To PUMA SE, Herzogenaurach/Germany
We have audited the consolidated financial statements of PUMA SE, Herzogenaurach/Germany, and its subsidiaries (“PUMA” or “the Group”) which comprise the consolidated balance sheet as at 31 December 2020, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the financial year from 1 January to 31 December 2020, and the notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the combined management report for the parent and the group (“combined management report”) of PUMA SE, Herzogenaurach/Germany, for the financial year from 1 January to 31 December 2020. In accordance with the German legal requirements, we have not audited the content of the consolidated corporate governance statement included in the section “Corporate governance statement in accordance with Section 289f and Section 315d German Commercial Code (HGB)” of the combined management report.
In our opinion, on the basis of the knowledge obtained in the audit,
Pursuant to Section 322 (3) sentence 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the combined management report.
We conducted our audit of the consolidated financial statements and of the combined management report in accordance with Section 317 HGB and the EU Audit Regulation (No. 537/2014; referred to subsequently as “EU Audit Regulation”) and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the Combined Management Report” section of our auditor’s report. We are independent of the group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated financial statements and on the combined management report.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and in forming our audit opinion thereon; we do not provide a separate audit opinion on these matters.
In the following we present the key audit matters we have determined in the course of our audit:
Our presentation of these key audit matters has been structured as follows:
a) The consolidated financial statements of PUMA SE show goodwill in the amount of mEUR 241.5 corresponding to approximately 5.2% of the consolidated balance sheet total or 13.7% of the group equity.
Each financial year or in case of signs of impairment, goodwill is subject to impairment tests. The impairment tests are performed by PUMA SE applying the “discounted cash flow method”. The valuations are based on the present values of the future cash flows which are in turn based on the three-year plan (detailed planning horizon) valid at the date of the impairment test. This detailed planning horizon is subsequently extended assuming long-term growth rates. Discounting is performed using the weighted average cost of capital (WACC). Here, the recoverable amount is determined on the basis of the value in use and a possible need for impairment is determined by comparing the value in use with the carrying amount.
The outcome of this valuation highly depends on the executive directors’ assessment of future cash inflows, the long-term growth rates as well as the WACC rates applied for discounting and therefore involves uncer-tainties and discretion. Thus, the assessment of the recoverability of the goodwill was classified as a key audit matter within the scope of our audit.
Information on the goodwill, provided by the executive directors, is disclosed in chapter 2 “Significant consolidation, accounting and valuation principles” and in chapter 11 “Intangible assets” of the notes to the consolidated financial statements.
b) Within the scope of our risk-based audit approach, we particularly gained an understanding of the systematic approach applied when performing the impairment tests. We satisfied ourselves, that the valuation model used adequately presents the requirements of the relevant standards, whether the necessary input data are completely and accurately determined and taken over and whether the calculations within the model are performed correctly. We assured ourselves of the appropriateness of the future cash inflows used for the computation by particularly reconciling these cash flows with the current three-year plan, as well as by interviewing the executive directors or persons appointed by them with regard to the material assumptions underlying this plan. In addition, we performed a critical assessment of the plan under consideration of general and industry-specific market expectations. Since a material portion of the respective value in use results from the forecast cash inflows for the period after the three-year planning horizon (phase of perpetuity), we in particular performed a critical assessment of the sustainable growth rate used within the perpetuity phase by means of general and industry-specific market expectations. Since relatively low changes of the discount rate used may already have a material effect on the amount of the recoverable amount, we also validated the parameters used for determining the discount rate (WACC = weighted average cost of capital) involving internal experts from the financial advisory sector and reproduced the computation scheme.
Due to the possibly material significance and taking into account the fact that the valuation of the goodwill also depends on the economic framework conditions that cannot be influenced by the Group, we additionally performed a critical assessment of the sensitivity analyses performed by PUMA SE for the cash-generating units (CGUs) with low headroom (present values compared to the carrying amount) in order to be able to assess a possible impairment risk in case of change of a material valuation assumption.
a) For the Cobra brand, the consolidated financial statements of PUMA SE disclose a brand value in the amount of mEUR 115.9 with an indefinite useful life, which corresponds to approximately 2.5% of the consolidated balance sheet total or 6.6% of the group equity.
