Componenta Oyj — Audit Report / Information 2020

Mar 12, 2021

Componenta’s Auditor’s report for the financial period 1 january – 31 December 2020

Componenta’s Auditor’s report for the financial period 1 january – 31 December 2020

Componenta Corporation, Stock Exchange Release, 12 March 2021 at 8.00 am Finnish
time

The Auditor of Componenta Corporation has today issued the following Auditor’s
Report for the financial period 1 January - 31 December 2020.

“Auditor’s Report (Translation of the Finnish Original)

To the Annual General Meeting of Componenta Oyj

Report on the Audit of the Financial Statements

Opinion

In our opinion
•    the consolidated financial statements give a true and fair view of the
group’s financial position and financial performance and cash flows in
accordance with International Financial Reporting Standards (IFRS) as adopted by
the EU
•    the financial statements give a true and fair view of the parent company’s
financial performance and financial position in accordance with the laws and
regulations governing the preparation of the financial statements in Finland and
comply with statutory requirements.

Our opinion is consistent with the additional report to the Board of Directors.

What we have audited

We have audited the financial statements of Componenta Oyj (business identity
code 1635451-6) for the year ended 31 December 2020. The financial statements
comprise:
•    the consolidated statement of financial position, income statement,
statement of comprehensive income, statement of changes in shareholders’ equity,
cash flow statement and notes, including a summary of significant accounting
policies
•    the parent company’s balance sheet, income statement, cash flow statement
and notes.

Basis for Opinion

We conducted our audit in accordance with good auditing practice in Finland. Our
responsibilities under good auditing practice are further described in the
Auditor’s Responsibilities for the Audit of the 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.

Independence

We are independent of the parent company and of the group companies in
accordance with the ethical requirements that are applicable in Finland and are
relevant to our audit, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.

To the best of our knowledge and belief, the non-audit services that we have
provided to the parent company and to the group companies are in accordance with
the applicable law and regulations in Finland and we have not provided non-audit
services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014.
The non-audit services that we have provided are disclosed in note 5 to the
Financial Statements.

Material uncertainties related to going concern

We draw attention to the accounting principles of the consolidated financial
statements and of the financial statements of the parent company, which describe
the status and progress of the corporate restructuring proceedings of the group
companies and their ability to continue as a going concern. The Board of
Directors and Management of Componenta Group have assessed the company’s ability
to continue as going concern taking into consideration the company’s liquidity
situation and the impact of the restructuring proceedings to the financial
position and cash flows of the group and group companies. The success of the
restructuring programmes as well as the outcome of the cash flow forecasts
together with other aspects desribed in notes to the consolidated fiancial
statements and notes to the parent company´s financial statements, are such
uncertainties that may cast significant doubt on the Componenta Group’s and its
subsidiaries’ ability to continue as a going concern.

Our opinion is not qualified in respect of this matter.

Tarkastuksen yleinen lähestymistapa

Overview
•    Overall group materiality: € 630 000 euros
•    Audit scope: The group audit scope has included the parent company and its
subsidiaries in Finland.
Key Audit Matters in the audit of the financial statements in the current period
•    Timing of revenue recognition
•    Valuation of assets taking into consideration the corporate restructuring
proceedings and reorganisation of the business operations
•    The effect of the corporate restructuring proceedings and reorganising of
the business operations to the parent company’s financial statements.

As part of designing our audit, we determined materiality and assessed the risks
of material misstatement in the financial statements. In particular, we
considered where management made subjective judgements; for example, in respect
of significant accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.

Materiality

The scope of our audit was influenced by our application of materiality. An
audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement. Misstatements may arise due to
fraud or error. They are considered material if individually or in aggregate,
they could reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative
thresholds for materiality, including the overall group materiality for the
consolidated financial statements as set out in the table below. These, together
with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the
effect of misstatements on the financial statements as a whole.

Overall group materiality
•    630 000 euros (previous year 500 000 euros)

How we determined it
•    Overall group materiality is determined as a percentage of the group’s
FY2020 net sales.

