Independent auditor’s report
To: the Annual General Meeting of shareholders and the Supervisory Board of Akzo Nobel N.V.
Report on the Financial statements 2018
In our opinion:
- Akzo Nobel N.V.’s consolidated financial statements give a true and fair view of the financial position of the the Group as at December 31, 2018, and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code; and
- Akzo Nobel N.V.’s company financial statements give a true and fair view of the financial position of the Company as at 31 December 2018 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code
What we have audited
We have audited the accompanying financial statements 2018 of Akzo Nobel N.V., Amsterdam (‘the Company’). The financial statements include the consolidated financial statements of Akzo Nobel N.V. together with its subsidiaries (‘the Group’) and the company financial statements.
The consolidated financial statements comprise:
- the consolidated balance sheet as at December 31, 2018;
- the following statements for 2018: the consolidated statement of income, the consolidated statements of comprehensive income, changes in equity and cash flows; and
- the notes, comprising a summary of significant accounting policies and other explanatory information.
The Company financial statements comprise:
- the balance sheet as at December 31, 2018;
- the statement of income for the year then ended;
- the notes, comprising a summary of the accounting policies and other explanatory information.
The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements.
The basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described our responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of Akzo Nobel N.V. in accordance with the European Regulation on specific requirements regarding statutory audit of public interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO – Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA – Code of Ethics for Professional Accountants, a regulation with respect to rules of professional conduct).
Our audit approach
Overview and context
Akzo Nobel N.V. is a global paints and coatings company headquartered in the Netherlands. Prior to and until the completion of the sale of the Specialty Chemicals business per October 1, 2018, the Group was also a major producer of specialty chemicals products. The Group is comprised of several components and therefore we considered our group audit scope and approach as set out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the Group, as set out below.
The sale and separation of the Specialty Chemicals business, completed on October 1, 2018, characterised the financial year 2018. This affected the scope of the group audit and our audit procedures. Further details of the implications of the sale of the Specialty Chemicals business are described in the section on ‘Key audit matters’.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the Board of Management made important judgments, for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. In Note 1 of the consolidated financial statements the company describes the areas of judgment in applying accounting policies and the key sources of estimation uncertainty. Given the significant estimation uncertainty and the related higher inherent risks of material misstatement in the valuation of goodwill and other intangible assets with indefinite useful lives, the valuation of the post-retirement benefit provisions and the accounting for and valuation of deferred tax assets and uncertain tax positions, we considered these to be key audit matters as set out in the ‘Key audit matters’ section of this report.
In addition, we identified the accounting for the completed sale of the Specialty Chemicals business and the transition from the accounting standard ‘IAS 17 – Leases’ to ‘IFRS 16 – Leases’ as new key audit matters, as this accounting treatment is complex, non-recurring and materially impacts the financial statements. The accounting for the completed sale of the Specialty Chemicals business replaces the key audit matter from last year “Specialty Chemicals Business recorded as Held for Sale and Discontinued Operations (IFRS 5)”.
Other areas of focus, that were not considered as key audit matters were related to the environmental, sundry, and legal provisions, and information technology general controls (‘ITGCs’). The ITGC’s are the policies and procedures used by the Company to ensure information technology (‘IT’) operates as intended and provides reliable data for financial reporting purposes. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Board of Management that may represent a risk of material misstatement due to fraud.
We ensured that the audit teams both at group and at component levels included the appropriate skills and competences which are needed for the audit of a paints and performance coatings company and a producer of specialty chemicals. We also included specialists in the areas of tax, IT, treasury and experts in the areas of pensions, share based payments and valuations in our team.
The outlines of our audit approach were as follows:
- Overall materiality: €45 million
- We conducted audit work at 37 components in 18 countries
- Site visits by the group team were conducted in 7 countries – China, Germany, France, Italy, the Netherlands, Sweden, and the United States.
- Audit coverage: 67% of consolidated revenue, 82% of consolidated total assets and 75% of consolidated profit before tax
Key audit matters
- Accounting for the completed sale of the Specialty Chemicals Business
- Annual impairment testing of goodwill and other intangibles with indefinite useful lives
- Valuation of post-retirement benefit provisions
- Valuation of deferred tax assets and uncertain tax positions
- Transition from the accounting standard ‘IAS 17 – Leases’ to ‘IFRS 16 – Leases’
The scope of our audit is influenced by the application of materiality which is further explained in the section ‘Our responsibilities for the audit of the financial statements’.
