MONCLER ANNUAL REPORT AT 31 DECEMBER 2020ATTACHMENTS 187186
Moncler Group Independent auditors report 31 December 2020
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assessing the appropriateness of the disclosures provided in the notes about the trademark, goodwill and the related impairment tests.
Measurement of inventories
Notes to the consolidated financial statements: paragraph 5.5 Inventory
Key audit matter Audit procedures addressing the key audit matter
The consolidated financial statements at 31 December 2020 include inventories of 203 million, net of the allowance for inventory write-down of 184 million. Determining the allowance for goods write-down is a complex accounting estimate, entailing a high level of judgement as it is affected by many factors, including:
the characteristics of the group s business segment;
the sales seasonality; the price policies adopted and the
distribution channels selling ability. For the above reasons, we believe that the measurement of inventories is a key audit matter.
Our audit procedures included:
understanding the process for the measurement of inventories and the related IT environment and assessing the design and implementation of controls and procedures to assess the operating effectiveness of material controls;
checking changes in inventories during the year, considering their expected life cycle based on their age and analysing the historical sales and profitability figures by season;
analysing documents and discussing the assumptions adopted to calculate the allowance for inventory write-down with the relevant internal departments, in order to understand the assumptions underlying the expectations of how goods will be sold;
assessing the appropriateness of the disclosures provided in the notes about inventories.
Responsibilities of the parent s directors and board of statutory auditors ( Collegio Sindacale ) for the consolidated financial statements The directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05 and, within the terms established by the Italian law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Moncler Group Independent auditors report 31 December 2020
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Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Recoverability of goodwill and the Moncler trademark
Notes to the consolidated financial statements: paragraphs 5.1 Goodwill, brands and other intangible assets and 5.2 Impairment of intangible assets with an indefinite useful life and goodwill
Key audit matter Audit procedures addressing the key audit matter
The consolidated financial statements at 31 December 2020 include the Moncler trademark (the trademark ) with a carrying amount of 224 million, which is an intangible asset with an indefinite useful life, and goodwill of 156 million. At least annually, at the reporting date, the group checks the recoverable amount of the trademark and goodwill. It calculates the recoverable amount of the trademark and goodwill by estimating its value in use, using a method that discounts its expected cash flows. Specifically, with reference to the trademark, it used the royalty relief method. These methods, by their very nature, require a high level of directors judgement about:
the expected cash flows, calculated by taking into account the general economic performance and that of the group s sector, the actual cash flows for the last few years and the projected growth rates;
the financial parameters used to calculate the discount rate.
For the above reasons, we believe that the recoverability of the trademark and goodwill is a key audit matter.
Our audit procedures, which also involved our own specialists, included:
understanding the process adopted to prepare the impairment test;
understanding the process adopted for the preparation of i) the 2020- 2022 business plan approved by the parent s board of directors on 11 June 2020, ii) the 2021 budget approved by the parent s board of directors on 28 January 2021, iii) the 2023-2025 management estimates, as part of which the expected cash flows used for impairment testing have been inferred;
analysing the main assumptions used by the directors in estimating the expected cash flows, including the analysis of any discrepancies between the previous year business plans figures and actual figures;
analysing the reasonableness of the impairment testing model and the key assumptions used by the directors to determine the recoverable amount of the trademark and goodwill;
checking the sensitivity analyses presented in the notes with reference to the key assumptions used for impairment testing, including the interest and perpetual growth rates;