- Independent auditor's report
To: the general meeting and supervisory board of Beter Bed Holding N.V.
Report on the financial statements 2019
- the consolidated financial statements of Beter Bed Holding N.V. together with its subsidiaries (‘the Group’) give a true and fair view of the financial position of the Group as at 31 December 2019 and of its result and 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;
- the company financial statements of Beter Bed Holding N.V. (‘the Company’) give a true and fair view of the financial position of the Company as at 31 December 2019 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 2019 of Beter Bed Holding N.V., Uden. The financial statements include the consolidated financial statements of the Group and the Company financial statements.
The consolidated financial statements comprise:
- the consolidated balance sheet as at 31 December 2019;
- the following statements for 2019: the consolidated profit and loss account, and the consolidated statement of comprehensive income, consolidated cash flow statement and consolidated statement of changes in equity; and
- the notes to the consolidated financial statements, comprising significant accounting policies and other explanatory information.
The company financial statements comprise:
- the company balance sheet as at 31 December 2019;
- the company profit and loss account for the year then ended;
- the notes to the company financial statements, comprising the accounting policies applied 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.
Material uncertainty related to going concern
We draw attention to the going concern paragraph in note 'Going Concern' of the Notes to the Consolidated financial statements. This note indicates that the Group's business operations may be severely impacted by the COVID-19 (Corona) virus. This indicates the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
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 Beter Bed Holding N.V. in accordance with the European Union 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, Dutch Code of Ethics).
Our audit approach
Overview and context
Beter Bed Holding N.V. is a retail- and wholesale organisation in the bedroom furnishing sector. 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’.
The deleveraging of the Group and its finance position characterised the financial year 2019. The current financing agreements with the banks and shareholders expire in July 2020 so that new financing agreements need to be obtained. This has resulted in the decision to deleverage the Group for example by divesting Matratzen Concord (Germany, Austria and Switzerland) and sale-and-leaseback transactions on the real estate in the Netherlands as noted in the section ‘Going concern’ of the annual report. The management board has made plans to realize a successful refinancing. Because of the significance of management’s assertion with respect to the probability of refinancing, we have paid specific attention to this in our audit as described in the key audit matter ‘Financial positioning and refinancing’
The decision to divest Matratzen Concord led to the share deal with Magical Honour Limited in December 2019. As 39% of the revenue over 2019 relates to Matratzen Concord, this represents a major line of business. This affected our audit procedures, we therefore included the ‘accounting for the completed sale of Matratzen Concord’ as a key audit matter.
Beter Bed Holding N.V. has strategic objectives related to increasing customer satisfaction and growth of both revenue and market share. To reach the objectives, investments are made in online solutions, shop formulas and extension/optimisation of shops in different countries. Based on this, revenue is an important metric for stakeholders. As a result, we have identified accuracy of revenue as a key audit matter. Furthermore, we have used revenue as the basis for determining materiality as is further disclosed in the section ‘Materiality’.
Additionally, we identified the transition to the new accounting standard ‘IFRS 16 – Leases’ as a key audit matter because of the significant amount of lease contracts within the Group.
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the financial statements. In particular, we considered where the management board made important judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. In the annual report, the entity has disclosed the accounting estimates and most important sources of estimation uncertainty in the section estimates and judgements. This has not resulted in other key audit matters besides those mentioned above.
Another area of focus, that was not considered as key audit matter, was the existence and valuation of inventory. Existence and valuation of inventory was considered a key audit matter in previous years. However, as a result of the developments at the Group such as the focus on bringing down inventory levels and the sale of Matratzen Concord we consider the risk profile to be lower. As in all of our audits, we also addressed the risk of management override of controls, including evaluating whether there was evidence of bias by the management board that may represent a risk of material misstatement due to fraud.
We ensured that the audit teams at both group and component level included the appropriate skills and competences which are needed for the audit. Therefore, we have included specialists and experts in our team in the areas of IT, income tax, IFRS 16 and refinancing matters.