Based on our professional judgment, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements, both individually and in aggregate, on the financial statements as a whole and on our opinion.
Overall group materiality
€45 million (2017: €70 million).
Basis for determining materiality
We used our professional judgment to determine overall materiality. As a basis for our judgment we used 5% of total profit before tax from the continued operations and nine-month period result of the Specialty Chemicals discontinued operations combined, excluding the deal result and excluding separation related identified items.
Rationale for benchmark applied
We used profit before tax from the continued operations and nine-month period result of the Specialty Chemicals discontinued operations combined, excluding the deal result (€6,074 million) and excluding separation related identified items as the primary benchmark based on our analysis of the common information needs of users of the financial statements. On this basis, we believe that profit before tax is an important metric for the financial performance of the company. We excluded the deal result and separation related identified items as these are non-recurring and are not representative of normal operating results.
To each component in our audit scope, we, based on our judgment, allocate materiality that is less than our overall group materiality. The range of materiality allocated across components was between €6 million and €21 million.
We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons. We agreed with the Supervisory Board that we would report to them misstatements identified during our audit above €2.25 million (2017: €3.5 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
The scope of our group audit
Akzo Nobel N.V. is the parent company of a global group of entities managed by the Board of Management and Executive Committee. The financial information of this group is included in the consolidated financial statements of Akzo Nobel N.V.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole, taking into account the management structure of the Group, the nature of operations of its components, the accounting processes and controls, and the markets in which the components of the Group operate. In establishing the overall group audit strategy and plan, we determined the type of work required to be performed at the component level by the group engagement team and by each component auditor.
The group audit included 26 components which were subjected to audits of the complete financial information as those components are material to the group. Nine components were subjected to specific risk-focused audit procedures as they include higher risk areas. Additionally, twelve components were selected for audit procedures to achieve appropriate coverage on financial line items in the consolidated financial statements. The group team also audited the Specialty Chemicals business for the nine-month results reported as discontinued operations. In total, in performing these procedures, we achieved the following coverage on the financial line items (which include both continued and discontinued operations):
Profit before tax*
None of the remaining components represented more than 1% of total group revenue or total group assets. For those remaining components we performed, among other things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components.
The group consolidation, financial statement disclosures and a number of complex items and processes controlled and monitored centrally by Akzo Nobel N.V. are audited by the group engagement team at the head office. These include impairment testing of goodwill and other intangibles with indefinite useful lives, valuation of post-retirement benefit provisions, valuation of deferred tax assets and uncertain tax positions, accounting for the completed sale of the Specialty Chemicals Business, environmental, sundry, and legal provisions, share based payments, treasury, IT and the Akzo Nobel N.V. standalone entity.
The group engagement team also performed central procedures over the controls performed by the business units and other central functions, where relevant for our audit. This included: Business performance review controls and indirect entity level controls (e.g. to prevent and detect fraud), including the code of conduct, corporate directives, whistle blower policy, internal representations, business partnering program and internal audits.
For all components, we used component auditors who are familiar with the local laws and regulations to perform the audit work. We performed hard close audit procedures with the components on the interim October balance sheet positions and results. These hard close audit procedures include substantive audit work on material balances and transactions at group level as well as components in scope for our group audit. For the Specialty Chemicals business we performed a full scope audit on the balance sheet and results for the nine-months period ended September 30, 2018, reported as discontinued operations.
Where the work was performed by component auditors, we determined the level of involvement we needed to have in their audit work to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the consolidated statements as a whole. We issued instructions to the component audit teams in our audit scope. These instructions included amongst others our risk analysis, materiality and scope of the work. We explained to the component audit teams the structure of the group, the main developments that are relevant for the component auditors, the risks identified, the materiality levels to be applied and our global audit approach. We had individual calls with each of the in-scope component audit teams during the year including upon the conclusion of their work. During these calls, we discussed the significant accounting and audit issues identified by the component auditors, the reports of the component auditors, the findings of their procedures and other matters, which could be of relevance for the consolidated financial statements.
