RWS Annual Report 2022 web - Flipbook - Page 82
Audit Committee Report (continued)
SIGNIFICANT JUDGEMENTS
Identification of the issues deemed to be significant takes
place following open, frank and challenging discussion
between the Audit Committee members, with input
from the CFO, the external auditor, the Group Financial
Controller and other relevant personnel.
The Audit Committee considered the following significant
matters during the course of the financial year. In all
cases, papers were presented to the Audit Committee
by management, setting out relevant facts, material
accounting estimates and the judgements associated with
them. The Committee satisfied itself that the disclosures
in relation to accounting judgements and key sources
of estimation were appropriate and obtained, from the
external auditor, an independent view of the issues and
risks. The Committee is satisfied that the judgements
made are reasonable and appropriate disclosures have
been included in the accounts.
Acquisition accounting for Liones
Holdings B.V. acquisition, including the
valuation of goodwill and intangible assets
The Group acquired the entire share capital of Liones
Holdings B.V. and its subsidiaries on 22 March 2022 for an
initial consideration of €17.7m with an additional deferred
consideration of €5m payable in two equal instalments on
the first and second anniversaries of the transaction.
Acquired businesses give rise to material assets and
liabilities at the point of acquisition that are based on
estimates and judgements about future performance.
The provisional recognition of goodwill, intangible
assets, other assets and liabilities and estimates of the
fair value of consideration transferred were based on a
number of assumptions. Significant judgement is involved
in assessing the relevant forecast and selecting the
appropriate discount rates.
Management engaged with an external third party to
provide assistance in the determination of the valuation
of goodwill and intangible assets. The Committee has
reviewed the acquisition accounting calculations and
underlying estimates of this work and understood the key
drivers and financial information used in their work.
The Committee considered the work management
performed on the opening balance sheet and purchase
price allocations and concurred with management’s
recommendation.
Capitalised software development
The Audit Committee has reviewed reports on the
capitalisation policies and procedures for internally
developed software. The papers submitted considered
detail of individual products, features and enhancements
to products, together with the incremental economic
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RWS — Annual Report 2022
GOVERNANCE REPORT
value-add to support the addition to intangible assets.
Specifically, the Committee has considered whether the
capitalisation policy enables the Group to meet the criteria
set out under IAS38 and is sufficient to enable identification
of costs to be capitalised and costs to be expensed, such as
support and maintenance expenditure.
Carrying value of goodwill
The Group considers the carrying value of goodwill as a
minimum on a half yearly basis, and also when there is an
indicator of impairment. Management prepared a paper
which concluded that no indicators exist and that sufficient
headroom exists within the Group’s value in use models.
The Audit Committee reviewed this paper which included
challenging the key assumptions: revenue growth rates,
forecasting accuracy, cash flow projections and discount
rates. The Group has not recognised any goodwill
impairment in the current or prior year. See note 12 to the
financial statements for further information.
Revenue recognition
The Audit Committee has continued to receive and review
reports on the standard processes in place around revenue
recognition. In particular management’s paper covered
whether service revenue is recognised at a point in time
or over time. It was concluded that point in time revenue
recognition be reserved for the completion of filings
revenues in IP Services and the recognition of perpetual/
term licence revenue in Technology and for other services
provided, the revenue is recognised over time.
The Committee discussed and challenged management’s
papers, satisfying itself that a consistent approach had
been applied to determine revenue recognised in 2022.
The Audit Committee has reviewed the disclosures
provided in the FY22 financial statements in relation to
revenue recognition policy and to the significant estimates
and judgements policy on note 2.
Uncertain tax provisions
The Group recognises a provision for uncertain tax
positions within the financial statements.
The Committee has reviewed management’s
consideration of uncertain tax provisions and understood
the involvement of experts in the preparation and
determination of these provisions.
The Committee has reviewed movements in the key
uncertain tax position provisions that have been
recognised and understood the basis for the recognition
of any new provisions made during the year.
The Committee discussed and challenged management’s
papers satisfying itself that a consistent approach had
