The Auditor’s Report of Valoe
Valoe Corporation Stock Exchange Release 7 May 2020 at 22.00 Finnish time
THE AUDITOR’S REPORT OF VALOE
Valoe Corporation’s auditor has given the following report for the company’s Financial Statements for 2019 on 7 May 2020. The Auditor’s report includes so called emphasis of matter relating to the measurement of development costs.
This document is an English translation of the Finnish auditor’s report. Only the Finnish version of the report is legally binding.
Auditor’s Report
To the Annual General Meeting of Valoe Oyj
Report on the Audit of the Financial Statements Opinion
We have audited the financial statements of Valoe Oyj (business identity code 0749606-1) for the year ended 31 December 2019. The financial statements comprise the consolidated balance sheet, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company’s balance sheet, income statement, statement of cash flows and notes.
In our opinion
- the consolidated financial statements give a true and fair view of the group’s financial performance, financial position and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU
- the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.
Emphasis of Matter – Measurement of Development Costs
We would like to draw attention to the development costs totaling EUR 4.2 million that have been capitalized in the non-current assets. The company’s management has, pursuant to the IAS 36, run impairment testing where the recoverable amounts have been determined on the basis of the value in use. Those calculations use discounted future cash flow forecasts in which management make judgments over certain key inputs, for example net sales growth rate, discount rate and rate of borrowed capital.
The measurement of development costs may include uncertainty, which will have a significant impact on the company's financial position.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, 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.
We have not performed any other services than auditing to the parent company or to any Group companies.
Materiality
The scope of our audit was influenced by our application of materiality. The materiality is determined based on our professional judgement and is used to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified misstatements on the financial statements as a whole. The level of materiality we set is based on our assessment of the magnitude of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic decisions of the users of the financial statements. 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.
| THE KEY AUDIT MATTER | HOW THE MATTER WAS ADDRESSED IN THE AUDIT |
| Going Concern | |
| During the financial year 2019 and at the year- end the company’s financial situation was very tight and its liquidity was low. The Group’s overdue debts totaled EUR 3.7 million at balance sheet date. The consolidated cash flow from operating activities was negative in the financial years 2018 and 2019. Based on the assessment presented in the Financial Statements and Directors’ Report, management of the company and the Board of Directors believe that the going concern basis is appropriate in preparing the financial statements. The assessment is based on the following: the company has been able to improve its financing situation by drawing new borrowings in 2019, by converting convertible bonds to shares in a share issue and rearranging its current debts. Furthermore, the company has resolved it will not launch delivery projects in full until project funding pursuant to a delivery agreement is available to the company. Additionally, investments will not be made unless required financing and going concern is secured. | Our audit procedures comprised evaluation of the company’s cash flow forecast, order book and sufficiency of the financing. In addition, we discussed with company representatives about the future development and outlook of the company’s operations. The company’s ability to continue as a going concern is dependent on the development of its operations and cash flows, as well as on the company’s efforts to settle the borrowings and other liabilities fallen due with its creditors. At the beginning of 2020, the company has agreed on new financing facilities which, in the view of the company’s management, secure going concern until 30 June 2021. |
| Capitalised development costs, EUR 4.2 million (refer to Accounting Principles for consolidated financial statements and notes 6 and 12) (refer to Accounting, measurement and accrual principles for the parent company financial statements and note 12) | |
| At the balance sheet date of 31 December 2019 the capitalised development costs were carried at EUR 4.2 million, which accounted for 27 per cent of the consolidated total assets. The capitalized development costs of the parent company totaled EUR 4.4 million, representing 29 per cent of the parent company’s total assets. As part of the accounting for development costs, management is required to exercise judgment and make assumptions that affect carrying values and amortisation methods. Development costs have been tested for possible impairment. Valoe determines the recoverable amounts in impairment testing based on value in use. Value in use is calculated on discounted cash flow forecasts. Determination of key assumptions underlying the forecasts requires management’s judgement. The consideration is related to e.g. income expectations, the market interest rate used for discounting and the interest rate on borrowings. Due to management's judgment related to the used forecasts, uncertainty estimation, and the significance of balance sheet values, capitalized development costs are a key consideration in the audit. | We assessed the composition of development costs and the capitalization criteria applied, original project plans and discussed the changes in plans with the company representatives. Our audit procedures also included agreeing the non- current asset register to the general ledger, assessing the appropriateness of the amortisation methods and testing amortisation accounting. In addition, we discussed with company representatives how development costs are monitored and accounted for, assessed amortization and how stages in a project when amortization is begun is defined. We analysed management estimates and assumptions, upon which future cash flow forecasts are based. We involved our own valuation specialists when assessing the appropriateness of the assumptions used, such as discount rates. We performed audit procedures to examine the technical accuracy of the calculations. Furthermore, we considered the appropriateness of the disclosures provided in respect of developments costs and impairment testing. |
Responsibilities of the Board of Directors and the Managing Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. 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 the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
— Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Other Reporting Requirements
We have been the company’s auditor elected by the general meeting as from 17 February 2020.
Other Information
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises information included in the report of the Board of Directors and in the Annual Report but does not include the financial statements and our auditor’s report thereon. We have received the report of the Board of Directors before the date of this Auditor’s Report and we expect to receive the Annual Report after this date. Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information received prior the date of the Auditor’s Report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
In Tampere, 7 May 2020
AUDITUS TILINTARKASTUS OY
Mikko Riihenmäki
Authorised Public Accountant, KHT
In Mikkeli, 7 May 2020
Valoe Corporation
Board of Directors
For more information:
CEO Iikka Savisalo, Valoe Corporation
p. 0405216082
email:
Distribution:
Nasdaq Helsinki Oy
Main media
Valoe Corporation specializes in the clean energy, especially in photovoltaic solutions. Valoe provides automated production technology for solar modules based on the company’s own technology; production lines for modules; solar modules and special components for solar modules. Valoe's head office is located in Mikkeli, Finland.
