Page 186 - Sigmaroc Annual-Report 2023

SIGMAROC ANNUAL REPORT 2023 GOVERNANCE REPORT
Independent Auditor’s report to the members of SigmaRoc plc
Our work in this area included:
• Using our valuation team, who are part of our audit team, to review the PPA prepared by a third party engaged by management. The work included reviewing the PPA and assessing the key assumptions and inputs used to allocate the goodwill value to other intangible assets;
• Obtaining the impairment models and assessment for each subsidiary and reviewing the models for reasonableness;
• Assessing the mathematical accuracy of the models;
• For all key assumptions and inputs to the impairment models:
• discussing their appropriateness with management;
• agreeing them to supporting evidence and where possible, to third party data; and
• evaluating and recalculating the discount rate used;
• Assessing the historical forecasting accuracy, by comparing previously forecasted cash flows to actual results achieved;
• Performing a sensitivity analysis on the key assumptions and inputs noted above;
• Considering the existence of impairment indicators per IAS 36 Impairment of Assets; and
• Reviewing the associated disclosures in the financial statements and assessing the appropriateness of such disclosures.
Valuation and Allocation of Goodwill (Note 17)
The Group carries a balance of over £170.34 million (2022: £147.74
million restated) in goodwill relating
to the acquisition of its subsidiaries. Furthermore, in accordance with
group’s accounting policy on business acquisitions and pending the finalisation of the Purchase Price Allocation (PPA) report, provisional goodwill is allocated to other identifiable assets and any unallocated amount sits within goodwill.
In accordance with IAS 36, goodwill is not amortised; however, an impairment review should be undertaken annually, or more frequently, should events or changes in circumstances indicate a potential impairment.
Goodwill is allocated to groups of cash generating units according to the level at which management monitors the operating segments. As such, the impairment reviews are performed
in conjunction with the respective investment reviews.
We have assessed this to be a key audit matter given that the estimated recoverable amount of goodwill is subjective, including the estimates and judgements when calculating
the recoverable amount, and as such there is a risk that the carrying value of goodwill may be overstated.