I.A. Årsredovisning 2020 ENG 1
Key audit matter How our audit addressed the Key
audit matter Valuation of inventories The Group's inventory amounts to SEK 2 774 million as of 31 December 2020, which is a significant item in the balance sheet. If the net selling price is lower than the acquisition value, an obsolescence allowance for stock obsolescence is recorded. The obsolescence allowance is based on an individual assessment of the vehicle inventory and for the spare part inventory it is based on an age analysis. Please see note 1 and note 3 in the annual report for more information regarding inventory. Valuation of Goodwill and customer relations The Group’s intangible assets in the form of customer relations and goodwill amounts to a book value of SEK 360 and SEK 1 336 million, respectively. The valuation of these is based on estimates and assessments of future cash flows. The Group examines at least annually if any impairment loss exists for goodwill. For customer relations amortizations are made and in cases of any indication of depreciation a test for impairment is performed. See note 1, note 3 and note 13 in the annual report for information regarding goodwill, intangible assets and impairment test of non-financial assets. Revenue recognition Net sales for the Group amounted to SEK 24 963 million. Net sales refer to agreements with customers which include delivery of both goods and services. Income is reported when the amount can be measured reliable and it is likely that the company will gain future economic benefits and thus when significant risks and benefits as well as commitments for the goods have been transferred to the buyer. Sales with repurchase agreements are reported as operating leases and the income is distributed straight-lined from the date of sale to the date of repurchase. Please see note 1 and note 3 in the annual report for information regarding revenue recognition and net sales. We have taken part of agreements to assess the company's identification and accounting of goods and services. We have tested a selection of controls regarding the distribution and allocation of income. For a selection of transactions we have assessed the timing and value of income recognition for goods and services based on when delivered or provided. For the impairment test based on the calculation of value in use, our audit procedures include the following elements: • An assessment of the mathematical correctness of the cash flow calculation and a reconciliation of the cash flow forecasts against the assumed budget and business plan. • Assessment that the company's valuation model is consistent with established valuation techniques. • An estimation of the assumptions with the greatest impact on impairment tests. • For intangible assets that are subject to amortization we have evaluated whether an indication of impairment testing has existed. We have assessed the Group's routines and controls regarding the valuation of the inventories in the audit. We have also analyzed the outcome of age analysis and individual valuation of vehicle inventories and compared to external transactions. I.A. HEDIN BIL AB / ANNUAL REPORT / 2020 85