TRANSLATORS’ EXPLANATORY NOTE
The English content of this report is a free translation of the registered auditor’s report of the below-mentioned Polish Company. In Poland statutory accounts as well as the auditor’s report should be prepared and presented in Polish and in accordance with Polish legislation and the accounting principles and practices generally adopted in Poland.
The accompanying translation has not been reclassified or adjusted in any way to conform to the accounting principles generally accepted in countries other than Poland, but certain terminology current in Anglo-Saxon countries has been adopted to the extent practicable. In the event of any discrepancies in interpreting the terminology, the Polish language version is binding.
PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt sp. k., Polna 11 str.,
00-633 Warsaw, Poland; T: +48 (22) 746 4000, F: +48 (22) 742 4040, www.pwc.com
PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt sp. k. is entered into the National Court Register maintained by the District Court for the Capital City of Warsaw, under KRS number 0000750050, NIP 526-021-02-28. The seat of the Company is in Warsaw at Polna 11 str.
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Independent Registered Auditor’s Report
To the General Shareholders’ Meeting and the Supervisory Board of Ronson Development SE
Report on the audit of financial statements
Our opinion
In our opinion, the accompanying annual financial statements:
• give a true and fair view of the financial position of Ronson Development SE (the “Company”) as at 31 December 2020 and the Company’s financial performance and the cash flows for the year then ended in accordance with the applicable International Financial Reporting Standards as adopted by the European Union and the adopted accounting policies;
• comply in terms of form and content with the laws applicable to the Company and the Company’s Articles of Association;
• have been prepared on the basis of properly maintained books of account in accordance with the provisions of Chapter 2 of the Accounting Law of 29 September 1994 (the “Accounting Act” – consolidated text: Journal of Laws of 2021, item 217, as amended).
Our opinion is consistent with our additional report to the Audit Committee issued on the date of this report.
What we have audited
We have audited the annual financial statements of Ronson Development SE which comprise:
• the Statement of Financial Position as at 31 December 2020;
and the following prepared for the financial year from 1 January to 31 December 2020:
• the Statement of Comprehensive Income;
• the Statement of Changes in Equity;
• the Statement of Cash Flows, and
• the Notes to the Financial Statements comprising a description of the significant adopted accounting policies, notes and other explanations.
Basis for opinion
Basis for opinion
We conducted our audit in accordance with the National Standards on Auditing in the wording of the International Standards on Auditing as adopted by the resolution of the National Council of Statutory Auditors (“NSA”) and pursuant to the Law of 11 May 2017 on Registered Auditors, Registered Audit Companies and Public Oversight (the “Law on Registered Auditors” – Journal of Laws of 2020, item 1415) and the Regulation (EU) No. 537/2014 of 16 April 2014 on specific
requirements regarding the statutory audit of public-interest entities (the “EU Regulation” – Journal of Laws EU L158). Our responsibilities under NSA are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Independence
We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted by resolution of the National Council of Statutory Auditors and other ethical requirements that are
relevant to our audit of the financial statements in Poland. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. During the audit, the key registered auditor and the registered audit firm remained independent of the Company in accordance with the independence requirements set out in the Act on Registered Auditors.
Our audit approach
Overview
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the Company’s Management Board made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement. Misstatements may arise due to fraud or error.
They 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.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole , as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the financial statements as a whole.
• The overall materiality threshold adopted for the purposes of our audit was set at PLN 6.3 million, which represents 1% of the Company’s assets.
• We have audited the annual financial statement of the Company for the period ended 31 December 2020.
• Measurement of investments in subsidiaries and impairment of granted loans to subsidiaries
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Materiality
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Group scoping
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Key audit matters
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Overall Company materiality
PLN 6.3 million
How we determined it
1% of the total assets of the Company
Rationale for the materiality benchmark applied
We have adopted the Company’s total assets as the basis for determining materiality because the value of total assets in our opinion it is an indicator commonly used by the users of financial statements to evaluate the operations of a holding company, which does not conduct direct business activities. We adopted the materiality threshold at 1% because based on our professional judgement it is within the acceptable quantitative materiality thresholds.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above PLN 440 thousand, as well
as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. They include the most significant identified risks of material misstatements, including the identified risks of material misstatement
resulting from fraud. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Measurement of investments in subsidiaries and impairment of loans granted to subsidiaries
As at 31 December 2020, investments in subsidiaries in the financial statements of Ronson Development SE. amounted to PLN 435.9 million (PLN 419.8 million as at 31 December 2019), whereas loans granted to subsidiaries amounted to PLN 160.3 million (PLN 113.8 million as at 31 December 2019), which represented 95% of total assets and total liabilities and equity as at that date (98% of total assets/equity and liabilities as at 31 December 2019).
