Urbanise.com Annual Report 2019

Annual Report 2019 Urbanise.com Limited Independent Auditor’s Report to the members (continued) A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Page 2 We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. 1. Carrying value of intangible assets (including goodwill) and property, plant and equipment Why significant How our audit addressed the key audit matter As required by Australian Accounting Standards - AASB 136 Impairment of Assets, the Group annually tests the amount of goodwill for impairment and tests other non-current assets where indicators of impairment exist using a discounted cash flow (“DCF”) impairment model to estimate recoverable value. As at 30 June 2019, the Group held $4,786,480 in goodwill and $5,444,561 of intangible assets, recording no impairment after completing its impairment testing. The Group’s disclosures are included in Note 16 of the financial report which specifically explain the key assumptions used and sensitivity of changes in the key assumptions which could give rise to impairment of the intangible assets (including goodwill) in the future. This was a key audit matter because the impairment assessment process is complex and judgmental and is based on assumptions that are affected by expected future market or economic conditions and the achievement of forecast cash flow and growth assumptions. The audit procedures we performed included evaluating the Group’s assessment of impairment indicators, and evaluation of the assumptions and methodologies used by the Group in the DCF impairment model, in particular those relating to key assumptions set out in Note 16 of the financial report. Our valuation specialists were involved in these audit procedures. In respect of the Group’s DCF impairment model and forecasts, our audit procedures included the following: • Agreed the underlying cash flow projections to the Board approved forecasts; • Tested the mathematical accuracy of the model; • Assessed key assumptions such as forecast revenue growth and gross margins; • Assessed the Group’s current year actual results in comparison to forecasts to assess forecast accuracy; • Assessed the Group’s assumptions for growth rates in comparison to economic and industry forecasts; • Considered capital expenditure forecasts; • Assessed discount rates through comparing the cost of capital for the Group with comparable businesses; and • Considered the EBITDA multiples against comparable companies as a valuation cross check. We performed sensitivity analysis in respect of the assumptions noted above, to ascertain the extent of changes in those assumptions which either individually or collectively would be required for the intangible assets (including goodwill) to be impaired. We assessed the likelihood of these changes in assumptions arising. We assessed the adequacy of the Group’s disclosures of those assumptions to which the outcome of the impairment test is most sensitive, 86