Audit Report / Information • Mar 18, 2019
Audit Report / Information
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This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation.
We have audited the accompanying annual consolidated financial statements of Arctic Paper S.A. Group (the "Group"), whose parent entity is Arctic Paper S.A. (the "Parent Entity"), which comprise:
— the consolidated statement of financial position as at 31 December 2018,
and, for the period from 1 January to 31 December 2018:
and
— notes comprising a summary of significant accounting policies and additional explanatory information
(the "consolidated financial statements").
In our opinion, the accompanying consolidated financial statements of the Group:
Our audit opinion on the consolidated financial statements is consistent with our report to the Audit Committee dated 4 March 2019.
KPMG Audyt spółka z ograniczoną odpowiedzialnością sp.k.
© 2019 KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k., a Polish limited partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
ul. Inflancka 4A, 00-189 Warszawa, tel. +48 (22) 528 11 11, fax +48 (22) 528 10 09, Email [email protected], Internet www.kpmg.pl
We conducted our audit in accordance with:
We are independent of the Group in accordance with the Code of Ethics for Professional Accountants ("IFAC Code") issued by the International Ethics Standards Board for Accountants as adopted by the resolutions of the National Council of Certified Auditors, as well as other independence and ethical requirements, applicable to audit
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. They are the most significant assessed risks of material misstatements, including those due to fraud, described below and we performed appropriate audit procedures to address these matters. Key audit matters were addressed in
Decision 2005/909/EC (Official Journal of the European Union L 158 from 27 May 2014, page 77 and Official Journal of the European Union L 170 from 11 June 2014, page 66) (the "EU Regulation"); and
— other applicable laws.
Our responsibilities under those standards are further described in the Auditor's Responsibility for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
engagement in Poland. We have fulfilled all ethical responsibilities resulting from those requirements and IFAC Code. During our audit the key certified auditors and the audit firm remained independent of the Group in accordance with requirements of the Act on certified auditors and the EU Regulation.
the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon we have summarised our response to those risks. We do not provide a separate opinion on these matters. We have determined the following key audit matters:
.
The carrying value of the Group's property, plant and equipment and intangible assets presented in the financial statements amounted to PLN 951 million as at 31 December 2018.
Refer to: Note 5 Material values based on professional judgements and estimates, Note 9 Significant accounting policies, Note 25 Impairment test for tangible fixed assets and intangible assets
| Key audit matter | Our response |
|---|---|
| The Group decided to withdraw one of the production machines from the manufacturing process in the pulp mill of Arctic Paper |
Our procedures in this area included, among others: |
| Grycksbo AB in Sweden. Furthermore, the financial results of the Arctic Paper Grycksbo AB cash generating unit were worse than budgeted for 2018. |
— understanding of the process relating to impairment testing of non-current assets as well as related internal controls, |
| A recoverable amount of assets which do not generate cash flows independently from other assets is estimated based on the |
— assessment of the quality of the Group's budgeting process by comparing previous budgets to their subsequent realization, — with support of our valuation specialists: |
| projected cash flows of the smallest cash generating unit to which these assets belong. |
• assessment of the macroeconomic assumptions including discount rate applied in the model by comparing them to publicity available data, |
| As a result, as at 31 December 2018 the Group performed the impairment test in respect of the Arctic Paper Grycksbo AB cash-generating unit. |
• assessment whether the discounted cash flows model complies with the requirements of the relevant financial reporting standards, |
| The estimate of future cash flows requires from management to apply a number of assumptions including the discount rate, exchange rates, expected prices of paper and pulp, as well as assumptions in respect of projected production volume, sales and operating expenses. These assumptions require significant subjective judgments and |
— assessment of significant assumptions applied in the impairment model, in particular related to sales, production levels and operating costs by comparing them to historical data of the cash generating unit subject to the impairment test and with respect to projected prices of pulp to publicly available external forecasts, |
| estimates which have a significant impact the consolidated financial statements. |
— challenging significant assumptions by analysing sensitivity of the model to changes in significant assumptions and |
| Based on the above, we considered the impairment of the property, plant and equipment and intangible assets to be a key audit matter. |
considering whether the level of significant assumptions applied in the model indicates management bias. |
| Furthermore we assessed the |
appropriateness and completeness of the disclosures in the consolidated financial statements in relation to the impairment of tangible and intangible fixed assets.
The consolidated financial statements of the Group as at and for the year ended 31 December 2017 were audited by another
auditor, who expressed an unqualified opinion on those financial statements on 9 April 2018.
