KAP

ARÇELİK A.Ş.

ARCLK

Publish Date

30.01.201818:51:08

Disclosure Type

Year

2017

Period

Annual

Notification Attachments (2)

ARCELIK - 31 12 2017 - SPK - TR.pdf ARCELIK - 31 12 2017 - SPK - ENG.pdf

Financial Report

Independent Audit Firm	Audit Type	Opinion Type
PwC BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş	Audit	Unqualified Opinion

CONVENIENCE TRANSLATION INTO ENGLISH OF

INDEPENDENT AUDITOR'S REPORT

ORIGINALLY ISSUED IN TURKISH

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of Arçelik A.Ş.

A. Audit of the Consolidated Financial Statements

1. Opinion

We have audited the accompanying consolidated financial statements of Arçelik A.Ş. (the "Company") and its subsidiaries (collectively referred to as the "Group"), which comprise the consolidated statement of financial position as at 31 December 2017 and the consolidated statement of profit or loss, consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and the notes to the consolidated financial statements and a summary of significant accounting policies and consolidated financial statement notes.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2017, and its financial performance and its cash flows for the year then ended in accordance with Turkish Accounting Standards ("TAS").

2. Basis for Opinion

Our audit was conducted in accordance with the Standards on Independent Auditing (the "SIA") that are part of Turkish Standards on Auditing issued by the Public Oversight Accounting and Auditing Standards Authority (the "POA"). Our responsibilities under these standards are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements" section of our report. We hereby declare that we are independent of the Group in accordance with the Ethical Rules for Independent Auditors (the "Ethical Rules") and the ethical requirements regarding independent audit in regulations issued by POA that are relevant to our audit of the financial statements. We have also fulfilled our other ethical responsibilities in accordance with the Ethical Rules and regulations. We believe that the audit evidence we have obtained during the independent audit provides a sufficient and appropriate basis for our opinion.

3. Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. Key audit matters were addressed in the context of our independent audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Kilit denetim konuları

Konunun denetimde nasıl ele alındığı

Recoverability of trade receivables

Trade receivables from third parties (TL 6.516.438 thousand as of 31 December 2017), constitute a significant portion of the consolidated assets of the Group. Furthermore, the assessment of the recoverability of these assets involves significant level of management estimates. Such estimation includes considering the following for each customer ? the amount of guarantees/collateral held, past collection performance, creditworthiness and aging of receivables. The outcome of such estimates is very sensitive to changes in market conditions. Therefore, recoverability of trade receivables is a key matter for our audit.

Please refer to notes 2.3, 9 and 35 to the consolidated financial statements for the Group's disclosures on trade receivables, including the related accounting policy and risk management policy.

We performed the following procedures in relation to the recoverability of trade receivables:

· Understanding the business process for collections from customers and testing the operational effectiveness of selected key controls,

· Understanding, evaluating and testing of credit risk related key controls in the financial reporting process,

· Understanding and evaluating the customer and distributor collections process run by the finance department,

· Analytical procedures on aging of receivables and trade receivable turnover days, comparing them to the prior period,

· Inquiries with management in relation to any disputes with customers or distributors and written inquiries with the Group's legal counsels on outstanding litigation in relation to trade receivables,

· Testing receivables from third parties by obtaining confirmation letters from customers and distributors and reconciling them to the Group's accounting records,

· Testing collections in the subsequent period from selected customers and distributors,

· Testing, on a sample basis, guarantees/collaterals held and assessing the Group's ability to convert them to cash,

· Assessing the adequacy of disclosures around recoverability of trade receivables in the consolidated financial statements.

We had no material findings related to the recoverability of trade receivables as a result of these procedures.

3. Key Audit Matters (Continued)

Kilit denetim konuları

Konunun denetimde nasıl ele alındığı

Provision for the impairment of inventories

The Group's inventories, amounting to TL 3,779,928 thousand as of 31 December 2017, carry a risk of diminution in value due to disruptive technological changes and macroeconomic developments. In addition, determining the provision for such diminution in value involves judgements and estimates. These judgments and estimates include evaluation of the slow moving inventories due to various reasons such as technological changes and decrease in customer demands, and evaluation of the provision for obsolete and damaged inventories. Therefore, the provision for the impairment of inventories is a key matter for our audit.

Please refer to notes 2.3 and 11 to the consolidated financial statements for the Group's disclosures on this provision, including the related accounting policy.

Procedures performed to ensure the adequacy of the provision for the diminution of the value of inventories are as follows:

· Understanding and evaluating the reasonableness of the provisioning policy and the assessment of its compliance,

· Inquiry with the Group management about the risk of diminution in value as a result of disruptive technological changes,

· Analytical procedures on inventory turnover rates compared to the prior year,

· Evaluation of the adequacy of the provision recognized in the current period in comparison to the write downs realized in the prior period,

· Observation of obsolete and damaged inventories during inventory counts,

· Testing, on a sample basis, the net selling prices used in the calculation for the net realizable value of inventories.