The group engagement team visits the component teams and local management on a rotational basis. The most significant components are visited every year and other components are visited depending on specific considerations which include amongst other audit observations, specific risks identified or other major events. In the current year, the group audit team visited the component teams and local management in the United States, China, Germany, France, Italy, Sweden and the Netherlands. Furthermore, we reviewed selected working papers of the component teams and performed any further work considered necessary by the group audit team.
By performing the procedures above at components, combined with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to provide a basis for our opinion on the financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the supervisory board. The key audit matters are not a comprehensive reflection of all matters identified by our audit and that we discussed. In this section, we described the key audit matters and included a summary of the audit procedures we performed on those matters.
We addressed the key audit matters in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide separate opinions on these matters or on specific elements of the financial statements. Any comments or observations we made on the results of our procedures should be read in this context. Unless noted otherwise, we concur with the positions taken by the Company in the context of our audit of the financial statements as a whole.
Key audit matter
Accounting for the completed sale of the Specialty Chemicals Business
On 27 March 2018, AkzoNobel announced the sale of the Specialty Chemicals business to the Carlyle Group and GIC and the sale was completed on 1 October 2018 with a deal result of €6.1 billion before taxation and consideration received for shares sold of €8.3 billion. Management reported the Specialty Chemicals Business in accordance with IFRS 5 – ‘Non-Current Assets Held for Sale and discontinued operations’, consistent with the 2017 consolidated financial statements. The accounting for the completed sale of the Specialty Chemicals business is significant to our audit because the transaction and its accounting is complex, non-routine and involves management judgments. These include, amongst others, the identification of the disposal group and presentation of the disposal groups’ results as discontinued operations consistent with prior year, the actual legal separation of the Specialty Chemicals business from the company, the interpretation and application of the Share Purchase Agreement (SPA) and calculation of the final net debt/working capital adjustments with the buyers to estimate the deal result and consideration (to be) received for shares sold.
How our audit addressed the matter
Our audit procedures included, among others, an evaluation of the assumptions used by the company to identify the disposal group, to account for the legal separation and to estimate the deal result and consideration to be received for shares sold of the Specialty Chemicals Business. We have reviewed the identification of the disposal group and presentation of the results of the Specialty Chemicals Business as discontinued operation. We reviewed the Share Purchase Agreement (SPA), confirmed the effective date of the sale, tested the calculation of the net debt/working capital adjustments to estimate the expected deal proceeds to be in line with the SPA, vouched the cash proceeds received and checked managements calculations used for mathematical accuracy. We tested the accounting for the legal separation and disentanglement of the Specialty Chemicals business from the company’s consolidation (e.g. update consolidation structure, recycling currency translation adjustments) by reconciling the transactions to legal contracts, invoices and financial information. In addition, we tested the calculation of the result. We have challenged management, primarily on the assumptions to determine the deal result and consideration (to be) received, in particular on the calculation of the final working capital settlement with the buyers, third party indebtedness and other SPA adjustments. We have made use of technical accounting specialists as part of our audit. We also assessed the adequacy of the company’s disclosure in note 2 to the consolidated financial statements.
Key audit matter
Impairment testing of goodwill and other intangibles with indefinite useful lives
As at 31 December 2018, the Company’s goodwill and other intangibles with indefinite useful lives are valued at €2.8 billion. The key assumptions and sensitivities are disclosed in note 10 to the consolidated financial statements. The annual impairment test for goodwill and indefinite life intangibles assets is significant to our audit because the assessment process is complex, involves significant management judgments and is based on assumptions regarding expected future market and economic conditions, revenue growth, margin developments, the discount rates and terminal growth rates. This is consistent with prior year. Based on the annual goodwill impairment test, including sensitivity tests, the Board of Management concluded that no impairment of goodwill and other intangibles with indefinite useful lives was necessary.
