AFRICAN DAWN ANNUAL REPORT 2018 Independent Auditor’s Report To the shareholders of African Dawn Capital Limited continued The following key audit matters relate to the separate financial statements. Key audit matter How our audit addressed the key audit matter Impairment of Investments 30 As per IAS 36 Impairment of Assets, the Company is required to annually test the carrying value of the investments in subsidiaries for impairment when there is an indicator of impairment. This is performed using discounting cash flow models for the various investments. Due to the value of the investment in subsidiaries representing 50% of the total assets as of 28 February 2018, as well as the significant judgement used in the inputs into the free cash flow models, this has been considered to be a key audit matter. The impairment testing resulted in an impairment in the value of investments in subsidiaries in the current year of R1.675million. In evaluating the recoverable amount of investments in subsidiaries, we performed various procedures, including the following: • Utilised our corporate finance specialist in assessing the reasonableness of the model used for the value in use calculation as well as the key inputs into the model such as the pre-tax discount rate, revenue growth rates and terminal growth rate against external market data; • Tested the mathematical accuracy of the models; • Held discussions with management to understand the key assumption applied; • Performed sensitivity analysis on the key assumptions; • Considered the reasonableness of management’s forecast and WACC; • Reviewed the historical budgeting accuracy of the Group. We assessed the adequacy of the Group’s disclosure (refer Note 6) about these assumptions to which the outcome of the impairment test is most sensitive. That is, those disclosures that have the most significant effect on determination of the recoverable amount of the investment in subsidiaries. Other information The directors are responsible for the other information. The other information comprises the information included in the Annual Report which includes the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate as required by the Companies Act of South Africa. Other information does not include the consolidated and separate financial statements and our auditor’s report thereon. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the consolidated and separate financial statements The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and / or the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated and separate financial statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate 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 level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.
AFRICAN DAWN 2018 Annual Report
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