New Wave Group AB Annual_report_2018_EN_HQ | Page 123

NWG // FINANCIAL INFORMATION
judgement in regards to recognition of discounts for
retailers, risks related to revenue reduction and the
transfer of risk to the customer, which is why we have
considered the revenue recognition as a key audit
matter in our audit.
The audit procedures related to revenue recog-
nition, among other things include:
# # Walkthrough of processes and procedures
related to revenue recognition, verification of
compliance in regards to IFRS standards.
# # Detailed analysis of recorded revenue for
different agreements based on historical
results, budgets, and the follow ups where made
to deviations from the expected outcome.
# # Random inspection of contracts and the
transfer of risk associated to the period close in
order to verify correct revenue accruals.
# # Review of the supporting material that judg-
ments, calculations and accruals related to
estimates of discounts and bonuses are based
on.
# # We have reviewed the transfer to IFRS 15
and assess that the revenue recognition is in
accordance with IFRS 15 and that related
disclosures in accordance with IFRS 15 are
met.
We have also reviewed the Company's effectiveness
regarding the revenue disclosures.
Valuation of goodwill and trademarks
The reported value for goodwill and trademarks
amounted to SEK 1,401 million per 31 of December
2018 according to the consolidated statement
regarding financial position. That amount repre-
sents 20 percent of total assets. The Company
performs checks of the reported value against the
recoverable amount at an annual basis or at signs
of impairment. The recoverable amount is deter-
mined for each cash generating unit by performing
a present value calculation of future cash flows. The
calculations are based on the decided business plan
for the next five years and an estimate of cash flows
at the end of the forecast period. The calculations
are also based on a number of assumptions, such as
growth, operating margin and discount rate.
Changes in assumptions have a material effect
on the calculation of the recoverable amount. Due to
this fact we have considered the valuation of goodwill
and trademarks as a key audit matter in our audit.
A description of the impairment loss test is
presented in Note 8 “Intangible fixed assets”.
As a part of our audit we have evaluated
and tested the Company’s process for preparing
impairment loss tests. The evaluation and testing
has been based on a review of the accuracy of earlier
forecasts and assumptions. We performed reaso-
nability assessments of forecasted cash flows and
growth assumptions by comparing them to other
companies within the same industry. Furthermore
we have tested the marketability of the company’s
assumptions regarding the discount rate and long
term growth rate with support from our valuation
experts. We have also reviewed the Company’s
model and method for conducting impairment loss
tests, this includes an evaluation of the company’s
sensitivity analysis. We have also reviewed the effec-
tiveness of the disclosures related to valuation of
goodwill and trademarks in the annual report.
Valuation of inventory
The reported value of inventory amounted to SEK
3,231 million per 31 of December 2018 according
to the consolidated statement regarding financial
position. That amount represents 46 percent of total
assets. The inventory is valued based on the first
in-first out principle at the lowest cost and net reali-
zable value at the balance sheet date. The calculation
of the net realizable value is based on the Company’s
assumptions regarding slow moving and obsolete
goods. Due to this fact we have considered the valu-
ation of inventory as a key audit matter in our audit.
The Company’s disclosures regarding stock-in-
trade is presented in note 16 in the annual report.
ANNUAL REPORT // 123