Plastic Omnium - 2020 Universal Registration Document

CONSOLIDATED FINANCIAL STATEMENTS 2020 Statutory auditors’ report on the consolidated financial statements PLASTIC OMNIUM UNIVERSAL REGISTRATION DOCUMENT 2020 263 EVALUATION OF REVENUE Note 1.3.2 « Revenue » / « Revenue from contracts with Customers » of the notes to the consolidated financial statements. As of December 31, 2020, consolidated revenue of Compagnie Plastic Omnium amounts to €7 073 million. KEY AUDIT MATTERS Revenue from sales of parts is recorded when the significant risks and rewards of ownership of the goods are transferred to the buyer, usually upon ● delivery of the goods, and measured at the fair value of the consideration received, after deducting discounts, rebates and other sales taxes and customs duties. Regarding the revenue from services and creation of specific tooling: ● The accounting treatment applied is based on the identification by the Group in most cases of two performance obligations, distinct from ● the production of parts, under the Design business and the supply of certain specific tooling whose control is transferred to clients. Products, including those explicitly included in the part price, are recognized at the start of production life. Payments received before the start of series ● life are recorded in customer advances. The costs related to these two performance obligations are recognized in inventories during the project phase and then in expenses when their control is transferred to the client, i.e. when series production is launched. We considered the valuation of Parts revenue and the valuation of revenue from services and creation of specific tooling as a key audit matter given: ● Regular discussions between the Group and its customers on parts prices, discounts and rebates. ● Judgments have to be made by Group management to estimate revenue relating to these performance obligations to the extent that such revenue is ● not necessarily or directly identifiable within the contracts and therefore requires a specific assessment by management as to their valuation. OUR RESPONSE We have reviewed the process and identified key controls implemented by management regarding revenue recognition. ● In order to assess the recognition of revenues related to the sale of parts, we conducted tests on a sample of contracts by: ● comparing the sale prices applied to the deliveries of parts with the contractual prices; ● examining the credit notes issued during the period. ● In order to assess the recognition of the turnover related to services and realization of specific tooling, we conducted tests on a sample of contracts by: ● comparing the sales prices applied to services and realization of specific tooling and recognized at the start of the series life with the valuation made ● by the management and contractual documentation; examining revenue and costs allocated to performance obligations. ● EVALUATION OF FIXED ASSETS RELATED TO THE DEVELOPMENT COSTS AND TANGIBLE ASSETS Notes 1.6.2 « Intangible assets », 1.6.3 « Property, plant and equipment », 1.6.4.2 « Impairment of depreciable property, plant and equipment and intangible assets » in the notes to the consolidated financial statements. As of December 31, 2020, the net value of the fixed assets related to the development costs and to property, plant and equipment amounts respectively to €468 million and €1 476 million, representing approximately 31% of total assets as of December 31, 2020. KEY AUDIT MATTERS Note 1.6.2 describes the accounting methods in intangible assets of the development costs incurred during the project phase and related to the execution ● of the contract with the client not fulfilling a performance obligation as well as those used for their amortization. Note 1.6.3 describes the accounting methods in tangible assets of the property, plant and equipment and tangible assets in progress as well as those used for their amortization. As described in Note 1.6.4.2, the Group performs loss of value tests on these intangible and tangible assets when there are indications of loss of value, ● and at least once a year at year-end for intangible assets in progress. The criteria used by the Group to assess the existence of an indication of impairment loss include recurring losses for an entity, decisions to stop selling production or site closures.