The Company measures its investment in subsidiaries in accordance with IAS 27 "Separate Financial Statements" according to the equity method consisting in initial recognition at cost, and then adjusting for changes in the Company's share in the net assets of the subsidiaries, which occurred after the acquisition date. In the event of indication of impairment of the above-mentioned investment, the Company performs an impairment test in accordance with the guidelines of IAS 36 "Impairment of Assets". As at 31 December 2020 and prior year balance
Our audit procedures comprised in particular:
a) identifying significant changes in the structure and discussing them with the representatives of the Company;
b) assessing compliance of the adopted accounting policies in respect of investments in subsidiaries with the appropriate financial reporting standards;
c) understanding and evaluation of the process of valuation of investment in subsidiaries according to the equity method, including the procedures for identifying indications of impairment and the method of determining and verifying the calculation of an impairment;
d) critical assessment of indicators of potential impairment for significant balances of investments in subsidiaries, and in the event of indictor occurred, we analyzed the impairment tests performed
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sheet date, the Company did not recognized any impairment allowance of investment in subsidiaries.
Loan granted to subsidiaries are measured at amortized cost, taking into account the expected credit losses in accordance with IFRS 9 "Financial Instruments". In respect of loans granted to subsidiaries, the Management assessed the impairment using expected credit loss methodology, which as of 31 December 2020 amounted to PLN 9.0 million.
Estimates of impairment, including determining the correct recoverable value and the impairment allowance in respect of the loans granted to subsidiaries requires significant estimates to be made by the Management Board. Expected future cash flows generated by subsidiaries, forecasted market conditions and discount rate are key assumptions that have significant impact on determining the recoverable value of investment in subsidiaries and decision about recognition of additional impairment or its reversal. To estimate the impairment allowance on the loans granted to subsidiaries, the Company uses the probability of default based on individual analyses of the borrowers.
Using different measurement techniques and different assumptions to determine the recoverable value may result in materially different estimates of impairment allowances on the loans granted and of the value of investments in subsidiaries.
Taking into consideration the inherent risk of uncertainty related to significant judgments and estimates made by the Management Board, and the materiality of receivables and interest for the separate financial statements, we have acknowledged that this is a key audit matter.
Accounting policies and disclosures relating to shares in subsidiaries, as well as receivables in respect of loans granted to subsidiaries have been described in Notes to financial statements point 3(c) and in Notes 9 and 10.
by the Management Board. In particular, as part of this work, we have done:
- checking the mathematical correctness and methodological consistency of the adopted valuation model;
- use of the results of our audit procedures performed for the purposes of the consolidation. As part of this work, we verified the valuation of assets owned by subsidiaries and the correctness of identification of the indicators for impairment of the net investment value as at December 31, 2020;
- reconciliation of input data such as net result and net assets value to the financial data of subsidiaries within the scope of our audit procedures;
e) understanding and evaluating the process of calculating impairment losses on loans granted to subsidiaries in accordance with the expected credit loss model;
f) to determine the correctness of impairment allowances for loans granted to subsidiaries, we critically assessed the classification to the level of credit risk, made an independent calculation of allowances based on the parameters used by the Management Board and compared to determine whether there were any significant discrepancies;
g) assessment of the completeness and correctness of disclosures on shares in subsidiaries and loans granted.
Responsibility of the Management and Supervisory Board for the financial statements
The Management Board of the Company is responsible for the preparation, based on the properly maintained books of account of the annual financial statements that give a true and fair view of the Company’s financial position and results of operations, in accordance with International Financial Reporting Standards as adopted by the European Union, the adopted accounting policies, the applicable laws and the Company’s Articles of Association, and for such internal control as the Management Board
determines 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 Company’s Management Board is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the
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Company or to cease operations, or has no realistic alternative but to do so.
