Vetoquinol - Universal Registration Document - 2021

Vetoquinol Universal Registration Document 2020 Financial report 111 6 CONSOLIDATED FINANCIAL STATEMENTS Statutory auditor’s report on the consolidated financial statements 6.6.3 Justification of assessments - Key audit matters The global crisis related to the COVID-19 pandemic created special conditions for the preparation and audit of this year’s financial statements. This crisis and the exceptional measures taken within the context of the state of health emergency had multiple consequences for companies, particularly with respect to their activity and their financing, as well as increased uncertainties regarding their future prospects. Some of these mea- sures, such as travel restrictions and working from home, have also had an impact on the internal organiza- tion of companies and on the way audits are carried out. It is in this complex and evolving context that, in accor- dance with the provisions of Articles L. 823-9 and R. 823-7 of the French Commercial Code relating to the justification of our assessments, we draw to your atten- tion the key audit matters in relation to risks of material misstatement which, in our professional judgment, were of most significance in the audit of the consolidated financial statements for the financial year, as well as our responses to those risks. These assessments formed part of our audit of the consolidated financial statements, taken as a whole, and contributed to the formation of the opinion expressed above. We do not express an opinion on elements of these consolidated financial statements taken individually. Valuation of goodwill Risk identified As of December 31, 2020, the net value of goodwill amounted to €79.9 million. The accounting principles applied to the valuation of goodwill are set out in Note 6.5.20.1 “Goodwill” and the allocation per cash-gene- rating unit (CGU) is presented in Note 6.5.20.2 to the consolidated financial statements. Your Group reviews the valuation of goodwill once a year or more fre- quently if circumstances indicate possible impairment, in accordance with the conditions set out in Note 6.5.3.6 “Impairment of assets” to the consolidated financial sta- tements. The recoverable amount was determined by reference to the value in use calculated on the basis of the discounted value of the estimated future cash flows expected from the group of assets comprising each CGU. We believe that the valuation of goodwill represents a key audit matter, in light of the materiality of these assets in the Group’s financial statements and the level of judg- ment required on the part of management to determine the recoverable amount of these assets, especially in the context of the COVID-19 pandemic. Our response More specifically, our work consisted, in the context mentioned above, of: • reviewing the impairment tests prepared by manage- ment with the help of external consultation; • assessing the reasonableness of the cash flow fore- casts by means of interviews with members of the Finance Department and comparisons with actual results in 2020; • comparing the 2021 cash flows used in the tests with the 2021 budgets prepared by management; • assessing the consistency and reasonableness of the major assumptions made (including growth rate and discount rate); • performing a critical analysis of the tests carried out by management on the sensitivity of the value in use to changes in the main assumptions made. We have also assessed the appropriateness of the information provided in Note 6.5.20 to the consolidated financial statements. Final allocation of the acquisition price of Clarion Biociências Risk identified On April 15, 2019, the Group acquired 90% of the assets of the Brazilian company Clarion Biociências (put and call options for the remaining 10%, to be exercised by the end of 2022) and proceeded with its first consolidation for the purposes of the closing of the year ended December 31, 2019. The final allocation of the purchase price occurred in 2020, resulting in the recognition of identifiable assets of €21.1 million, as described in Note 6.5.7.1 to the consolidated financial statements. Note 6.5.3.4 describes the accounting treatment of business combinations. The final allocation of the purchase price of the assets and liabilities of Clarion Biociências is a key point of the audit given the significance of the transaction in the consolidated financial statements and insofar as it invol- ves estimates and judgments on the part of the Group’s management to allocate the purchase price to the assets and liabilities assumed.