AI Annual Report 2019 1
Key audit matter Valuation of inventories How our
audit addressed the Key audit matter The Group's inventory amounts to SEK 3 089 million as of 31 December 2019, which is a significant item in the balance sheet. Ifthe net selling price is lower than the acquisition value, an obsole-scence 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 acquired new companies during the year, which has contributed to the increase of intangible assets in the form of customer relations and goodwill, to a book value of SEK 439 and SEK 1 421 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 impairment a test 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 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. Revenue recognition Net sales for the Group amounted to SEK 22 301 million. Net sales refer primarily to sales of vehicles and the aftermarket service. The company has to take a position on various variables in the income recognition regarding sales of vehicles and the aftermarket in order to report revenue in connection with the control being transferred to the costumer, which can be done on delivery or over the contract period. Please see note 1, note 3 and note 4 in the annual report for information regarding revenue recognition and net sales. In our audit we have for a selection of transactions assessed if the timing of the income recognition is correct. In our audit we have assessed the Group's routines and controls regarding the valuation of the inventories. We have also analyzed the outcome of age analysis and individual valuation of vehicle inventories and compared the value towards external transactions. 82 I.A. HEDIN BIL AB / ANNUAL REPORT / 2019