AGRIBEL HOLDINGS LTD FINANCIAL REVIEW 2021
AUDITOR ’ S REPORT
Key Audit Matter
Therefore , the calculation of the ECL allowance was considered to be a Key Audit Matter .
How the matter was addressed in the audit
• We assessed the adequacy of the disclosures made on judgements and estimates made on the provision for expected credit losses in terms of IFRS 9 .
Valuation of business acquisitions ( Consolidated financial statements )
Suidwes acquisition : The Group acquired 100 % shareholding in Suidwes Holdings Group of companies for R113m and recognised a gain on bargain purchase of R36m .
The acquisition was accounted for using the acquisition method as prescribed in IFRS 3 : Business Combinations , where the Group performed a purchase price allocation (“ PPA ”) exercise as disclosed in Note 6.1 to the financial statements .
Hinterland share buy back : Furthermore , the Group obtained 100 % shareholding of Hinterland Holdings ( Pty ) Ltd as a result of Hinterland Holdings ( Pty ) Ltd repurchasing 50 % of its shares issued to Afgri Agri Services Ltd ( share buy-back ). The previously held 50 % shareholding was revalued and a remeasurement gain of R28m was recognised as well as a gain on bargain purchase of R88m .
The revaluation of the previously held 50 % shareholding was performed in terms of IAS 28 : Investments in Associates , before the share buy back transaction , which was accounted for using the acquisition method as prescribed in IFRS 3 , where the Group performed a PPA exercise as disclosed in Note 6.2 to the financial statements .
The significant management judgment and estimates involved in the PPA exercise mainly relate to the fair value determination of the following :
- The acquired assets , particularly an extensive retail property portfolio across a wide geographical area in towns with limited comparable property transactions , including 23 grain silos ;
- The previously held investment in Hinterland Holdings ;
- The intangibles which include trademarks , customer relationship , accreditations and supplier agreements for the Suidwes acquisitions ; and
- The intangibles which include customer relationship for the Hinterland acquisitions .
Our audit procedures included , amongst others , the following :
• We have read the purchase agreements to obtain an understanding of the transactions and the key terms . We reviewed the key terms and conditions of the transactions accounted for to determine whether they are consistent with the terms approved .
• We assessed the purchase consideration which was split as follows : Suidwes acquisition : - 37 % of the consideration was Senwes shares that were converted for which we performed a recalculation and inspected the relevant transactions ; and - 67 % was a cash consideration for which we inspected the actual payment .
Hinterland share buy back : We evaluated the accounting treatment and purchase price allocation in terms of IFRS3 as well as the accounting treatment of the previously held interest pertaining to the Hinterland Holdings share buy back in terms of IAS 28 .
• We inspected management ’ s identification and valuation of identifiable assets as part of the PPA in terms of IFRS3 and performed further assessments as noted below on the values .
• With the assistance of our valuation specialists , we reviewed management ’ s valuation methodologies and assessed the key assumptions and inputs used in measuring the fair value of the identifiable assets against the principles as set out in IFRS 13 and by reference to actual or independent data supporting the assumptions and inputs .
• We assessed the adequacy of the related disclosures in Note 6.2 to the consolidated financial statements in terms of IFRS 3 , IFRS 13 and IAS 28 .
Due to the complexity involved in determining the fair value of the above assets , we involved our internal valuation experts .
In addition , the business combinations required other adjustments outside the PPA , to align the accounting treatment of certain balances in the acquired entities to
4 AGRIBEL ANNUAL FINANCIAL REVIEW 2021 Agribel Holdings Limited Reg nr : 1996 / 017629 / 06