Vector Annual Report 2019

The key audit matter

How the matter was addressed in our audit

— the overall comparison of the group’s net assets to market capitalisation did not indicate an impairment. 3. Valuation of investments in the technology segment, as part of the group’s strategy to ‘Create a New Energy Future’

During the 30 months ending 30 June 2019 the group has invested circa $270 million in new energy technologies and markets as part of its strategy to ’Create a New Energy Future’, including but not limited to: — acquisitions of E-Co Products group Limited (refer point 2 above) and PowerSmart NZ Limited; — investment in mPrest Systems (2003) Limited in October 2017; and — continued investment in developing a presence in the Australian electricity metering market to coincide with changes to the market regulation and structure. We consider the valuation of investments in new energy technologies and markets to be a key audit matter because of the judgement involved whether through; — valuing intangible assets and goodwill acquired in a business or asset purchase; — assessing the fair value of investments, when carried at fair value, in absence of a listed-market reference; or — considering impairment in markets where the future outcomes are more uncertain than in the group’s established businesses.

The procedures we performed to conclude on the valuation assessments included: — evaluating the performance of the Australian metering business, in particular understanding the status and critically challenging the expected future outlook of the group’s bids for meter data and deployment contracts with Australian energy retailers; — considering actual and possible metering M&A activity in Australasia and how that informs the carrying value and classification of the group’s metering assets (including goodwill); — assessing whether there are indicators of impairment in respect of any of these investments; and — assessing the fair value of mPrest, including various techniques that could be employed as the maturity of mPrest evolves. We did not identify any material errors in the valuations attributed to the investments in the new non-regulated activities outlined opposite.

Use of this independent auditor’s report This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might state to the shareholders those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed.

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