The outline of our audit approach was as follows:
- Overall materiality: € 3,400,000.
- We conducted audit work on the financial reporting of 5 entities.
- We have audited the complete financial information of Beter Bed B.V., BBH Services GmbH & Co. KG (consolidated) and Matratzen Concord GmbH (Vienna, Austria). As Matratzen Concord is divested on 2 December 2019 (economic transfer 30 November 2019), the discontinued operations have been part of Beter Bed Holding N.V. for 11 months in 2019. Specific audit procedures were performed for the components Beter Beheer B.V. and Beter Bed Holding N.V.
- Audit coverage: 86% of consolidated revenue, 91% of total assets (continued operations) and 83% of profit before taxation.
Key audit matters
- Accounting for the completed sale of Matratzen Concord
- Financial positioning and re-financing
- Transition to the accounting standard 'IFRS 16 - Leases'
- Accuracy of revenue
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 judgement 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
€ 3,400,000 (2018: € 3,960,000).
Basis for determining materiality
We used our professional judgement to determine overall materiality. As a basis for our judgement we used 1% of revenue.
Rationale for benchmark applied
We have applied this benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of users of the financial statements. On this basis we believe that revenue is an important metric for the financial performance of the Group. Profit before taxation is not considered an appropriate benchmark, because this would result in large fluctuations in overall group materiality year over year.
To each component in our audit scope, we, based on our judgement, allocate materiality that is less than our overall group materiality. The range of materiality allocated across components was between € 1,500,000 and € 3,000,000.
We have allocated a lower materiality level of € 1,500,000 to Beter Bed B.V. based on 1% of revenue of the continued business on a standalone basis.
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 € 100,000 (2018: € 100,000) as well as misstatements below that amount which, in our view, warranted reporting for qualitative reasons.
The scope of our group audit
Beter Bed Holding N.V. is the parent company of a group of entities. The financial information of this group as listed in ‘The principles of consolidation’, is included in the consolidated financial statements of Beter Bed Holding N.V.
We tailored the scope of our audit to ensure that we, in aggregate, gain sufficient coverage on the financial statements for us 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 component level by the Group engagement team and by each component auditor.
The group audit primarily focussed on the significant components: Beter Bed B.V. and BBH Services GmbH & Co. KG (consolidated). At the level of BBH Services GmbH & Co. KG a subconsolidation is made for the German entities, including Matratzen Concord Germany.
We have performed an audit of the complete financial information for Beter Bed B.V. as this entity is individually financially significant considering the financial volumes. Since Matratzen Concord has been divested as of 2 December 2019, BBH Services GmbH & Co. KG (consolidated) and Matratzen Concord GmbH (Vienna, Austria) were subject to audits of their complete financial information until the divestment date. For Beter Beheer B.V. and Beter Bed Holding N.V. specific audit procedures have been performed on material financial line items to achieve appropriate coverage on financial line items in the consolidated financial statements.
In total, in performing these procedures, we achieved the following coverage on the financial line items:
Profit before tax
None of the remaining components represented more than 5% 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 audit team performed audit procedures on the components Beter Bed B.V., Beter Beheer B.V. and Beter Bed Holding N.V. As the auditor of the Group we used the work performed by the component auditor of BBH Services GmbH & Co. KG (consolidated) and Matratzen Concord GmbH (Vienna, Austria).
Where component auditors performed the work, we determined the level of involvement needed in their audit work to be able to conclude on whether sufficient and appropriate audit evidence has been obtained as a basis for our opinion on the consolidated financial statements as a whole.
Before the start of their audit procedures we have shared detailed instructions. As group auditor, we have had periodic meetings with the auditor of the components where we discussed risks, the audit approach, process of the audit, and based on reports received from the auditor, findings and conclusions. The group audit team reviewed the audit file of the component auditor to assess the quality of work performed. We discussed the financial results, (important) estimates and findings of the audit with the financial director and the audit team of the components.
