolete inventory. The committee reviewed and discussed with management the monthly
board report which sets out, for each of the Group’s divisions, gross inventory balances and
associated obsolescence provision including an analysis by inventory, category and ageing.
Inventory provisions are reviewed on an ongoing basis throughout the year in conjunction
with the internal audit process. The committee was satisfied that such judgements were
appropriate and the risk had been adequately addressed.
Taxation
Provisioning for potential current tax liabilities and the level of deferred tax asset recognition in
relation to accumulated tax losses are underpinned by a range of judgements. The committee
addresses these issues through a range of reporting from senior management and a process
of challenging the appropriateness of management’s views including the degree to which
these are supported by professional advice from external legal and other advisory firms. This
assessment was conducted in line with the provisions of IFRIC 23.
The Group’s accounting manual sets out detailed policies that prescribe the methodology to
be used by management in calculating the above provisions. Each division formally confirms
compliance with these policies on an annual basis.
The Committee was satisfied that such judgements were appropriate and the risk had been
adequately addressed.
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