IBERSOL Annual Report and Consolidated Accounts 2017

ANNUAL REPORT 2017 Key Audit Matter Summary of the Audit Approach Recoverability of fixed assets, intangible assets and Goodwill In 31 December 2017 fixed assets and intangible assets (excluding goodwill) recognized in consolidated financial statements amount to 197,9 and 35,1 million of euros, respectively, being done impairment tests to the respective cash generating units identified, whenever there is indicators that the respective recoverable amount may be lower than the amount registered. In result of the impairment tests impairment losses of 169,635 euros were registered in 2017. Additionally, in 31 December 2017, Goodwill recognized in consolidated financial statements amounts to 92,8 million euros and respect mainly to acquisition in previous years of 2 subsidiaries (Lurca and Vidisco) and of Eat Out Group, being done impairment tests using the discounted cash flow model. Considering the materiality of the amounts, the complexity of the assessment model and the elevated level of judgement, related to the assumptions used in impairment tests, the matter is a key audit matter for the issuance ofour opinion. The calculation of the value in use requires that management defines a set of estimatives and assumptions based on economic and market forecasts, namely in what concerns projections of future cash flows, growth rates in perpetuity and discount rates to be used. Disclosures related to fixed assets, intangible assets and goodwill are presented in notes 8, 9 and 35 of the consolidated financial statements. In the specific case of fixed assets and intangible assets, we analyse the EBITDA of the cash generating units in order to identify the units that present indicators of impairments. For the situations that require the performance of impairment tests, the audit procedures that we developed consisted in the following: - Assessment of the adequation of the impairment model used by management and respective calculations therein; - Appreciation of the reasonability of assumptions used inherent to the impairment model, namely those that present more sensibility in the determination of the value in use, namely evolution of revenues, margin EBITDA, discount rate and growth rate in perpetuity; - Assessment of the reasonability of projections of future cash flows, compared with historic performance, in particular the following: (i) Assessment of growth rates of sales by their comparation to historic and forecasted values for the economy and business sector; (ii) in the specific case of foods beverage business in retail service areas, we tested the reasonability of assumptions of management, relatively to the evolution of traffic in SCUT’s through analysis of the report of the Institute of Mobility and Transports (IMT); - Obtaining information of PwC specialists in relation to discount rates used, considering comparable data from other companies in the sector of food & beverage in order to assess the reasonability of the discount rate; - Making meetings with management to understand and assess the assumptions used and their. - Performing a sensibility analysis to main assumptions of the model. We also reviewed the compliance of disclosures considering the accounting standards applicable, namely IAS 36. Statutory Audit Report 31 December 2017 Ibersol, S.G.P.S., S.A. PwC 2 of 7 285