Rationale for the materiality benchmark applied
•    We chose net sales as the benchmark because, in our view, it is the
appropriate benchmark, which the users of the financial statements regularly use
to evaluate the performance of the group.

How we tailored our group audit scope

We tailored the scope of our audit, taking into account the structure of the
group, the accounting processes and controls, and the industry in which the
group operates. The scope included the parent company and its subsidiaries in
Finland. We have predefined the audit focus areas of financial information to
each group component.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of
most significance in our audit of the financial statements of the current
period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.

As in all of our audits, we also addressed the risk of management override of
internal controls, including among other matters consideration of whether there
was evidence of bias that represented a risk of material misstatement due to
fraud.

In addition to matter described in paragraph above “Material uncertainties
related to going concern” we have concluded that the matters listed below are
key audit matters.

Key audit matter in the audit of the group

Timing of revenue recognition
Refer to Note 1 of the consolidated financial statements.
Componenta's revenue consist of sale of goods and services. The main sales
products are non-machined, machined and painted iron cast components.
Additionally the company sells machining services for its clients own products.
Revenue from products and services sold to customers is mainly recognized when
disposed, that is the moment when the customer assumes control of the goods.
Small part of the revenue from machining services is recognized over time and
the degree of fulfillment is based on the proportion of actual and estimated
total costs.

The timing of revenue recognition has been considered a key audit matter in the
auditing of the consolidated financial statements due to the significance of
revenue to the financial statements.

How our audit addressed the key audit matter

Our audit procedures included for example the following procedures:
­    Evaluation of internal control activities over revenue recognition and
testing of key controls.
­    Analysis of significant sales contracts to test correct accounting
treatment.
­    Testing timeliness of revenue recognition by comparing individual sales
transactions to delivery documents and by checking significant credit notes
issued after year-end.
­    Analysis of revenue transactions using data analysis techniques.
­    Our audit procedures included for example the following procedures:
­    Evaluation of internal control activities over revenue recognition and
testing of key controls.
­    Analysis of significant sales contracts to test correct accounting
treatment.
­    Testing timeliness of revenue recognition by comparing individual sales
transactions to delivery documents and by checking significant credit notes
issued after year-end.
­    Analysis of revenue transactions using data analysis techniques.
­    Testing of accounts receivables by requesting confirmations from the
company’s customers and by reconciling cash payments received after the year end
against the accounts receivable balances at the year end.

Key audit matter in the audit of the group

Valuation of assets taking into consideration the corporate restructuring
proceedings and reorganisation of the business operations.
Refer to accounting principles and Notes 3, 13 and 14 of the consolidated
financial statements.
The Componenta Group’s parent company Componenta Corporation and its Finnish
subsidiary Componenta Castings Oy are under corporate restructuring programmes.
The uncertainties described in section “Material uncertainties related to going
concern” cast significant doubt on the group’s ability to continue as a going
concern.

The Board of Directors and Management have used significant judgment in
assessing the effect of above mentioned matters in valuation of assets including
goodwill arising from acquisition of Componenta Manufacturing Oy in the end of
2019. For this reason the valuation of assets taking into consideration the
corporate restructuring proceedings and reorganising of the business operations
are considered a key audit matter in the group audit.

How our audit addressed the key audit matter
Our audit procedures included for example the following procedures:
-    We updated our perception of the contents of the corporate restructuring
proceedings and progress.
-    We discussed with the management and examined the matters discussed by the
board of directors related to reorganization of the business operations.
-    We assessed cash flow analysis prepared by management and reviewed by the
board of directors used as a basis of valuation of assets.
-    We assessed the management´s estimates related to valuation of properties.
-    We gained an understanding and assessed the reasonableness, consistency and
mathematical accuracy of the methods and assumptions used in goodwill impairment
testing.

Key audit matter in the audit of the parent company

The effect of the corporate restructuring proceedings and reorganising of the
business operations to the parent company’s financial statements.
Refer to the accounting principles of the consolidated financial statements and
the parent company’s financial statements.
The Componenta Corporation’s Finnish subsidiary Componenta Castings Oy is under
corporate restructuring programmes.

