Constance Hotels, Resorts and Golf | Annual Report 2023

124

Corporate Governance

Constance Hotels Services Limited

Annual Report 2023

125

Corporate Governance

Constance Hotels Services Limited

Annual Report 2023

Independent Auditor’s Report to the Members of Constance Hotels Services Limited

Independent Auditor’s Report to the Members of Constance Hotels Services Limited

REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS (continued)

REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS (continued)

Key Audit Matters (continued)

Key Audit Matters (continued)

KEY AUDIT MATTER

HOW THE MATTER WAS ADDRESSED IN THE AUDIT

KEY AUDIT MATTER

HOW THE MATTER WAS ADDRESSED IN THE AUDIT

Our procedures in relation to the valuation of employee benefit liabilities included the following: - Evaluated the appropriateness of the assumptions applied in the valuation of the pension liabilities, and the information contained within the actuarial valuation reports in conjunction with our internal pension specialist team; - Assessed and challenged the assumptions made in determining the present value of the liabilities and fair value of the plan assets such as discount rate, future salary increase; - Assessed the reasonableness of material movements in retirement benefit obligations by reference to changes in market and demographic assumptions; - Verified the data used by the actuary with the payroll report for completeness and accuracy; - Assessed the completeness and accuracy of disclosures within the financial statements in accordance with IFRSs; - Assessed the competence, capabilities, independence and objectivity of management’s independent actuary and verified the qualification of the actuary; and - Ensured reasonableness of the planned assets by obtaining independent confirmation from the fund administrator.

Impairment of investments in subsidiary companies

Our procedures in relation to assessing the impairment of investments in subsidiary companies included the following:

Valuation of employee benefit liabilities

The Company holds investments in subsidiaries which amounted to MUR 2.9 billion as of December 31, 2023 (2022: MUR 2.9 billion). Investments in subsidiary companies are carried at cost less impairment in accordance with IAS 36 Impairment of Assets in the Company’ separate financial statements. Management determines at the end of each reporting period the existence of any indication of impairment of the Company’s investments in subsidiaries. If there are indicators of impairment, management would assess the recoverable amounts of the investments in subsidiary companies. Any shortfall between the recoverable amounts of the subsidiaries and their carrying value is recognised in profit or loss. These subsidiaries might not sustain their performance in order to support their respective carrying value in the company’s financial statements. As a result, an impairment assessment was required to be performed by comparing the carrying value of these to their recoverable amount to determine whether an impairment was required to be recognised. The impairment of the subsidiaries involves significant use of estimates and judgements, including occupancy rates, average room rates, guest night spending, growth rates and discount rates. The value in use is highly sensitive to changes in these key inputs. The impairment adjustments for December 31, 2023 is Nil (2022: MUR 443 million). Disclosures relating to the impairment review of investments in subsidiary companies have been provided in Notes 4 and 8 to the separate financial statements. The determination of the recoverable amount of the investments in subsidiaries was one of the key judgemental areas in preparing the financial statements due to a combination of the significance of the investments in the subsidiaries and the inherent uncertainty in the assumptions supporting the recoverable amount of these investments.

The employee benefit liabilities of the Group amount to MUR 499.8 million as of 31 December 2023 (2022: MUR 507.7 million). The Group’s employee benefit liabilities comprise the obligations under the defined benefit plan and the Workers’ Rights Act. Accounting for a defined benefit pension plan and the value of liabilities is dependent on significant assumptions, including an assessment of the discount rate, salary increase inflation and key demographic figures including life expectancy and mortality rates as disclosed in Note 18. A change in any of these assumptions could cause a material change in the value of the liabilities. Employee benefit liabilities are considered a key audit matter due to the significance of the balance to the financial statements as a whole and due to the judgment associated with determining the amount of provision.

We reviewed the Group’s controls relating to the preparation and approval of cash flow forecasts.

We obtained the discounted cash flow models that support the value-in-use calculations. Together with our valuation specialist, we performed the following: - assessed the appropriateness of the methodology applied in the impairment assessment of investments in subsidiary companies; - assessed the reliability and appropriateness of assumptions used to reach projections on future income, terminal growth rate assumptions, discount rates and performed sensitivity analysis to determine the impact of those assumptions. Our valuation specialists independently derived the discount rates and compared same with those of management; - verified the mathematical accuracy of the discounted cashflow forecasts and checked the internal consistency of the models; - reviewed the supporting agreements and underlying documentation which support the financial forecasts prepared by management; - challenged the key judgments provided by management with reference to historical trends, our own expectations based on our industry knowledge and management’s strategic plans; - discussed potential changes in key inputs with management in order to evaluate whether the inputs and assumptions used in the cash flow forecasts were reasonable. We reviewed the sensitivity analysis performed by management to evaluate the impact on the value in use calculations; and - assessed the appropriateness and completeness of the related disclosures made in the financial statements.

Other Information

The Directors are responsible for the other information. The other information comprises the information included in the 194 page document titled “CONSTANCE HOTELS SERVICES LIMITED AND ITS SUBSIDIARIES FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2023”, which includes Sustainability Report, Corporate Social Responsibility Report, Other Statutory Disclosures, Statement of Directors’ Responsibilities, and the Secretary’s Certificate as required by the Companies Act 2001, which we obtained prior to the date of this report, and the other information included in the Annual Report, which is expected to be made available to us after that date. The other information does not include the consolidated or the separate financial statements and our auditor’s report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, 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.

Accordingly, the impairment of investment in subsidiary companies was determined to be a key audit matter.