Boskalis Annual Report 2018

ANNUAL REPORT 2018 – BOSKALIS 140 RISK

OUR AUDIT APPROACH

KEY OBSERVATIONS

VALUATION OF HARBOR TOWAGE JOINT VENTURES (SEE NOTE 3.5, 3.8, 3.20, 5.2, 10, 17 AND 31) Deteriorating market conditions in a number of port areas where harbor towage joint ventures In our audit approach we evaluated the impairment testing models including the main assumptions used. This includes assessing the forecasted margins, working capital and

We consider management’s key assumptions and estimates, used in the impairment tests, to be within an acceptable range. We agree with the management’s conclusion from its impairment tests and further analyses that the book value of the joint ventures should be impaired. We further assessed that the required disclosures were appropriate.

are active indicate a risk of impairment. In February 2019 Boskalis announced the contemplated sale of its stake held in the partnership Saam Smit Towage for a sales price approximating the book value, after recognizing an impairment charge. In March 2019 the contemplated sale of the stake held in Kotug Smit Towage was announced. which management identified external and internal indications of impairment. The assess- ment of the valuation of the joint ventures is considered complex and requires significant management judgment with respect to future market and economic conditions, developments in revenue, margins, working capital levels and investments, which individually may have a material effect on the result of the calculation. Therefore it is significant to our audit. Impairment charges relating to the harbor towage joint ventures of EUR 189.9 million were recognized in the profit and loss account of 2018 (2017: nil). Management performed impairment tests on the valuation of its harbor towage joint ventures for represents 52% of the balance sheet total. Due to a deteriorated market outlook for some categories of equipment, management decided to take a number of specific vessels out of service in the near future, mainly for future scrapping. Management performed impairment tests of the respective floating equipment related to the transport activities in the low end of the Offshore Energy market. The assessment of the valuation of floating and other construction equipment is significant to our audit because this process is complex and requires significant management judgments, such as of future market and economic conditions. Impairment charges of EUR 136.9 million were recognized in the profit and loss account of 2018.

investment levels, discount rates and contemplated sales prices, where applicable. The procedures performed include comparing assumptions to external data. Furthermore, we analysed sensitivities, compared the projected cash flows to budgets and management’s forecasts and assessed the historical accuracy of management’s estimates. We included valuation experts in our team to assess the valuation models and parameters used and to assist us with above mentioned procedures. Furthermore, we evaluated the adequacy of the company’s disclosures regarding the impairment of the harbor towage joint ventures.

VALUATION FLOATING AND OTHER CONSTRUCTION EQUIPMENT RELATED TO THE OFFSHORE ENERGY DIVISION (SEE NOTE 3.5, 3.7, 10 AND 16) Property, plant and equipment includes floating and other construction equipment amounting to EUR 2.4 billion as at 31 December 2018, which In our audit approach we evaluated management’s assessment of impairment

We consider management’s assessment of impairment indicators as appropriate and the key assumptions and estimates used in the impairment tests to be within an acceptable range. We agree with management’s conclusion on the recorded impairment amount. We further assessed that the required disclosures were appropriate.

indications, tested management’s assumptions used in the value in use calculations and we assessed the historical accuracy of management’s estimates. We evaluated supporting external broker reports obtained by management and observable market data on scrap values to evaluate the fair value less cost of disposal, where applicable. We involved our valuation experts to assess the valuation model and to evaluate the discount rate used, performed sensitivity analyses where considered necessary, and assessed the consistency of valuation methodologies applied. Furthermore, we evaluated the adequacy of the company’s disclosures regarding the impairments of this equipment. assumptions used with regard to the future market and economic conditions and the decision taken to exit the lower-end of transport activities. This includes assessing the forecasted margins, working capital and investment levels and discount rate. The procedures performed include comparing assumptions to external data. Furthermore, we analyzed sensitivities, compared the projected cash flows to budgets and management’s forecast and assessed the historical accuracy of management’s estimates. We included valuation experts in our team to assess the valuation models and parameters used and to assist us with above mentioned procedures. Furthermore, we evaluated the adequacy of the company’s disclosures regarding the impairment of goodwill.

VALUATION OF GOODWILL OF THE OFFSHORE ENERGY DIVISION (SEE NOTE 3.5, 3.6, 10 AND 15) Goodwill of the Offshore Energy division amounts to nil as at 31 December 2018 (2017: EUR 154.9 million) and is fully impaired in 2018. A sharp decrease in the results in certain parts of the Offshore Energy division, in In our audit approach we evaluated the goodwill impairment testing model including the main

We consider management’s key assumptions and estimates, used in the impairment test, to be within an acceptable range. We agree with management’s conclusion that the full goodwill amount for the CGU Offshore Energy is impaired. We further assessed that the required disclosures were appropriate.

particular in the transport activities in the low end of the market, and the decision to take a specific number of vessels out of service, required management to conduct an impairment analysis. Goodwill impairment test is considered complex and requires significant management judgment with respect to future market and economic conditions, developments in revenue, margins, working capital levels and investments, which individually may have a material effect on the result of the calculation. Therefore it is significant to our audit.