Consolidated Financial Statements
DMG MORI CO., LTD.
Fiscal year ended 31 December 2021 with Independent Auditor's Report
DMG MORI CO., LTD. Consolidated Financial Statements
Fiscal year ended 31 December 2021
Contents
Consolidated Financial Statements
Independent Auditor's Report
Consolidated Statement of Financial Position ................................................................................................... 1
Consolidated Statement of Profit or Loss .......................................................................................................... 3
Consolidated Statement of Comprehensive Income .......................................................................................... 4
Consolidated Statement of Changes in Equity ................................................................................................... 5
Consolidated Statement of Cash Flows ......................................................................................................... 11
Notes to Consolidated Financial Statements .................................................................................................... 13
Independent Auditor's Report
The Board of Directors
DMG MORI CO., LTD.
Opinion
We have audited the accompanying consolidated financial statements of DMG MORI CO., LTD. (the Company) and its subsidiaries (collectively, the Group), which comprise the consolidated statement of financial position as at December 31, 2021, and the consolidated statements of profit or loss, comprehensive income, changes in equity, and cash flows for the year then ended, and notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of goodwill and other intangible assets with indefinite useful lives arising on business combination with DMG MORI AKTIEGESELLSCHAFT ("DMG MORI AG") | |
Description of Key Audit Matter | Auditor's Response |
As described in Note 11, "Goodwill and Other Intangible Assets," to the consolidated financial statements, the Company recorded goodwill of ¥70,834 million and other intangible assets with indefinite useful lives of ¥33,847 million, (mainly trademark) as of December 31, 2021, ¥67,873 million and ¥33,847 million, respectively, arising on the business combination with DMG MORI AG. | The audit procedures we performed to assess the valuation of goodwill and other intangible assets with indefinite useful lives arising on the business combination with DMG MORI AG included the following, among others: ・ We assessed the design and operating effectiveness of the internal control for determining whether impairment loss should be recognized with regard to the valuation of goodwill and other intangible assets with indefinite useful lives. |
The Company allocated the carrying amounts of goodwill and other intangible assets arising on the business combination with DMG MORI AG to a cash generating unit ("CGU") or group of CGUs, such as Machine Tools and Industrial Services, and performs impairment testing annually. The recoverable amount of goodwill and other intangible assets with indefinite useful lives is measured based on value in use of the CGU or group of CGUs to which they are allocated. During the year ended December 31, 2021, the Company did not recognize an impairment loss as the value in use exceeded the carrying amount. The value in use is calculated by discounting the estimated future cash flows based on the five-year business plan approved by management and the terminal value based on the growth rate for the period subsequent to the period covered by the business plan, using the pre-tax discount rate considering the corresponding pre-tax WACC for similar industries and reflecting current market assessments of the time value of money and specific risks. For the period subsequent to the period covered by the business plan, the Company calculates the terminal value by discounting estimated future cash flows to their present value using a growth rate determined in consideration of the conditions of the country and industry to which the CGU or group of CGUs belongs based on the forecasted cash flows for the final year of the business plan. The key assumptions used for the calculation of value in use are the growth rate of sales revenues and ratio of operating costs to sales revenues incorporated in the business plan, the growth rate for the period subsequent to the period covered by the business plan and pre-tax discount rate used in the calculation of present value. |
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The above key assumptions used to calculate value in use of goodwill and other intangible assets with indefinite useful lives arising on the business combination with DMG MORI AG are subject to uncertainty and require significant management judgment. The estimates are highly uncertain since in particular, the growth rate of sales revenues tends to be significantly affected by any increase or decrease in capital expenditure demand in the machine tool market due to economic fluctuations, and the ratio of operating costs to sales revenues is affected by the aforementioned fluctuations in economic conditions as well as the risk of rising raw material costs.
Therefore, we determined the valuation of goodwill and other intangible assets with indefinite useful lives arising on the business combination with DMG MORI AG to be a key audit matter.
Classification of perpetual subordinated bonds as equity instruments | |
Description of Key Audit Matter | Auditor's Response |
As described in Note 21, "Equity and Other Equity Items," to the consolidated financial statements, the Company raised funds in the amount of ¥30 billion through the Fourth Subordinated Bonds ("the perpetual subordinated bonds") in August 2021. The Company determined that these perpetual subordinated bonds are classified as equity instruments as the Company has the option to defer interest payments and has no obligation to make payments, except in the case a liquidation event as defined in the subordinated bond clause, and recorded these bonds under "Equity" in the consolidated statement of financial position. As a result, the proceeds from the perpetual subordinated bonds, after deducting issue costs in the amount of ¥29,718 million, are recorded as "Other equity instruments" under "Equity" in the consolidated statement of financial position as of December 31, 2021. | The audit procedures we performed to assess the reasonableness of the classification of perpetual subordinated bonds as equity instruments included the following, among others:
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DMG Mori Co. Ltd. published this content on 08 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 April 2022 08:28:06 UTC.