We had no material findings related to the provision for the impairment of inventories as a result of these procedures.

3. Key Audit Matters (Continued)

Kilit denetim konuları

Konunun denetimde nasıl ele alındığı

Impairment tests of indefinite-life intangible assets

The carrying value of brands and goodwill which are accounted for under indefinite-life intangible assets amounted to TL 1,052,282 thousand and TL 438,112 thousand, respectively, in the consolidated financial statements as of 31 December 2017. In accordance with TAS, these indefinite-life intangible assets should be tested for impairment annually.

Brands and goodwill are material to the consolidated financial statements. In addition, significant judgements and estimates are used in the impairment tests performed by management. These are, for goodwill impairment tests; earnings before interest, tax, depreciation and amortization ("EBITDA") growth forecasts, long term growth rates and discount rates and in addition to these, royalty rates used in the relief from royalty method for the brand impairment tests. The outcome of such estimates is very sensitive to changes in market conditions. Therefore, these impairment tests are key matters for our audit.

Please refer to notes 2.3, 14 and 15 to the consolidated financial statements for the relevant disclosures, including the accounting policy and sensitivity analysis.

We performed the following procedures in relation to the impairment tests of brands and goodwill:

· Evaluating the appropriateness of the Cash Generating Units ("CGUs") determined by management,

· Evaluating management forecasts and future plans based on macroeconomic information,

· Comparing forecasted cash flows for each CGU with its historical financial performance,

· Through involvement of our internal valuation specialists, assessing the reasonableness of key assumptions, including long term growth rates, discount rates and royalty rates and benchmarking these against rates used in the durable goods and consumer electronics industries,

· Testing of the setup of the discounted cash flow models and their mathematical accuracy,

· Assessing management's sensitivity analysis for key assumptions,

· Testing of the disclosures in the consolidated financial statements in relation to indefinite-life intangible assets, and evaluating the adequacy of these disclosures for TAS' requirements.

We had no material findings related to the impairment tests of indefinite-life intangible assets as a result of these procedures.

4. Other matter

The consolidated financial statements of the Group as of 31 December 2016 and for the year then ended were audited by another audit firm whose audit report dated 6 February 2017 expressed an unqualified opinion.

5. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

The Group management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with TAS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group'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 management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

6. Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Responsibilities of independent auditors in an independent audit are as follows:

Our aim is 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 independent auditor's report that includes our opinion. Reasonable assurance expressed as a result of an independent audit conducted in accordance with SIA is a high level of assurance but does not guarantee that a material misstatement will always be detected. Misstatements can arise from fraud or error. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an independent audit conducted in accordance with SIA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

6. Auditor's Responsibilities for the Audit of the Consolidated Financial Statements (Continued)

· Identify and assess the risks of material misstatement in the consolidated 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.

· Assess the 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 Group's internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

· Conclude on the appropriateness of management'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 Group'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 consolidated 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 independent auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance 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.

6. Auditor's Responsibilities for the Audit of the Consolidated Financial Statements (Continued)

We provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence. We also communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated 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.

B. Other Responsibilities Arising From Regulatory Requirements

1. No matter has come to our attention that is significant according to subparagraph 4 of Article 402 of Turkish Commercial Code ("TCC") No. 6102 and that causes us to believe that the Company's bookkeeping activities concerning the period from 1 January to 31 December 2017 period are not in compliance with the TCC and provisions of the Company's articles of association related to financial reporting.

2. In accordance with subparagraph 4 of Article 402 of the TCC, the Board of Directors submitted the necessary explanations to us and provided the documents required within the context of our audit.

3. In accordance with subparagraph 4 of Article 398 of the TCC, the auditor's report on the early risk identification system and committee was submitted to the Company's Board of Directors on
30 January 2018.

PwC Bağımsız Denetim ve
Serbest Muhasebeci Mali Müşavirlik A.Ş.

Cihan Harman, SMMM
Partner

İstanbul, 30 January 2018

Notification Attachments (2)

ARCELIK - 31 12 2017 - SPK - TR.pdf ARCELIK - 31 12 2017 - SPK - ENG.pdf

Notifications Financial Statements Corporate Actions

PDF

WORD

EXCEl

Presentation Currency	1.000 TL
Nature of Financial Statements	Consolidated

Presentation Currency	1.000 TL
Nature of Financial Statements	Consolidated

Presentation Currency	1.000 TL
Nature of Financial Statements	Consolidated

Presentation Currency	1.000 TL
Nature of Financial Statements	Consolidated

Presentation Currency	1.000 TL
Nature of Financial Statements	Consolidated