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Report on the financial statements 2015
In our opinion:
- the consolidated financial statements give a true and fair view of the financial position of GrandVision N.V. as at 31 December 2015, and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code;
- the parent company financial statements give a true and fair view of the financial position of GrandVision N.V. as at 31 December 2015 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the accompanying financial statements 2015 of GrandVision N.V., Haarlemmermeer (‘the company’). The financial statements include the consolidated financial statements of GrandVision N.V. and its subsidiaries (together: ‘the Group’) and the parent company financial statements.
The consolidated financial statements comprise:
- the consolidated balance sheet as at 31 December 2015;
- the following statements for 2015: the consolidated income statement and the consolidated statements of other comprehensive income, the consolidated changes in shareholders’ equity and the consolidated cash flow statement; and
- the notes, comprising a summary of significant accounting policies and other explanatory information.
The parent company financial statements comprise:
- the parent company balance sheet as at 31 December 2015;
- the parent company income statement for the year then ended; and
- the notes, comprising a summary of the accounting policies and other explanatory information.
The financial reporting framework that has been applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the parent company financial statements.
The basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the 'Our responsibilities for the audit of the financial statements' section of our report.
We are independent of GrandVision N.V. in accordance with the 'Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten' (ViO) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA).
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit approach
Overview and context
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the Management Board made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Management Board that may represent a risk of material misstatement due to fraud.
We ensured that the audit teams both at group and at component levels included the appropriate skills and competences which are needed for the audit of a global retail company. We therefore included specialists in the areas of IT, valuations, taxes, actuarial and financial instruments expertise in our team.
Overall materiality: €16.7 million which represents 5% of profit before tax.
We conducted audit work in 13 locations covering 15 countries. Site visits were conducted by the group audit team to eight locations – Apollo (Germany), Vision Express (United Kingdom), GrandVision Benelux (The Netherlands), GrandVision (France), Synoptik (Denmark), Avanzi (Italy), Randazzo (Italy) and Lensmaster (Russia). Audit coverage: 81% of consolidated revenue and 76% of consolidated total assets.
Key audit matters
Assessment of goodwill valuation; accounting for acquisitions; accounting for uncertain tax and legal positions.
The scope of our audit is influenced by the application of materiality which is further explained in the section 'Our responsibility for the audit of the financial statements'.
We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements on our opinion.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall group materiality
€16.7 million (2014: €12.5 million).
How we determined it
5% of profit before tax (2014: 5% of profit before tax).
Rationale for benchmark applied
We have applied this benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of users of the financial statements. On this basis we believe that profit before tax is an important metric for the financial performance of the company.
To each component in our audit scope, we, based on our judgement, allocate materiality that is less than our overall group materiality. The materiality allocated across components in the range of €0.2 million to €8.5 million.
We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.
We agreed with the Supervisory Board that we would report to them misstatements identified during our audit above €250,000 (2014: €250,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
The scope of our group audit
GrandVision N.V. is the parent company of a group of entities. The financial information of this group is included in the consolidated financial statements of GrandVision N.V.
The group audit focussed on the significant components Apollo (Germany), Vision Express (United Kingdom), GrandVision Benelux (The Netherlands) and GrandVision (France). Additionally, based on risk profile and significance to the group, nine locations were selected for full scope audit procedures.
In total, in performing these procedures, we achieved the following coverage on the financial line items:
Profit before tax
None of the remaining locations represented more than 2% of total group revenue or total group assets. For those remaining locations we performed, amongst others, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those locations.
For all Dutch holding entities, the group engagement team performed the work. For all other locations that are in scope of the group audit, we used component auditors from other PwC network firms who are familiar with the local laws and regulations to perform this audit work.
Where the work was performed by component auditors, we determined the level of involvement we needed to have in the related audit work to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the group financial statements as a whole. The group engagement team attended all clearance meetings of the component teams with local and group management. The group team engagement leader and the senior members of the group engagement team reviewed all reports about the audit approach and findings of the other component auditors in detail. The group engagement team visited Apollo (Germany), Vision Express (United Kingdom), GrandVision Benelux (The Netherlands) and GrandVision (France) given the relative size of the locations. For each of these locations we have reviewed the audit files of the component auditors. In addition the group engagement team visits other operating companies on an annual rotational basis. In 2015 the group engagement team visited Synoptik (Denmark), Avanzi (Italy), Randazzo (Italy) and Lensmaster (Russia).
