See Notes “1.6 - Accounting principles - Intangible assets”, “1.8.1 – Investments”, “11 - Intangible assets”, “13 - Financial fixed assets” and “29 - List of subsidiaries and investments” to the financial statements
| Risk identified | Our response |
|---|---|
| Risk identified
As at December 31, 2023, investments and intangible assets (excluding software and assets in progress) were recorded in the balance sheet for a net book value of € 17 billion and € 3,5 billion, respectively, i.e. 77% of the balance sheet total. They were recorded at their date of entry at acquisition cost. An impairment loss is recognized if their value in use falls below their net book value. As described in Notes 1.6 and 1.8 to the financial statements, their value is examined annually by reference to their value in use, which takes into account:
Estimating the value in use of these assets requires Management’s judgment in determining future cash flow projections and key assumptions used. Given the weight of investments and intangible assets in the balance sheet and the uncertainties inherent in certain items, including the realization of forecasts used in the valuation of the value in use, we considered the valuation of these assets to be a key audit matter with a risk of material misstatements. |
Our response
We examined the methodology employed by Management to estimate the value in use of investments and intangible assets (excluding software and assets in progress). Our audit work mainly focused on examining, on the basis of the information provided to us, that the estimated values determined by Management were based on an appropriate valuation method, and in assessing the quality of these estimates by considering the data, assumptions and calculations used. We focused our work primarily on investments and intangible assets with a value in use close to their net book value. We assessed the reasonableness of the key estimates, and more specifically:
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See Notes “1.1 – Accounting principles – Sales” and “2 – Sales” to the financial statements
This risk relates to the revenue generated by L'Oréal France during the first six months of the year, prior to the partial contribution of assets of Affaires Marché France and International Distribution executed July 1st, 2023.
| Risk identified | Our response |
|---|---|
| Risk identified
Your Company’s revenue is presented net of product returns made to distribution and discounts and rebates granted. These various deductions from revenue are recorded simultaneously with the recognition of sales in particular on the basis of contractual conditions and statistical data from past experience. At the end of the financial year, the valuation of the revenue thus includes estimates related to the amounts deducted, which we considered to be (i) complex, due to the diversity of contractual agreements and commercial conditions existing in your Company's different markets, (ii) sensitive, revenue being a key indicator in the valuation of the Company’s and its Management’s performance, and (iii) significant given their impact in the financial statements. The valuation of product returns, discounts, rebates and other benefits granted to customers is therefore considered to be a key audit matter. |
Our response
We have assessed the appropriateness of your Company's accounting policies with respect to the recognition of product returns, discounts, rebates and other benefits granted to customers, in accordance with French accounting principles. We obtained an understanding of the internal control system put in place, which allows the valuation and recognition of the items deducted from revenue, particularly at closing, and we tested, by sampling, the main controls of this system. We also carried out substantive tests in order to assess the reasonableness of the estimate of product returns and customer benefits. These tests mainly consisted in:
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