Elixinol Global Limited Annual Report 2020

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Impairment and recoverability of intangible non-current assets Key audit matter How the matter was addressed in our audit There is a risk that the carrying value of the assets held by the Group might be impaired if they are unlikely to produce economic benefits in excess of their book value. For the Group’s American cash generating unit (‘CGU’), as a result of the COVID-19 outbreak and other factors, there has been a decline in demand and sales value. Based on these factors, it was identified that impairment indicators exist. The determination of the value in use model, which relies on forecasted cash flows, involves significant judgement. As disclosed in note 17, for the Group’s American CGU, significant judgement was required in determining the assumptions used in the value in use model including forecasted cash flows, discount rate, inflation rate, growth rate and forecasted sales growth. The recoverable value as determined by the value in use model was less than the carrying value and an impairment of $39m recognised for the American CGU for the year ended 31 December 2019 . Our procedures included but were not limited to: • Evaluating and analysing the Group’s value-in-use cash flow models to support the carrying value and assessed the model. This included assessing the following key assumptions: • Discount rate through comparison to independently calculated discount rate and considering with the assumed growth in revenue; • Inflation rate through comparison to external data; and • Forecasted financial performance with reference to historical performance, stabilised costs ongoing costs and external data. • Performing procedures on the forecasts and discounted cash flow models, including validation of the inputs and forecasts, in order to test the impairment analysis; • Comparing the group’s financial performance for the period subsequent to the financial year end; • Enquiring with management, corroborating assumptions with audit evidence and assessed the judgements made in respect of CGU impairment assessment prepared by the Group; • Considering the appropriateness and completeness of the allocation of corporate head office assets and liabilities to CGUs; • Performing sensitivity analysis on key assumptions including discount rates, projected expenses and expected sales growth; and • Assessing the appropriateness of disclosures in the Notes to the financial statements. F INANCI AL REPORT Company Overview Financial Report Shareholder Information FY2020 Milestones 95 Strategy and Market Update