How our audit addressed the matter
We evaluated the assumptions and methodologies used in the annual impairment test prepared by the company. We verified the mathematical accuracy of the calculations and a reconciliation to the 2019 five year outlook as approved by the Board of Management. We have challenged management, primarily on their assumptions applied to which the outcome of the impairment test is the most sensitive, in particular, the projected revenue growth, margin developments, discount rates and terminal growth rates. We performed independent testing and analysis of the basic peer group composition, amongst others, and challenged management by comparing the assumptions to historic performance of the company and local economic developments, taking into account the sensitivity test of the goodwill balances for any changes in the respective assumptions. We have made use of valuation experts as part of our audit. We assessed the adequacy of the Company’s disclosures in note 10 to the consolidated financial statements and in particular the key assumptions to which the outcome of the impairment test is most sensitive.
Key audit matter
Valuation of post-retirement benefit provisions
The post-retirement benefit provisions consist of defined benefit obligations (€13.4 billion) offset by plan assets (€13.7 billion). The largest pension plans are the ICI Pension Fund (ICIPF) and the AkzoNobel (CPS) Pension Scheme in the UK which together account for 87 percent of the defined benefit obligation (DBO) and 91 percent of plan assets. The procedures over the post-retirement benefit provisions, specifically the procedures on the DBO, the de-risking transactions during the year, and updates to the assumptions were significant to our audit because the assessment process is complex, involves significant management judgment and is based on actuarial assumptions. The actuarial assumption includes discount rates, compensation increase, expected inflation rates, mortality tables and indexation percentages, as disclosed in note 17 of the consolidated financial statements. This is consistent with prior year. Technical expertise is required to determine the amounts and significant de-risking transactions that have occurred.
How our audit addressed the matter
We evaluated the Board of Management’s actuarial assumptions, specifically the assumptions applied in the UK, the valuation methodologies used and we assessed the objectivity and competence of the company’s external pension expert used for the calculation of the post-retirement benefit positions. We have challenged management, primarily on their assumptions applied to which the post-retirement benefit provisions are the most sensitive, by performing independent testing and comparing to the published actuarial tables, amongst others, with support of internal actuarial experts. We also tested the participant census data and the valuation of the plan assets through independent price testing (e.g. by reconciling to independently published market prices). Further, we tested the de-risking transactions to the UK plans, the gender equalization impact calculation after the court ruling in the UK and we verified the appropriate accounting. We also assessed the adequacy of the company’s disclosure in note 17 to the consolidated financial statements.
Key audit matter
Valuation of deferred tax assets and uncertain tax positions
The Group operates in various counties and is subject to income taxes in various tax jurisdictions. The assessment of the valuation of deferred tax assets, resulting from net operating losses and temporary differences, and provisions for uncertain tax positions is significant to our audit as the calculations are complex and depend on sensitive and judgmental assumptions.
These include, amongst others, long-term future profitability, local fiscal regulations and new developments. The company’s disclosures concerning income taxes are included in note 8 to the consolidated financial statements.
How our audit addressed the matter
Our procedures included, amongst others, procedures on the completeness and accuracy of the deferred tax assets and uncertain tax positions recognized. We challenged and tested the Board of Management’s assessment of the recoverability of the deferred tax assets, including the projected revenue growth and margin development based on the 2019 five year outlook as approved by the Board of Management, the probability of future cash outflows related to the uncertain tax positions identified by the company and the impact of the separation of the Specialty Chemicals business on the projections. We also assessed the applicable local fiscal regulations and developments, in particular those related to changes in the statutory income tax rate and the of the statues of limitation since these are key assumptions underlying the valuation of the deferred tax assets and uncertain tax positions. We analysed the tax positions and evaluated the assumptions and methodologies used. In addition, we also focused on the adequacy of the company’s disclosures on deferred tax assets and uncertain tax positions and assumptions used. We have made use of tax specialists as part of our audit.
Key audit matter
Transition from the accounting standard ‘IAS 17 – Leases’ to ‘IFRS 16 – Leases’
‘IFRS 16 – Leases’ becomes effective for annual reporting beginning on or after 1 January 2019. The application of the new standard gives rise to a right of use asset of €350 million, a financial lease receivable of €20 million and a corresponding increase in lease liabilities of €370 million. The Company decided to apply the modified retrospective approach for the transition accounting. The assessment of the impact of the new standard is significant to our audit, as the balances recorded are material, the update of the accounting policy requires policy elections, the implementation process to identify and process all relevant data associated with the leases (including IT software and controls) is complex and the measurement of the right-of-use asset and lease liability is based on assumptions such as discount rates and the lease terms, including termination and renewal options.