The group engagement team performed the audit work on the group consolidation, notes to the financial statements and with certain specific items. These include share-based payments, taxes and related disclosures and the company financial statements of Beter Bed Holding N.V.
By performing the procedures above at components together 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 judgement, 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 comment or observation we made on the results of our procedures should be read in this context.
Key audit matter
Our audit work and observations
Accounting for the completed sale of Matratzen Concord
Note ‘Discontinued operations’ of the Notes to the Consolidated financial statements
During summer 2019, Beter Bed Holding N.V. announced its intention to divest Matratzen Concord (Germany, Austria and Switzerland) and the sale was completed on 2 December 2019 with a loss of €13.3 million. Management reports the Matratzen Concord Business as discontinued operations in accordance with IFRS 5 – ‘Non-Current Assets Held for Sale and discontinued operations’.
The accounting for the completed sale of Matratzen Concord is significant to the financial statements and non-routine. Relevant elements of the transaction include, amongst others, the identification of the disposal group and presentation of the disposal group’s results as discontinued operations, the application of the Sale, Purchase and Investment Agreement (SPIA) and to determine the deal result and consideration (to be) received for shares sold.
For stakeholders it is particularly important to be able to properly distinct continued from discontinued operations and that this segregation is correctly made and presented, given the Group’s strategy. Therefore, we considered the accounting for the transaction and the classification as discontinued operations as key audit matter.
Our audit procedures included, among others, an evaluation of the identification of the disposal group, the accounting for the legal separation and estimation of the deal result, and consideration (to be) received for shares sold of Matratzen Concord as done by Beter Bed Holding N.V. We have evaluated the identification of the disposal group and presentation of the results of Matratzen Concord as discontinued operation against the requirements of IFRS 5.
The results of Matratzen Concord are included in the consolidated financial information until the moment of sale. As such, we have not changed the audit scope and performed full scope audits on the balance at the moment of the sale of BBH Services GmbH & Co. KG (consolidated) and Matratzen Concord GmbH (Vienna, Austria).
We evaluated the Sale, Purchase and Investment Agreement (SPIA), confirmed the effective date of the sale, tested the calculation of expected deal proceeds to be in line with the SPIA, vouched the cash proceeds received and checked management’s calculations used for mathematical accuracy. Part of the SPIA is the transfer of subscription shares. We have evaluated supporting documentation for this transfer.
We tested the disentanglement of Matratzen Concord from the Group by reconciling financial information of the component to the consolidati0n. In addition, we also assessed the adequacy of the disclosure in note ‘Discontinued operations’ of the notes to the consolidated financial statements.
Based on the audit procedures performed, we have not found any material findings.
Key audit matter
Our audit work and observations
Financial positioning and refinancing
Note 'Going concern' of the Notes to the Consolidated financial statements
Current credit facilities will expire per July 2020 and therefore new credit facilities need to be secured before that date to fulfil Beter Bed Holding N.V.’s financing needs.
To successfully initiate the refinancing of the Group, management had to take a number of actions to arrive at a fundable business case. Beter Bed Holding N.V. deleveraged, by means of sale-and-leaseback transactions of the three distribution centres in the Netherlands, issuance of share capital, obtaining a shareholder loan which is subsequently partly converted into a perpetual loan, and the divestment of Matratzen Concord in Germany, Austria and Switzerland (the discontinued operations). These actions were finalized in 2019.
Next to these actions, the expected refinancing was substantiated by the management board’s analysis of the continuing business. In this analysis, the management board made various assumptions like order intake, revenue growth rates for the online and offline channels, gross margin percentages, operating expenses, working capital needs and free cash flows, risks and opportunities.
The management board has analysed and assessed the liquidity position and -needs of the Group and is confident that the refinancing will be completed in time and is currently discussing its financing needs with various banks. Given the importance of a timely refinance to Beter Bed Holding N.V.’s operations we consider this a key audit matter.
