Page 221 - Tata_Chemicals_yearly-reports-2020-2021
P. 221
Integrated Report Statutory Reports Financial Statements
1-59 60-146 Consolidated
Impairment evaluation of goodwill and mining rights (refer notes 2.3.1, 2.16, 7 and 8 to the Consolidated Financial
Statements)
The Key Audit Matter How the matter was addressed in our audit
The carrying amount of goodwill and mining rights represents Our audit procedures included the following:
33% of the Group’s total assets. Assessing the identification of relevant Cash Generating
The Group tests goodwill for impairment annually, or more Units (CGU) to which goodwill is allocated and to which
frequently when there is an indication that the cash generating mining rights belong that are being tested;
unit to which goodwill has been allocated may be impaired. Assessing the accuracy of prior period forecasts of the CGU
Mining rights are tested for impairment when there is an with the actual financial performance of the CGU;
indication that these may be impaired.
Challenging the assumptions used in impairment analysis,
With the spread of COVID-19 in India and globally, demand such as growth rate, discount rate, forecasted gross margins
loss is expected for the products of the Group. We consider the and forecasted revenue. This was based on our knowledge
impairment testing of goodwill and mining rights by the Group of the Group and the markets in which the CGU operates.
to involve significant estimates and judgment. We took assistance of our valuation specialists for the above
We identified the impairment assessment of goodwill and mining testing;
rights as a key audit matter since the assessment process is Performing sensitivity analysis of the key assumptions, such
complex and judgmental by nature and is based on assumptions as growth rates, discount rate, forecasted gross margins and
relating to: forecast revenue used in determining the recoverable value;
- Identifying Cash Generating Unit (‘CGU’) for allocation of Evaluating the adequacy of disclosures of key assumptions,
goodwill; judgements and sensitivities in respect of goodwill and
- projected future cash inflows; mining rights.
- expected growth rate and profitability;
- discount rate;
- perpetuity value based on long term growth rate;
- sensitivity analyses; and
- macro-economic growth factors.
Employee benefits provision (refer notes 2.20, 21 and 40 to the Consolidated Financial Statements)
The Key Audit Matter How the matter was addressed in our audit
The valuation of employee benefits by the Group’s UK and US Our audit procedures included:
subsidiaries is performed annually with the assistance of external Involving our actuarial specialists to assist us in evaluating all
independent actuaries. pension plans;
This involves significant estimates and judgment. There are Assessing and testing the valuation methodology used by
inherent uncertainties involved in estimating salary increase, the actuary;
mortality rate, return on plan assets, discount rate and changes in Evaluating the competency of the experts appointed by the
provisions of pension laws.
Group;
These estimates of the Group and our related skeptical judgements Challenging assumptions used by the Group based on
are considered to be significant to our overall audit strategy and externally derived data in relation to key inputs such as
planning. Accordingly, we have considered employee benefits inflationary expectations, discount rates and mortality rates
provision for certain components of the Group as a key audit with the assistance of our subject matter experts;
matter.
Identifying any changes in actuarial assumptions resulting
into actuarial gain or loss;
Performing sensitivity analysis on the assumptions with the
assistance of our subject matter experts;
Assessing and testing the adequacy of disclosures of key
assumptions and sensitivities in respect of the employee
benefits provision.
219