The Company’s Management Board and members of the Supervisory Board are obliged to ensure that
the financial statements comply with the requirements specified in the Accounting Act. Members of the Supervisory Board are responsible for overseeing the financial reporting process.
Auditor’s responsibility for the audit of the financial statements
Our objectives are to obtain reasonable assurance about 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 the NSA 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 economic decisions of users taken on the basis of these financial statements.
The scope of the audit does not include an assurance on the Company’s future profitability nor the efficiency and effectiveness of the Company’s Management Board conducting its affairs, now or in future.
As part of an audit in accordance with NSA, we exercise professional judgement and maintain professional scepticism 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.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Company’s Management Board.
• Conclude on the appropriateness of the Company’s Management Board’s use of the
going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the Audit Committee 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 the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the Audit Committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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Other information, including the Report on the operations
Other information
Other information comprises a combined report on operations of the Company and on the group Ronson Development SE in which Ronson Development SE is the parent entity (“the Group”) for the financial year ended 31 December 2020 (“the combined Report on the operations”) and the corporate governance which is a separate part of the Report on the operations (together “Other information”). Other information does not include the financial statements and our auditor’s report thereon.
Responsibility of the Management and Supervisory Board
The Management Board of the Company is responsible for the preparation of the Other Information in accordance with the law.
The Company’s Management Board and the members of the Supervisory Board are obliged to ensure that the combined Report on the Company’s and Group’ s operations including its separate parts complies with the requirements of the Accounting Law.
Registered auditor’s responsibility
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 and, in doing so, consider whether the Other Information is materially inconsistent with the information in the financial statements, our knowledge obtained in our audit, or otherwise appears to be materially misstated. If, based on the work performed, we identified a material misstatement in the Other Information, we are obliged to inform about it in our audit report. In accordance with the requirements of the Law on the Registered Auditors, we are also obliged to issue an opinion on whether the combined Report on the operations has been prepared in accordance with the law and is consistent with information included in annual financial statements and consolidated financial statements.
Moreover, we are obliged to issue an opinion on whether the Company and the Group provided the required information in its corporate governance statement.
Opinion on the combined Report on the operations
Based on the work we carried out during our audit, in our opinion, the combined Report on the Company’s and Group’s operations:
• has been prepared in accordance with the requirements of Article 49 of the Accounting Act and para. 70 and para. 71 of the Regulation of the Minister of Finance dated 29 March 2018 on current and periodical information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State (“Regulation on current information” – Journal of Laws 2018, item 757);
• is consistent with the information in the financial statements and consolidated financial statements.
Moreover, based on the knowledge of the Company and the Group and its environment obtained during our audit, we have not identified any material misstatements in the combined Report on the Company’s and Group’s operations.
Opinion on the corporate governance statement
In our opinion, in its corporate governance statement, the Company and the Group included information set out in para. 70.6 (5) of the Regulation on current information. In addition, in our opinion, information specified in paragraph 70.6 (5)(c)–(f), (h) and (i) of the said Regulation included in the corporate governance statement are consistent with the applicable provisions of the law and with information included in the financial statements and consolidated financial statements.
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Report on other legal and regulatory requirements
Statement on the provision of non-audit services
To the best of our knowledge and belief, we declare that the non-audit services we have provided to the Company and its subsidiaries are in accordance with the applicable laws and regulations in Poland and that we have not provided any non-audit services prohibited under Article 5(1) of the EU regulation and Article 136 of the Law on Registered Auditors.
The non-audit services which we have provided to the Company and its subsidiaries during the audited period are disclosed in note 17 to the financial statements.
Appointment
We have been appointed to audit the annual financial statements of the Company by the Resolution of the Supervisory Board of 4 December 2019. The financial statements of the Company were audited by us for the first time.
The Key Registered Auditor responsible for the audit on behalf of PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp.k., a company entered on the list of Registered Audit Companies with the number 144., is Piotr Wyszogrodzki.
Piotr Wyszogrodzki
Key Registered Auditor
No. 90091
Warsaw, 10 March 2021