Our audit procedures included evaluating the different transactions and assessing the adequacy of the disclosures in the financial statements.
For the three sale-and-leaseback transactions, we have evaluated contractual terms to verify classification as sale-and-leaseback. We tested the calculation of the transaction result and assessed the valuation of the lease asset by recalculating the right of use asset and lease liability. No material findings were noted.
We have evaluated the loan agreements with the shareholders for relevant factors such as principal amount, interest and repayment terms and reconciled the principal amount to the cash receipts. Half of the shareholder loan has been converted to a perpetual loan per 31 December 2019. Management has assessed the classification of the perpetual loan as equity. We have evaluated this assessment based on the underlying contracts and noted no material findings.
For our audit work on the issuance of share capital and the divestment of Matratzen Concord, we refer to the key audit matter ‘Accounting for the completed sale of Matratzen Concord’.
We have assessed the analysis of the continuing business and its underlying assumptions with the support of our experts. Where possible, we have tested these assumptions by comparing them to previously realised results, current results, operational KPIs, results of actions taken and external sources. By assessing this analysis, we used a mix of audit techniques such as inquiry with different people within the Group, calculations on the different models, reconciliation to supporting documentation and external documents.
In addition, we have evaluated the disclosure notes in the financial statements.
Based on the work performed we have no material findings with respect to the appropriateness of management’s assertion regarding the refinancing.
Key audit matter
Our audit work and observations
Transition to the accounting standard ‘IFRS 16 – Leases’
Notes 3 and 11 to the consolidated balance sheet and profit and loss account
IFRS 16 – ‘Leases’ became 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 €142 million and a corresponding increase in lease liabilities of €142 million in the opening balance including discontinued operations. Beter Bed decided to apply the modified retrospective approach for the transition accounting. Under this approach, the cumulative effect of initially applying IFRS 16 is recognized as an adjustment to equity at the date of initial application.
The assessment of the impact of the new standard is a key audit matter, as the balances disclosed 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 implementing IT software) is complex and the measurement of the right of use asset and lease liability is based on estimations. Most important in these estimations are the assumptions on discount rates and lease terms, including termination and renewal options.
Our audit procedures included an evaluation of management’s implementation process, including the evaluation 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-use asset and lease liability.
We performed testing on a sample basis on the accuracy of the lease contracts input in the lease accounting system. We furthermore performed independent testing on a sample basis on the accuracy of calculation of the output from the software tool for several populations. We have tested completeness of the identified lease contracts on a sample basis based on available store information and lease payments made during the year. Our tests resulted in matters that were discussed with and subsequently addressed by management.
We assessed the Information Technology General Controls for the software tool used to register and calculate lease liabilities as a basis to be able to rely on the calculations made. No material findings were noted.
We challenged management’s assumptions, specifically on the discount rates, the application of a single discount rate for a portfolio of leases and the assessment of renewal options by considering market conditions and comparison of rates used to available external market data. We have made use of valuation experts as part of our audit in assessing the discount rates. We found assumptions to be reasonable.
We assessed the adequacy of the disclosures on the impact of the new standard in note 3 and 11 to the consolidated financial statements.
Key audit matter
Our audit work and observations
Accuracy of revenue
Note 14 to the consolidated balance sheet and profit and loss account
Revenue is an important key measure used to evaluate the performance of the Group by various stakeholders (also refer to the section ‘Materiality’).
Revenue is accounted for when mutual contractual obligations are met. When goods are instantly being taken by consumers in the shop, this is at the time of payment at the cash register. When goods are assembled and/or delivered at the customer’s home, the sales are recognised at the moment when the transfer has led to a physical delivery of the goods. These transactions are mainly processed automatically through IT. Revenue is generated through both an online channel as well as in store.
Given the fact that revenue is a key measure and given the negative 2019 results, management may feel pressure to present better results than actually generated. As such there is a risk of overstatement of revenue. Therefore, we considered the accuracy of revenue as a key audit matter.