The group consolidation, financial statement disclosures and a number of complex items are audited by the group engagement team at the company’s head office. These include, the accounting of the long term incentive plan, the tax position and derivative financial instruments including hedge accounting.
By performing the procedures above at components, combined with additional procedures at group level, we have obtained sufficient and appropriate audit evidence regarding the financial information of the group as a whole to provide a basis for our opinion on the consolidated financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the Supervisory Board, but they are not a comprehensive reflection of all matters that were identified by our audit and that we discussed. We described the key audit matters and included a summary of the audit procedures we performed on those matters.
The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters or on specific elements of the financial statements. Any comments we make on the results of our procedures should be read in this context.
The key audit matters 'Impairment assessment of goodwill' and 'Accounting for acquisitions' are similar in nature to the key audit matters we reported in 2014. Last year’s key audit matter on the 'Liability for long term incentive plans' fully related to the expected listing of GrandVision’s shares and the related change of accounting of the plans. Following the listing and the payment of a significant part of the incentive liability, it is not considered as a key audit matter anymore.
Key audit matter
How our audit addressed the matter
Assessment of goodwill valuation
Refer to note 2.14, 4.2, 14 and 16 of the financial statements for the accounting policies and underlying assumptions.
We evaluated and challenged the Management Board’s future cash flow forecasts and the process by which they were drawn up, and tested the underlying value in use calculations. We tested these values by comparing the prior year’s forecast with the company’s actual performance in 2015, given this would be an indicator of the quality of the company’s forecasting process.
Key audit matter
How our audit addressed the matter
Accounting for acquisitions
See notes 2.3, 2.12, 2.13 and 6 to the financial statements for the Management Board’s disclosures of the related accounting policies, judgements and estimates.
We tested the (provisional) purchase price allocations in which we especially focused on the valuation of the intangible fixed assets such as trademarks and customer databases of the acquired companies. We tested that GrandVision applies a consistent and generally accepted valuation method for the trademarks and customer databases. We particularly focussed on the opening balances and related fair value adjustments. We evaluated the timing and appropriateness of the accounting treatment and the consideration of the acquisitions based on the contractual agreements per individual acquisition. With respect to our audit work on the goodwill valuation we refer to key audit matter “impairment assessment of goodwill”. In addition we have tested the adequacy of the related disclosures.
Key audit matter
How our audit addressed the matter
Accounting for uncertain tax and legal positions
See note 4.5, 4.7, 29 and 35.1 to the financial statements for the Management Board’s disclosures of the related accounting policies, judgements and estimates.
We have evaluated these tax and legal cases on an individual basis by evaluating the reports issued by the different authorities and the claim received from Zeiss. We gained an understanding of the process management followed to assess the impact of the tax and legal cases. We especially focussed on the present situation at GrandVision and the arguments of the different authorities and status pending legal proceedings. In addition we have evaluated the tax and legal opinions of management’s experts which have been obtained by GrandVision on the respective cases. Furthermore specific focus has been set on the similarities and differences of the situation at GrandVision and comparable tax and legal cases. Based on the above we, together with specialists in our team, evaluated the reasonableness of management’s assessment for the accounting of this uncertain tax and legal positions. In addition we have tested the adequacy of the related disclosures.
Responsibilities of the Management Board and the Supervisory Board
The Management Board is responsible for:
- the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the Management Board report in accordance with Part 9 of Book 2 of the Dutch Civil Code, and for
- such internal control as the Management Board determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Management Board is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Management Board should prepare the financial statements using the going concern basis of accounting unless the Management Board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The Management Board should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.
The Supervisory Board is responsible for overseeing the company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our responsibility is to plan and perform an audit engagement to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our audit opinion aims to provide reasonable assurance about whether the financial statements are free from material misstatement. Reasonable assurance is a high but not absolute level of assurance which makes it possible that we may not detect all misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A more detailed description of our responsibilities is set out in the appendix to our report.