The Cobra brand is subject to an impairment test conducted annually or in case of a triggering event. The impairment test is conducted by PUMA SE based on the relief from royalty method. According to this approach, the value of the brand results from future royalties that a company would have to pay for the use of the brand if they had to license it. The approach uses forecast revenue generated from the Cobra brand based on the effective three-year plan (detailed planning horizon) valid at the time the impairment test is conducted. This detailed planning horizon is subsequently extended assuming long-term growth rates. Discounting is performed using the weighted average cost of capital (WACC). Here, the recoverable amount is determined on the basis of the value in use and a possible need for impairment is determined by comparing the value in use with the carrying amount. If there are indications of impairment of the brand used by the Group itself, the recoverability of the brand is evaluated by reference to the recoverable amount of the cash-generating unit to which the brand is allocated.
The outcome of this valuation highly depends on the executive directors’ assessment of the future revenue generated from the Cobra brand, the royalty rate, the long-term growth rate as well as the WACC rate applied for discounting and therefore involves uncertainties and discretion. Thus, the recoverability of the Cobra brand was classified as key audit matter within the scope of our audit.
Information on the Cobra brand, provided by the executive directors, is disclosed in chapter 2 “Significant consolidation, accounting and valuation principles” and in chapter 11 “Intangible assets” of the notes to the consolidated financial statements.
b) As part of our risk-based audit
approach, we first examined on the basis of the information available to us and
in discussions with the executive directors and with persons appointed by them,
that there are no indications of impairment of the brand used by the Group
itself and that the recoverability of the brand can be assessed separately by
use of the relief-from-royalty method as part of the impairment test. We have
followed the methodological procedure for performing the impairment test using
the relief-from-royalty method. In this regard, we examined, whether the
valuation model adequately reflects the conceptual requirements of the relevant
standards, whether the necessary input data are completely and accurately
determined and whether the calculations applied to the model are made
correctly. We satisfied ourselves of the appropriateness of the assumed future
revenue (Cobra branded sales) on which the computation is based by reconciling
these sales particularly with the effective three-year plan as well as by
interviewing the executive directors and persons appointed by them with regard
to the material assumptions underlying this plan. In addition, we performed a
critical assessment of the plan under consideration of general and
industry-specific market expectations.
Since a material portion of the value in
use results from the forecast revenue for the period following the three-year
plan (phase of perpetuity), we particularly reviewed the sustainable growth
rate applied to the perpetuity phase by means of general and industry-specific
market expectations. As even relatively small changes of the expected royalty
rate and the used discount rate may have a material effect on the value in use,
we also assessed the parameters involved in the assumed royalty rate and
determination of the discount rate involving internal valuation experts from
the financial advisory sector and recalculated the computation scheme. We
critically assessed the used royalty rate by based on average industry rates.
Due to the potential material significance and as the measurement of the brand also depends on general economic conditions that are beyond the Group’s control, we additionally critically assessed the sensitivity analyses concerning the Cobra brand conducted by PUMA SE in order to be able to determine a potential impairment risk in case a material assumption underlying the measurement changes.
The executive directors and the supervisory board are responsible for the other information. The other information comprises:
The supervisory board is responsible for the report of the supervisory board. The executive directors and the supervisory board as well are responsible for the declaration according to Section 161 German Stock Corporation Act (AktG), which is part of the corporate governance statement pursuant to Section 289f and Section 315d HGB included in the section “Corporate governance statement in accordance with Section 289f and Section 315d German Commercial Code (HGB)” of the combined management report. Otherwise, the executive directors are responsible for the other information.
Our audit opinions on the consolidated financial statements and on the combined management report do not cover the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion thereon.
In connection with our audit, our responsibility is to read the other information stated above and, in so doing, to consider whether the other information
The executive directors are responsible for the preparation of the consolidated financial statements that comply, in all material respects, with IFRS as adopted by the EU and the additional requirements of German commercial law pursuant to Section 315e (1) HGB, and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position and financial performance of the Group. In addition, the executive directors are responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.
