Page 31 - Demo

GUARDIAN MEDIA LIMITED AND ITS SUBSIDIARIES ANNUAL REPORT 2020 29INDEPENDENT AUDITOR%u2019S REPORTTO THE SHAREHOLDERS OF GUARDIAN MEDIA LIMITEDReport on the Audit of the Consolidated Financial Statements (continued)Key Audit Matters (continued)Key Audit Matters How our audit addressed the key audit matterEstimation uncertainty involved in impairment testing of goodwill and other intangibles with indefinite livesRefer to related disclosures in notes 3 and 6, and accounting policy note 2 (xxii) to the consolidated financial statements. As described in these notes, impairment tests are performed annually on goodwill and certain indefinite life licences.As required by IAS 36: %u201cImpairment of Assets%u201d, management performed an impairment test on these assets. Based on the impairment test performed during the year, no impairment was recorded in 2020. Impairment tests on goodwill and other intangibles involve significant estimation and the application of a high level of judgement relative to key assumptions such as the applicable discount rate and future cash-flows. In determining future cash-flow projections, management uses assumptions and estimates in respect of future market conditions, future economic growth, expected market share and gross margins including the possible current and future negative effects of the pandemic. The outcome of the impairment testing is sensitive to these assumptions and estimates, such that changes in these assumptions/estimates may result in different impairment test conclusions.Our audit procedures focused on the assessment of the key assumptions utilized by management including the cash-flow projections and the discount rate. We also evaluated whether the value in use impairment test model met the requirements of IAS 36. To this end our procedures included, amongst others, evaluating and testing the assumptions, methodologies, Cash Generating Unit (CGU) determination, discount rate and other key data used by management. We also assessed the assumptions by comparing to historical performance of the entity, local economic conditions and other alternative independent sources of information. In so doing we evaluated the sensitivity of the key assumptions to reasonable possible changes, especially with the added estimation uncertainty brought on by the pandemic which could cause the carrying amount of the CGU to exceed its recoverable amount.We involved our EY valuation specialist to assist with our audit of the impairment test model, including the cash flows, discount rate and long-term growth rates. We also assessed the appropriateness of the disclosures in the notes to the consolidated financial statements, with reference to that prescribed by IFRSs.