How our audit addressed the matter
Our audit procedures included an evaluation of management implementation process, including the review of the updated accounting policy and policy elections, the completeness and accuracy of the lease contracts identified and recorded in the lease accounting system and calculation of the right of assets and lease liability.
We reviewed the updated accounting policy and policy elections to be in accordance with IFRS 16. We performed independent testing on a sample basis of the accuracy of the lease contracts input in the lease accounting system and completeness of the identified lease contracts, with the support of the local component teams. We challenged management assumptions, specifically on the assumptions used to determine the discount rates, the application of a single discount rate for a portfolio of leases and the assessment of renewal options. We recalculated the right-of-use asset and lease liability calculated by the system for each material type lease contract. We have made use of technical accounting specialists and valuation experts as part of our audit.
We assessed the adequacy of the Company’s disclosures of the impact of the new standard in note 1 to the consolidated financial statements and challenged management on the disclosure of the remaining uncertainty of the completeness and accuracy review of the input and assumptions for the opening balance.
Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists of:
- The report of the Board of Management, as defined in note 1 to the financial statements
- The other information pursuant to Part 9 of Book 2 of the Dutch Civil Code
- Other parts of the annual report: Business Performance, Leadership, Governance and compliance, Sustainability statements, Index, Financial calendar and Glossary
Based on the procedures performed as set out below, we conclude that the other information:
- is consistent with the financial statements and does not contain material misstatements;
- contains the information that is required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing our procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those performed in our audit of the financial statements.
The Board of Management is responsible for the preparation of the other information, including the directors’ report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
We were appointed as auditors of Akzo Nobel N.V. starting 2016, on 19 April 2014 by the Supervisory Board following the passing of a resolution by the shareholders at the annual meeting held on 29 April 2014. Our appointment has been renewed by shareholders representing a total period of uninterrupted engagement period of 3 years.
No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in Article 5(1) of the European Regulation on specific requirements regarding statutory audit of public interest entities.
The non-audit services that we have provided to the company and its controlled entities in addition to the audit, for the period to which our statutory audit relates, are disclosed in note J to the financial statements.
Responsibilities for the financial statements and the audit
Responsibilities of the Board of Management and the Supervisory Board for the financial statements
The Board of Management is responsible for:
- the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch Civil Code; and for
- such internal control as the Board of Management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Board of Management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Board of Management should prepare the financial statements using the going-concern basis of accounting unless the Board of Management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The Board of Management should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.
The Supervisory Board is responsible for overseeing the company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our audit opinion aims to provide reasonable assurance about whether the financial statements are free from material misstatement. Reasonable assurance is a high but not absolute level of assurance which makes it possible that we may not detect all misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
A more detailed description of our responsibilities is set out in the appendix to our report.
Amsterdam, February 12, 2019
PricewaterhouseCoopers Accountants N.V.
Original has been signed by R. Dekkers RA
Appendix to our auditor’s report on the financial statements 2018 of Akzo Nobel N.V.
In addition to what is included in our auditor’s report we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements
We have exercised professional judgment and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Our audit consisted, among other things of the following:
- Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
- Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.
- Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Management.
- Concluding on the appropriateness of the Board of Management’s use of the going concern basis of accounting, and based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the company to cease to continue as a going concern.
- Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the group, the significance and/or risk profile of group entities or activities, the accounting processes and controls, and the industry in which the group operates. On this basis, we selected group entities for which an audit or review of financial information or specific balances was considered necessary.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. In this respect, we also issue an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.
We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Supervisory Board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
The change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with shareholders in their capacity as shareholders.
Our Code of Conduct defines our core principles and how we work. It incorporates fundamental principles on issues such as business integrity, labor relations, human rights, health, safety, environment and security and community involvement.
Defined as long-term borrowings plus short-term borrowings less cash and cash equivalents and short-term investments.