Source: https://asmifrs2015uk.core-cms.eu/2015/statutoryannualreport/financial-statements/financial-statements-asm-international-nv/independent-auditor-s-report
Timestamp: 2019-03-21 11:29:42
Document Index: 629372692

Matched Legal Cases: ['art 9', 'art 9', 'art 9', 'art 9', 'art 9', 'art 9', 'art 9']

Financial statements>Financial statements ASM International NV>Independent auditor's report
To: the General Meeting and the Supervisory Board of ASM International NV.
the Consolidated financial statements give a true and fair view of the financial position of ASM International NV as at December 31, 2015, and of its result and its cash flows for 2015 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Netherlands Civil Code;
the company financial statements give a true and fair view of the financial position of ASM International NV as at December 31, 2015, and of its result for 2015 in accordance with Part 9 of Book 2 of the Netherlands Civil Code.
We have audited the Financial statements 2015 of ASM International N.V. (ASMI), based in Almere. The Financial statements include the Consolidated financial statements and the company financial statements.
the Consolidated statement of financial position as at December 31, 2015;
the following Consolidated statements for 2015: the statement of profit or loss, the statements of comprehensive income, changes in equity and cash flows; and
the company abbreviated statement of profit or loss for 2015; and
We are independent of ASM International NV in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA).
Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
Based on our professional judgment we determined the materiality for the Financial statements as a whole at €5 million. The materiality is determined with reference to income before income taxes (3.3%). We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the Financial statements, such as possible misstatements in the information on remuneration disclosures.
The audits undertaken for group reporting purposes at the group entities were all performed with materiality levels set by, or agreed with, us. In our audit instructions sent to our component auditors, we instructed the component auditors to apply allocated group materiality in the range of €2.7 million and €4.0 million depending on the size of the respective group entities or, in case of a statutory audit requirement, the lower statutory materiality.
We agreed with the Supervisory Board that misstatements in excess of €250,000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
ASM International NV is the parent company of a group of entities. The financial information of this group is included in the Financial statements of ASM International NV.
Considering our ultimate responsibility for the opinion, we are also responsible for directing, supervising and performing the group audit. In this context, we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive factors were the significance and / or the risk profile of the group entities or operations (components). On this basis, we selected components for which an audit of account balance or specified procedures had to be performed. Furthermore, we have determined the nature and extent of the audit procedures that we perform at group level and in the shared services center.
Our procedures cover the significant operations in Japan, Korea, the Netherlands, Singapore and the United States of America, all mainly through our audit procedures in the shared services center(SSC), supplemented with local audit procedures for audits of account balances. Further, our procedures cover the (results from) investment in associates, including the work performed by the non-KPMG member firm auditors of ASM Pacific Technology Ltd. Further, we performed limited procedures on the remaining balances, including desktop reviews and audit procedures on specific transactions.
We sent detailed instructions to all component auditors, covering the significant areas that should be covered (which included the relevant risks of material misstatement detailed below) and set out the information required to be reported to the group auditor. We visited Singapore and ASMPT in Hong Kong for site visits and file reviews and held various telephone calls with the auditors of the components, to discuss the Group audit, risks, audit approach and instructions, as well as the audit findings and observations reported to the group auditor.
By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion on the Financial statements.
First year audit
Financial year 2015 is the first year that KPMG Accountants NV audited the Financial statements of ASMI. As a result, our audit involved considerations not associated with recurring audits. Additional planning activities and considerations were necessary to establish an appropriate audit strategy and audit plan.
Our audit procedures included, among other things, meeting with the Board of Management and Audit Committee in the final meeting with the predecessor auditor. We have had several meetings at the Company’s headquarters and shared services center to gain an initial understanding of the Company and its business, including its control environment and information systems, sufficient to make audit risk assessments and develop the audit strategy and audit plan. We also have inquired with the predecessor auditor and performed a file review to obtain sufficient appropriate audit evidence in respect of the opening balance per January 1, 2015, including evidence with respect to the appropriate selection and application of accounting principles. During the performance of our procedures, we were provided with sufficient information to gain an understanding to base our audit strategy and detailed audit plan on.
Net sales is measured taking into account multiple element arrangements, for example a single sales transaction that combines the delivery of goods and rendering of (installation) services, as contracts with customers typically include separately identifiable components that are recognized based on the relative selling price. Furthermore, net sales is recognized when the risk and rewards of products and services have been transferred to the customer. Due to the multitude and variety of contractual terms, the different pricing elements and the risk of management override, revenue recognition is considered to be complex and involves significant management judgement.
Our audit procedures included, among other things, assessing the appropriateness of ASMI’s revenue recognition accounting policy in line with IFRS. We tested the effectiveness of controls over the various categories of net sales. In addition to testing the internal controls, we also assessed the existence and accuracy of the sales recorded, based among other things on inspection of sales contracts, final acceptances, and the allocation of revenue to the various elements in the contracts, reconciliation of cash received throughout the year for revenue recognized and sales transactions taking place before and after year-end to ensure that net sales was recognized in the correct period.
We further assessed the adequacy of the net sales disclosures contained in Note 19 Segment disclosure.
