REA Group Ltd Annual Report 2021

Annual Report 2021 | REA Group Ltd A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Property and online advertising revenue recognition and its reliance on automated processes and controls Why significant How our audit addressed the key audit matter The Group recognised $903.8m in Property and Online advertising revenue for the year ended 30 June 2021. The recognition of this revenue was considered a key audit matter due to the significance of revenue to the financial report and level of audit effort required, with the associated disclosures found in Note 3. The Group’s revenue recognition processes are heavily reliant on IT systems with automated processes and controls over the capturing, valuing and recording of transactions. These processes include a combination of manual and automated controls. The understanding and testing of the IT systems and controls that process revenue transactions is a key part of our audit. We assessed the effectiveness of relevant controls over the capture, recording and recognition of revenue transactions, including the relevant IT systems. We examined the processes and controls over the capture and determination of the revenue recognition in line with the satisfaction of performance obligations and tested a sample of transactions to supporting evidence. We tested the Group’s controls over IT systems relevant to revenue transaction initiation and revenue recognition. We performed data analysis procedures over the revenue transactions and the relationship of these transactions against the contract liability, trade receivables and cash accounts. We also assessed the timing, aging profile and nature of the transactions. We assessed the Group accounting policies set out in Note 3, for compliance with the revenue recognition requirements of Australian Accounting Standards. Acquisition accounting Why significant How our audit addressed the key audit matter During the year ended 30 June 2021, the Group made a number of acquisitions as detailed in Note 19. The most significant acquisitions were 100% of Mortgage Choice Ltd and a further 47.15% of Elara Technologies Pte Ltd to reach 60.65% for a total consideration of $243.7m and $105.7m respectively. The determination and recognition of the fair value of the intangibles was considered a key audit matter due to the size of the acquisition and the significant judgement required in identifying and allocating the purchase price to the fair values of the assets and liabilities acquired. Our audit procedures involved the following: ► Read the sale and purchase agreements to obtain an understanding of the transaction and key terms; ► Assessed whether the appropriate accounting treatment has been applied to these transactions; in regards to date of control, acquirer and purchase consideration ► Assessed the valuation for the considerations paid and traced shares issued to the share register. ► Tested the identification and fair valuation of the intangible assets and other assets acquired and liabilities assumed as part of the acquisitions. ► Assessed the competence, qualifications and objectivity of the experts engaged by the Group to assist with the identification and valuation of intangible assets acquired. ► Engaged our internal specialist to assist us in reviewing the valuation methodologies used by management and the external valuation expert in the fair valuation of acquired assets and liabilities. ► Assessed the key assumptions and valuation methodology used by the Group against external market data, which involved the input of our valuation specialists. ► Assessed the adequacy of the Group’s disclosures in the financial report in respect of the acquisitions, including the contingent consideration and the related estimates. Year in review Directors’ Report Financial Statements Remuneration Report Sustainability Our Leaders 127