We have evaluated the design of the controls that ensures accurate processing of revenue transactions and verified the existence and operating effectiveness of the most important (automated) internal controls implemented by management.
Amongst these controls are controls related to the interface between the cash-register and the financial administration, four-eye principle which is applied when making price changes, the reconciliation of electronic payments made to drivers with bank receipts and the financial administration and the automated ‘three-way match’. Additionally, by means of a sample we took notice of the internal representations where local management takes responsibility for the reported revenue and determined that these do not contain exceptional items, which could give further direction to the audit of the revenue.
We found that we could rely on the operating effectiveness of the internal controls for the purpose of our audit.
The most important internal control procedure for the accuracy of the revenue is the automated three-way-match. We assessed the Information Technology General Controls as a basis to be able to reperform the three-way-match between sales order-delivery-invoice. By means of data-analysis, we have made the reconciliation to the sales order, packing slip and invoice. No material findings were noted.
Furthermore, we have performed risk assessment analytical procedures on realized revenue through detailed store comparison. These did not lead to identification of additional risks.
The results of our controls testing, reperformance of the three-way-match and analytical procedures have been the basis for the nature and scoping of the additional test of details, which mainly consisted of testing individual sales transactions by reconciling them to proof of delivery (on location) or release. Additionally, we performed substantive procedures on credit notes sent throughout the year and after balance sheet date to ensure appropriate revenue recognition per year-end and we have performed audit procedures on the appropriate cut-off of revenue by reconciling invoices to the bill of lading to determine that revenue is accounted for in the correct period. Finally, we performed detailed testing on journal entries. These audit procedures have not resulted in material findings.
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: Facts & figures, CEO statement, Beter Bed Operations, Report of the Management Board, Corporate Social Responsibility, Corporate Governance, Report of the Supervisory Board and Remuneration report and additional details pursuant to Part 9 of Book 2 of the Dutch Civil Code.
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 and the sections 2:135b and 2:145 subsection 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 and section 2:135b subsection 7 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 management board 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 and the remuneration report in accordance with the sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
We were appointed as auditors of Beter Bed Holding N.V. on 19 May 2015 by the passing of a resolution at the annual meeting following the proposal of the supervisory board on 12 March 2015. Our appointment has been renewed annually by shareholders representing a total period of uninterrupted engagement appointment of 5 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 services, in addition to the audit, that we have provided to the Company and its controlled entities, for the period to which our statutory audit relates, are disclosed in note 34 to the financial statements.
Responsibilities for the financial statements and the audit
Responsibilities of the management board and the supervisory board for the financial statements
The management board is responsible for:
- the preparation and fair presentation of the financial statements in accordance with Part 9 of Book 2 of the Dutch Civil Code; and for
- such internal control as the management board 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 management board is responsible for assessing the Group’s ability to continue as a going concern. Based on the financial reporting framework mentioned, the management board should prepare the financial statements using the going-concern basis of accounting unless the management board either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. The management board should disclose events and circumstances that may cast significant doubt on the Group’s ability to continue as a going concern in the financial statements.
The supervisory board is responsible for overseeing the Group’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 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 and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high but not absolute level of assurance, which makes it possible that we may not detect all material 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.
Eindhoven, the Netherlands, 17 March 2020
PricewaterhouseCoopers Accountants N.V.
Original has been signed by W.C. van Rooij RA
Appendix to our auditor’s report on the financial statements 2019 of Beter Bed Holding 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 judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. 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 management board.
- Concluding on the appropriateness of the management board’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.
- Appropriation of result pursuant to the articles of association
Article 34 of the articles of association states the most important provisions pertaining to the appropriation of result:
Every year the Management Board, subject to approval from the Supervisory Board, determines the proportion of the company’s profit – the positive balance of the profit and loss account – to be added to the Company’s reserves.
The profit remaining after the reservation pursuant to the previous paragraph shall be placed at the disposal of the Annual General Meeting.