The assets on Componenta Corporation’s balance sheet consist to a large extent
of subsidiary shares and loan receivables from subsidiaries. Management have
used significant judgment in assessing the valuation of subsidiary shares and
loan receivables. When making the assessment the Management have considered
among other things the effect of the parent company’s and subsidiaries’
restructuring proceedings and their ability to continue as a going concern.

The Management have used significant judgment and estimations of future
development in assessing the effect of above mentioned matters in Componenta
Corporations financial statements. For this reason this matter is considered a
key audit matters in the audit of the parent company.

How our audit addressed the key audit matter

Our audit procedures included for example the following procedures:
-    We have updated our perception of the contents of the corporate
restructuring proceedings and progress.
-    We read the analyses of alternative outcomes of restructuring programs and
reorganisations of business prepared by management and approved by the board of
directors.
-    We assessed cash flow analysis prepared by management used as a basis of
valuation of certain assets.
-    We assessed the management´s estimates related to valuation of properties.

There is no significant risks of material misstatement referred to in Article
10(2c) of Regulation (EU) No 537/2014 with respect to the consolidated financial
statements or the parent company financial statements.

Responsibilities of the Board of Directors and the Managing Director for the
Financial Statements

The Board of Directors and the Managing Director are responsible for the
preparation of consolidated financial statements that give a true and fair view
in accordance with International Financial Reporting Standards (IFRS) as adopted
by the EU, and of financial statements that give a true and fair view in
accordance with the laws and regulations governing the preparation of financial
statements in Finland and comply with statutory requirements. The Board of
Directors and the Managing Director are also responsible for such internal
control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error.

In preparing the financial statements, the Board of Directors and the Managing
Director are responsible for assessing the parent company’s and the group’s
ability to continue as a going concern, disclosing, as applicable, matters
relating to going concern and using the going concern basis of accounting. The
financial statements are prepared using the going concern basis of accounting
unless there is an intention to liquidate the parent company or the group or to
cease operations, or there is no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s 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 good auditing practice 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 financial statements.

As part of an audit in accordance with good auditing practice, we exercise
professional judgment and maintain professional skepticism throughout the audit.
We also:

•    Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
•    Obtain an understanding of internal control relevant to the audit in order
to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the parent
company’s or the group’s internal control.
•    Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
management.
•    Conclude on the appropriateness of the Board of Directors’ and the Managing
Director’s use of the going concern basis of 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 parent company’s or 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 auditor’s report to
the related disclosures in the 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 auditor’s report. However, future events
or conditions may cause the parent company or the group to cease to continue as
a going concern.
•    Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events so that the financial
statements give a true and fair view.
•    Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the group to express
an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.

We communicate with those charged with governance 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 also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
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 those charged with governance, we determine
those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report 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.

Other Reporting Requirements

Appointment

We were first appointed as auditors by the annual general meeting on 28 February
2011.

Other Information

The Board of Directors and the Managing Director are responsible for the other
information. The other information comprises the report of the Board of
Directors and the information included in the Annual Review, but does not
include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is
to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially
misstated. With respect to the report of the Board of Directors, our
responsibility also includes considering whether the report of the Board of
Directors has been prepared in accordance with the applicable laws and
regulations.

In our opinion
•    the information in the report of the Board of Directors is consistent with
the information in the financial statements
•    the report of the Board of Directors has been prepared in accordance with
the applicable laws and regulations.

If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact. We
have nothing to report in this regard.

Helsinki 12 March 2021
PricewaterhouseCoopers Oy
Authorised Public Accountants

Samuli Perälä
Authorised Public Accountant (KHT)”

COMPONENTA CORPORATION

Sami Sivuranta
President and CEO

For further information. please contact:
Sami Sivuranta, President and CEO, tel. +358 10 403 2200
Marko Karppinen, CFO, tel. +358 10 403 2101

Distribution:
Nasdaq Helsinki
Principal media
www.componenta.com

Componenta is an international technology company with operations located in
Finland. With its wide technology portfolio. Componenta produces e.g. cast.
machined and unmachined components for its clients who are local and global
manufacturers of vehicles. machines and equipment. The company’s share is listed
on Nasdaq Helsinki.

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