Accounting for investments in associated companies
ASMI owns 39.55% in ASM Pacific Technology Ltd (ASMPT), an entity listed on the Hong Kong Stock Exchange. The investments in associated companies are accounted for under the equity method and considered for impairment in case of a significant or prolonged decline in value. The accounting for the results of and investment in ASMPT is significant to our audit due to the share in ASMI's net income, the book value of the investment, the fluctuating share price of ASMPT and judgment applied in determining if a decline in value is significant and temporary or prolonged.
At December 31, 2015, the Investments in associates amounted to €1,181 million, including goodwill and other intangibles of €806 million, and the share in income from investments in associates amounted to €16 million and mainly relates to the investment in ASMPT, including amortization of recognized (in)tangible assets.
Our audit procedures included, among other things, instructing the statutory auditor of ASMPT to perform an audit on the relevant financial information of ASMPT for the purpose of the Consolidated financial statements of ASMI. During the year, we discussed the risk assessment, audit strategy of the statutory auditor, as well as any significant developments on a quarterly basis. Subsequently we have performed a file review at the statutory auditor’s office.
We have further evaluated management’s considerations of the impairment indicators of the investment, including goodwill and other intangibles, in ASMPT. In such consideration, the fair value of the listed shares of ASMPT is used as a starting point to assess whether any significant or prolonged and other than temporary decline in value exists, next to a qualitative assessment. We have among other things analyzed the trend in the share price of ASMPT to the Hong Kong Stock Exchange, compared the share price with external data used by analysts expectations, and evaluated the results of ASMPT for potential valuation issues for the investment in ASMPT. We also assessed the adequacy of the company’s disclosure in Note 6 Investments in associates.
Accounting for income tax positions
Income tax positions are significant to our audit because the assessment process is complex, includes a certain level of estimation uncertainty and the amounts involved are material to the Financial statements as a whole. ASMI’s operations are subject to income taxes in various jurisdictions which results in complexities of transfer pricing and the applicability of various tax legislation. Furthermore, the Company has a significant amount of unrecognized Deferred Tax Assets for net operating losses.
At December 31, 2015, the deferred tax assets amounted to €12 million and the total net operating losses amounted to €161 million.
We have, among other things, performed audit procedures on the completeness and accuracy of the amounts recognized as current and deferred tax, including the assessment of correspondence with tax authorities and the evaluation of tax exposures. In addition, in respect of deferred tax assets, we reviewed and tested management’s assumptions that substantiate the probability that deferred tax assets (un)recognized in the balance sheet will be recovered through taxable income in future years and available tax planning strategies. During our procedures, we use, among other things, budgets, forecasts and tax laws and in addition, we assessed the historical accuracy of management’s assumptions. In those components determined to be part of jurisdictions with significant tax risk, we involved tax specialists to analyze the tax positions and to challenge the assumptions used to determine the tax positions. Based on our procedures performed we consider management’s key assumptions to be within a reasonable range. We also assessed the adequacy of the company’s disclosure in Note 20 Income taxes.
Accounting for capitalized development costs
Capitalized development costs of €72 million are deemed significant to our audit, given the significance of the position per December 31, 2015, the rapid technological change in the industry, as well as the specific criteria that have to be met for capitalization. This involves management judgment, such as with respect to technical feasibility, intention and ability to complete the intangible asset, ability to use or sell the asset, generation of future economic benefits and the ability to measure the costs reliably. In addition, determining whether there is any indication of impairment of the carrying value of assets, requires management judgment and assumptions which are affected by future market or economic developments.
We have performed audit procedures over the accuracy and valuation of amounts recognized. Our audit procedures included, among other things, assessing the recognition criteria for intangible assets, challenging the key assumptions used or estimates made in capitalizing development costs, including the authorization of the stage of the project in the development phase and the accuracy of costs included and assessing the useful economic life attributed to the asset.
In addition, we considered whether any indicators of impairment were present by understanding the business rationale for projects and performing reviews for indicators of impairment.
We also assessed the adequacy of the company’s disclosure in Note 5 Other intangible assets.
The Management Board is responsible for the preparation and fair presentation of the Financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Netherlands Civil Code and for the preparation of the Management Board Report in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Furthermore, the Management Board is responsible for such internal control as the Management Board determines is necessary to enable the preparation of the Financial statements that are free from material misstatement, whether due to errors or fraud.
As part of the preparation of the Financial statements, the Management Board is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting framework mentioned, the Management Board should prepare the Financial statements using the going concern basis of accounting unless the Management Board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The Management Board should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the Financial statements.
Pursuant to legal requirements of Part 9 of Book 2 of the Netherlands Civil Code (concerning our obligation to report about the Management Board Report and other information):
We have no deficiencies to report as a result of our examination whether the Management Board Report to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of the Netherlands Civil Code, and whether the information as required by Part 9 of Book 2 of the Netherlands Civil Code has been annexed.
We were engaged for the first time by the Annual General Meeting as auditor of ASM International NV on May 21, 2014, as of the audit for year 2015.
Amsterdam, April 13, 2016