LISI GROUP - 2018 Financial report

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2 IAuditors’ Special Report On The Consolidated Financial Statement
- Financial Year Ended December 31, 2018
To the Shareholders’ General Meeting of LISI,
Opinion
In accordance with the terms of our appointment by your Shareholders’
General Meeting, we have conducted the audit of the accompanying
consolidated financial statements of LISI for the financial year ended
December 31, 2018.
We certify that the consolidated financial statements for the period are,
inrespectoftheIFRSstandardasadoptedintheEuropeanUnion,correct
and genuine and give a true and fair viewof the earnings derived fromthe
Company’s activity during the year, as well as the financial position and
theassetsand liabilitiesattheendofthefinancialyear,ofallconsolidated
companies of the consolidated group.
The opinion expressed above is consistent with the content of our report
to the Audit Committee.
Basis of our opinion
Audit repository
We have carried out our audit in accordance with the professional
standards in use in France. We consider that the itemswe have gathered
formboth a sufficient and an appropriate basis for our opinion.
Our responsibilities under these standards are specified in the section
“Responsibilities of Auditors relating to the audit of the consolidated
financial statements” of this report.
Independence
Wehavecarriedoutourauditincompliancewiththerulesofindependence
applicable to us, for the period running from January 1, 2018 to the date
of issue of this report, and in particular, we have not provided services
prohibitedunderArticle5,paragraph1,ofRegulation(EU)No.537/2014or
under the French Code of Ethics for Auditors.
Justification of our assessments - Key audit matters
Pursuant to the provisions of Articles L. 823‑9 and R. 823‑of the French
Commercial Code on the justification of our assessments, we informyou
of the key audit matters relating to the risk of material misstatements
which, in our professional judgment, have been more significant for the
audit of the consolidated financial statements of the financial year, and
howwe tackled these risks.
These assessments formpart of our task asAuditors of the consolidated
financial statements, taken as a whole, and have helped us to form our
opinion, as it is described above. We do not express an opinion on
elements of these consolidated financial statements taken separately.
Goodwill - impairment test
Risk identified How we tackled it
At December 31, 2018, the net value of goodwill stood at €347,787,000 for a
balance sheet total of €1,865,775,000. These goodwill amounts correspond to
differences recognized between the cost of business combinations and LISI’s
share of the fair value, at the acquisition date, of assets and liabilities relating
to these companies, as detailed in Note 2.2.7.1 to the consolidated financial
statements.
Goodwill is subject to an impairment test at each year-end and each time that
a risk of impairment is identified. Notes 2.2.8.5 and 2.5.1.1.a) of the Notes to the
Consolidated Financial Statements describe the methods used and the
assumptions made for this test. For the purposes of these tests, goodwill is
allocatedtoeachgroupofCashGeneratingUnits(CGU)which,fortheLISIGroup,
corresponds to the three divisions: LISI AEROSPACE, LISI AUTOMOTIVE and
LISI MEDICAL.
The recoverable value of each of the Group’s CGUs is compared to the net book
value of the corresponding assets. The recoverable amount is defined as the
higher of the realizable value and the value in use. If the recoverable value is
lower than the net book value of the CGU tested, the discrepancy is recognized
as a loss of value.
As part of our work, we reviewed the process for preparation and approval of
estimates and assumptions made by management for the purposes of
impairment tests. Our work consisted in particular in:
• appraising the discount rate used by management, by comparing it to our
ownestimateofthisrate,establishedwiththehelpofourvaluationexperts,
and by analyzing the different constituent elements;
• examining, using sample testing techniques, the future cash flows used,
with regard to the budget figures approved by the Board of Directors, the
historical results, as well as the economic and financial environment in
which the Group operates;
• checking, using sample testing techniques, themathematical correctness
of the impairment tests performed by management.