Gschäftsbericht 2018

128 | Galenica financial statements 2018 Finance Statutory auditor’s report on the audit of the consolidated financial statements to our assessment of the risks of material misstatement of the consolidated financial state- ments. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the consolidated financial state- ments. Impairment risk of goodwill and other intangibles Risk As disclosed in note 15, goodwill amounts to CHF 691.5 million as at 31 December 2018 and represents a major asset of Galenica. In addition, Galenica recorded intangible assets with indefinite useful lives with a carrying amount of CHF 36.5 million. Both goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually. Procedures over management’s annual impairment test were significant to our audit, because the assessment process is complex and the test requires estimates. Galenica makes assumptions in respect of future market and economic conditions, such as economic growth, expected market share, revenue and margin development. Our audit response We assessed and tested, amongst others, the assumptions, weighted average cost of capital (WACC), methodologies and technical input parameters used by Galenica. We involved our internal valuation specialists to assist us with these audit procedures. In addition, we assessed the cash flow projections for all cash generating units (CGUs). These procedures included an assessment of the historical accuracy of management’s estimates and evaluation of business plans. In parti- cular, we focused on the sensitivity in the available headroom of CGUs and whether changes in assumptions as described in note 15 could cause the carrying amount to exceed its recoverable amount. Our audit procedures did not lead to any reservations regarding the impairment tests of goodwill and other intangibles. Significance and volatility of employee benefits Risk As outlined in note 22, Galenica’s employees work in Switzerland and are insured with pension funds that are financed by both Galenica and the employees (funded plans). The pension plans cover the risks of the economic consequences of old age, disability and death in accordance with the Swiss Federal Act of Occupational Old Age, Survivors’ and Invalidity Pension Fund (BVG/LPP). Procedures over defined benefit plans and related costs were important to our audit due to the signifi- cance of the net defined benefit obligation combined with the subjecti- vity and sensitivity of the key parameters used in the pension plan calculations. The defined benefit plans in Switzerland give rise to a net defined benefit obligation of CHF 59.1 million as at 31 December 2018. Key actuarial parameters used in the calculation of the pension plan obli- gation are the discount rate, salary development and the selection of mortality tables.