Furthermore, the executive directors are responsible for the preparation of the combined management report that as a whole provides an appropriate view of the Group’s position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a combined management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the combined management report.
The supervisory board is responsible for overseeing the Group’s financial reporting process for the preparation of the consolidated financial statements and of the combined management report.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the combined management report as a whole provides an appropriate view of the Group’s position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that includes our audit opinions on the consolidated financial statements and on the combined management report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Section 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this combined management report.
We exercise professional judgement and maintain professional scepticism throughout the audit. We also:
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter.
In accordance with Section 317 (3b) HGB, we have assessed with reasonable assurance whether the electronic files of the consolidated financial statements and of the combined management report (hereafter referred to as “ESEF files”) prepared for publication, contained in the accompanying file, which has the SHA-256 value 7BE69424E242C20952ED8ECCAB6CFF8D4AB508CA52E98846CC3C5097B4CA1944, meet, in all material respects, the requirements concerning the electronic reporting format (“ESEF format”) pursuant to Section 328 (1) HGB. In accordance with the German legal requirements, this audit only covers the transfer of the consolidated financial statements’ and the combined management report’s information into the ESEF format, and therefore covers neither the information contained in these electronic files nor any other information contained in the file stated above.
In our opinion, the electronic files of the consolidated financial statements and of the combined management report prepared for publication contained in the accompanying file stated above meet, in all material respects, the requirements concerning the electronic reporting format pursuant to Section 328 (1) HGB. Beyond this audit opinion and our audit opinions on the accompanying consolidated financial statements and on the accompanying combined management report for the financial year from 1 January to 31 December 2020 contained in the above “Report on the Audit of the Consolidated Financial Statements and of the Combined Management Report”, we do not express any audit opinion on the information contained in these electronic files and on any other information contained in the file stated above.
We conducted our audit of the electronic files of the consolidated financial statements and of the combined management report contained in the accompanying file stated above in accordance with Section 317 (3b) HGB and on the basis of the IDW Draft Auditing Standard: Audit of the Electronic Files of the Annual Financial Statements and of the Management Report prepared for Publication pursuant to Section 317 (3b) HGB (IDW Draft AuS 410). Our responsibilities in this context are further described in the section “Auditor’s Responsibilities for the Audit of the ESEF Files”. Our audit firm has applied the Quality Assurance Standard: Quality Assurance Requirements in Audit Practices (IDW QS 1) promulgated by the Institut der Wirtschaftsprüfer (IDW).
The executive directors of the parent are responsible for the preparation of the ESEF files based on the electronic files of the consolidated financial statements and of the combined management report according to Section 328 (1) sentence 4 no. 1 HGB and for the tagging of the consolidated financial statements according to Section 328 (1) sentence 4 no. 2 HGB.
In addition, the executive directors of the parent are responsible for such internal control as they have determined necessary to enable the preparation of ESEF files that are free from material violations against the requirements concerning the electronic reporting format pursuant to Section 328 (1) HGB, whether due to fraud or error.
The executive directors of the parent are also responsible for the submission of the ESEF files together with the auditor’s report and the accompanying audited consolidated financial statements and the audited combined management report as well as other documents to be filed with the publisher of the Federal Gazette.
The supervisory board is responsible for overseeing the preparation of the ESEF files as part of the financial reporting process.
Our objectives are to obtain reasonable assurance about whether the ESEF files are free from material violations, whether due to fraud or error, against the requirements pursuant to Section 328 (1) HGB. We exercise professional judgement and maintain professional scepticism throughout the audit. We also
We were elected as group auditor by the annual general meeting on 7 May 2020. We were engaged by the supervisory board on 15 September 2020. We have been the group auditor of PUMA SE, Herzogenaurach/Germany, without interruption since the financial year 2012.
We declare that the audit opinions expressed in this auditor’s report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).
The German Public Auditor responsible for the engagement is Dr Thomas Reitmayr.
Munich, February 2, 2021
Deloitte GmbH
Wirtschaftsprüfungsgesellschaft
signed:
(Dr. Thomas Reitmayr)
Wirtschaftsprüfer
[German Public Auditor]
signed:
(Stefan Otto)
Wirtschaftsprüfer
[German Public Auditor]
