FINANCIAL AND ACCOUNTING INFORMATION assets is performed at least once a year at the level • Corroborated including through interviews with of the cash-generating units (CGU) to which they management the reasonableness of the main data have been allocated. As described in Notes 3.5 and and assumptions underlying cash flow projections 12.1 to the consol idated financial statements, an (sales growth, EBITA margin); impairment loss is recorded when the recoverable Tested the mathematicalaccuracy of the amount of the CGU falls below its carrying amount. • discounted cash flow modelused and the The recoverable amount of a CGU (country) is sensitivity analyses; measured based on discounted future cash flows Verified that Note 12.1 to the consolidated financial and requires a significant degree of judgment from • statements included the appropriate disclosures. management, especial ly for the determination of revenue and EBITA margin forecasts as well as the Suppliers rebates selection of discount rates and long term growth rates. Notes 3.7, 3.15 and 13.3 to the consolidated financial As described in Note 12.1 to the consolidated financial statements statements, performance in 2017 was lower than Description of risk expected in some countries, which led the Group The Group enters into contracts with its suppliers, to adjust downwards its future cash flows, including through which it benefits from rebates, general ly the normative EBITA margin for those countries. on an annual basis, based on the volumes of As a result, the Group recognized a €133.7 mil lion goods purchased and the performance of certain impairment charge for the year ended December 31, specific commercial actions. These rebates may be 2017. conditional or not on the achievement of pre-defined Accordingly, we deemed the measurement of purchasing targets (unconditional or conditional the recoverable amount of goodwi l l and other rebates). intangible assets with indefinite useful lives to be These rebates are recorded as a reduction of the a key audit matter, due to the weighting of these cost of goods sold. assets in the consolidated balance sheet and the inherent uncertainty of specific inputs, in particular We deemed the recognition of suppliers rebates to the likelihood of achieving forecast results included be a key audit matter, due to: in such measurement and the impact of sensitivity analyses described in Note 12.1. • the significance of suppliers rebates, • the variety of contracts, How our audit addressed this risk We examined the Group’s budgeting process • the estimates required in terms of determining the upon which the forecasted cash flows used for the purchasing data to which contract clauses apply impairment tests are based. to calculate receivables at the closing date, For those CGUs for which the recoverable amount • and their impact on the valuation of inventories. is close to the carrying amount, we performed the How our audit addressed this risk following: We analysed the internal control procedures relating •Assessed the components of the carrying amount to the fol low-up of rebates on contracts signed of the CGUs to which the Group has al located with suppliers and to estimating rebates in order to goodwill; determine the cost of goods sold. •Assessed the consistency of cash flow projections We also performed the following procedures: with the economic environments in which the Group’s subsidiaries operate, as wel las the • analysed, on a sample basis, the contracts signed reliability of the estimate process in particular by with suppliers as well as the proper application of examining any differences between past cash flow the terms and conditions of those contracts where projections and actual cash flows; used to determine rebates recognized during the year, particularly in terms of the volumes •Assessed, with the assistance of our valuation purchased and including for the estimation of experts, the reasonableness of the discount rates suppliers rebates receivables at year-end; applied to the forecasted cash flows of the various CGUs; • reconci led, on a sample basis, the amount of purchases made with the calculation bases for •Compared the long-term growth rates of CGUs determining rebate receivables at year-end, as with macro-economic forecasts; well as with any purchasing confirmations received REXEL 2017 – REGISTRATION DOCUMENT 272