The Management Board of the Parent Entity is responsible for the preparation of consolidated financial statements that give a true and fair view of the consolidated financial position of the Group and of its consolidated financial performance in accordance with International Financial Reporting Standards, as adopted by the European Union, the adopted accounting policy, the applicable laws and the provisions of the Parent Entity's articles of association and for such internal control as the Management Board of the Parent Entity determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Management Board of the Parent Entity is responsible for assessing the
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with NSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
The scope of audit does not include assurance on the future viability of the Group or on the efficiency or effectiveness with which the Management Board of the Parent Entity has conducted or will conduct the affairs of the Group.
As part of an audit in accordance with NSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board of the Parent Entity either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
According to the accounting act dated 29 September 1994 (Official Journal from 2019, item 351) (the "Accounting Act"), the Management Board and members of the Supervisory Board of the Parent Entity are required to ensure that the consolidated financial statements are in compliance with the requirements set forth in the Accounting Act. Members of the Supervisory Board of the Parent Entity are responsible for overseeing the Group's financial reporting process.
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report on the audit of the consolidated financial statements to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report on the audit of the consolidated financial statements. However, future events or conditions may cause the Group to cease to continue as a going concern;
remain solely responsible for our audit opinion.
We communicate with the Audit Committee of the Parent Entity regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We provide the Audit Committee of the Parent Entity with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Audit Committee of the Parent Entity, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current reporting period and are therefore the key audit matters. We describe these matters in our auditors' report on the audit of the consolidated financial statements unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The other information comprise the information included in the consolidated annual report of the Group, but does not include the
The Management Board of the Parent Entity is responsible for the Other information in accordance with applicable laws.
The Management Board and members of the Supervisory Board of the Parent Entity are required to ensure that the report on activities
Our opinion on the consolidated financial statements does not cover the Other information.
consolidated financial statements and our auditor's report thereon (the "Other information").
of the for the year ended 31 December 2018 (the "Report on activities"), including the corporate governance statement which is a separate part of the Report on activities, are in compliance with the requirements set forth in the Accounting Act.
In connection with our audit of the consolidated financial statements, our responsibility was to read the Other information and, in doing so, consider whether the Other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we performed, we conclude that there is a material misstatement in the Other information, we are required to report that fact.
In accordance with the Act on certified auditors our responsibility was to report if the Report on activities was prepared in accordance with applicable laws and the information given in the Report on activities is consistent with the consolidated financial statements.
Based on the work undertaken in the course of our audit of the consolidated financial statements, in our opinion, the accompanying Report on activities, in all material respects:
In our opinion, the corporate governance statement, which is a separate part of the Report on activities, includes the information required by paragraph 70 subparagraph 6 point 5 of the Decree of the Ministry of Finance dated 29 March 2018 on current and periodic information provided by issuers of securities and the conditions for recognition as equivalent of information required by the laws of a nonmember state (Official Journal from 2018, item 757) (the "decree").
Information about the statement on non-financial information
In accordance with the requirements of the Act on certified auditors, we report that the Group has prepared a separate report on nonfinancial information referred to in art. 55 paragraph 2c of the Accounting Act.
Moreover, in accordance with the requirements of the Act on certified auditors our responsibility was to report whether the Group included in the statement on corporate governance information required by the applicable laws and regulations, and in relation to specific information indicated in these laws or regulations, to determine whether it complies with the applicable laws and whether it is consistent with the consolidated financial statements .
Furthermore, based on our knowledge about the Group and its environment obtained in the audit of the consolidated financial statements, we have not identified material misstatements in the Report on activities.
Furthermore, in our opinion, the information identified in paragraph 70 subparagraph 6 point 5 letter c-f, h and letter i of the decree, included in the corporate governance statement, in all material respects:
We have not performed any assurance procedures in relation to the separate report on non-financial information and, accordingly, we do not express any assurance conclusion thereon.
To the best of our knowledge and belief, we did not provide prohibited non-audit services referred to in art. 5 paragraph 1 second
subparagraph of the EU Regulation and art. 136 of the act on certified auditors.
We have been appointed for the first time to audit the annual consolidated financial statements of the Group by resolution of
Supervisory Board dated 22 February 2018. Our period of total uninterrupted engagement is 1 year.
Signed on the Polish original Signed on the Polish original
Wojciech Drzymała Ewa Skrzypczak
Key Certified Auditor Key Certified Auditor Registration No. 90095 Registration No. 12897 Limited Partner, Proxy
Poznań, 18 March 2019
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