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Independent Auditor’s Report

KEY AUDIT MATTERS (CONTINUED)

Key Audit Matter How our audit addressed the Key Audit Matter

Provision for obsolete or slow moving inventories
(Continued)

Management assessed the provision at each We tested, on a sample basis, by comparing the
period end for obsolete or slow moving inventories estimated selling price with post year-end sales
based on consideration of obsolescence of raw data of the selected items and tested the inventory
materials and work in progress, and the net aging by comparing the inventory records with the
realisable value of finished goods. The identification underlying documents. In addition, we discussed with
of inventory obsolescence and determination of management and inspected the latest sales pattern for
estimated selling price less cost to sell require both price and quantity for potential orders, and other
the use of significant judgement and estimates, factors, including the product change and the market
including their nature, ageing, latest selling price, trend.
and expectation of future sales orders. The
estimates are also subject to uncertainty of market On a sample basis, we have further corroborated
trends, customer demands and technological management’s explanations with underlying
development. documents and analysis of inventory aging and sales
pattern.
We focused on this area due to the significance
of the balance and of the management judgement Based on the procedures performed above, we
and estimates involved in determining the provision considered the estimates made by management in
for impairment of obsolete or slow moving assessing the provision for obsolete or slow-moving
inventories. inventories to be supported by available evidence.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2018 47