Notes A.2.3, E.9, E.10, F.13, H.17.1 and H.17.3 to the consolidated financial statements
Goodwill, concession intangible assets and other intangible assets had material net carrying amounts at 31 December 2021, i.e. €16,472 million, €25,329 million and €7,586 million respectively, together equal to 49% of total assets. Those assets may present a risk of impairment losses arising from internal or external factors, such as a deterioration in performance, changes in the economic environment, adverse market conditions, movements in traffic levels and changes in legislation or regulations.
The Group is also exposed to a risk of impairment losses in respect of infrastructure operated by concession companies over which it has joint control or significant influence. Interests in those concession companies amounted to €353 million at 31 December 2021.
The Group carries out impairment tests on goodwill, concession intangible assets, other intangible assets and interests in concession companies accounted for under the equity method where there is an indication that an impairment loss has arisen. The recoverable amount is based on a value in use calculation, which is itself based on discounted future cash flow forecasts.
These impairment tests reflected the uncertain macroeconomic outlook caused by the Covid-19 health crisis, and Management’s various recovery scenarios.
Determining the recoverable amount of these assets and any impairment losses to be recognised is a key audit matter, given the importance of estimates and the level of judgment required by Management regarding the operational performance and future traffic assumptions, long-term growth rates and discount rates used, and the sensitivity of their measurement to changes in certain assumptions.
For cash-generating units and intangible assets that are material or present what we regard as a substantial specific risk of impairment losses, we:
As regards goodwill, we examined the appropriateness of information provided in the Notes to the consolidated financial statements on the determination of underlying assumptions and sensitivity analyses in view of the appropriate accounting standard.
Notes A.2.3, G.16 and H.19.3 to the consolidated financial statements
VINCI Construction and VINCI Energies together account for more than 80% of the Group’s consolidated revenue, and most of the former’s revenue comes from long-term construction contracts.
Construction contract income and expenses are recognised using the stage-of-completion method: the stage of completion and the revenue to be recognised are calculated on the basis of a large number of completion estimates made by monitoring the work performed and taking into account unforeseen circumstances. Adjustments may therefore be made to initial estimates throughout the life of the contracts and may materially affect results.
If the estimate of the final outcome of a contract indicates a loss, a provision is made for the loss on completion regardless of the stage of completion, based on the best estimates of income, including, if need be, any rights to additional revenue or claims if these are highly probable and can be reliably estimated.
Determining these completion estimates and the financial impact of any adjustments that may become necessary during the performance of projects and operations is a key audit matter, given the amounts involved and the high level of judgment required on the part of the operational departments of the subsidiaries involved in the determination of these completion estimates.
We selected projects on the basis of their size, technical complexity and geographical location, and for each selected project, we: