2
We
draw attention to Note 39 Contingent Assets and Contingent
Liabilities of the Consolidated Financial
Statements,
which describes the possible effects of a full tax audit of the
subsidiary Monbat Recycling EAD for
the
period 2014 - 2019. At the beginning of 2021 a tax audit act was
issued for the amount of BGN 2,972
thousand
in connection with non-recognition of the right to deduct a tax
credit, non-recognition of tax expenses
under
CITA for supplies of lead-containing raw materials and accrued
interest for delay. The subsidiary Monbat
Recycling
EAD has undertaken a procedure to suspend the implementation of the
tax audit act by appealing to
the
relevant director of the Appeals and Tax Insurance Practice
Directorate at the Central Office of the NRA
pursuant
to Article 152 (1) of the TPSC. By a decision of 07.09.2021, the
Audit Act was revoked and a new
order
for audit was issued, which has not been completed as of the date of
this report. Our opinion has not
been
modified on this issue.
We
draw attention to Note 43 Events after the end of the reporting
period to the consolidated financial
statements,
which announces the unadjusted event related to the military
invasion of the Russian Federation in
the
Republic of Ukraine on February 24, 2022 and the general uncertainty
caused by world markets. military
action.
The intentions of the Group's management are to take all necessary
measures to limit potential future
negative
effects of sanctions against the Russian Federation, which have an
indirect effect on all spheres of
economic
activity worldwide and in Bulgaria, but the possibility of future
negative impact on the Group's
revenues
and supply chains as a result of the ongoing military conflict,
imposed restrictions and other factors.
Our
opinion has not been modified on this issue.
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. These
matters are considered as part of our audit
of
the consolidated financial statements as a whole and the formation
of our opinion on it, and we do not
provide
a separate opinion on these issues.
Assessment of the
recoverability of loans and receivables from Prista Oil Holding EAD
Group’s
disclosures regarding the assessment of the recoverability of loans
and receivables from Prista Oil
Holding
EAD are presented in notes 37 and 38 to the consolidated financial
statements.
Key audit matter
The
Group's
transactions
and balances with Prista Oil Holding
EAD,
as presented in notes 37 “Related party
transactions”
and 38 “Related party balances at year-
end”.
How this matter
was addressed during the audit
In
this area, our audit procedures included,
among
others, analysis of the Group's contractual
agreements
with related parties, as well as
specific
facts and circumstances, in order to
identify
the nature of the transactions and their
effect
on the financial condition and results of the
operations
include
significant
As
at 31 December 2020 the carrying amount of
receivables
and loans granted to Prista Oil Holding
EAD
is BGN 36,836 thousand (or 8% of the total
assets
of the Group). IFRS 9 requires the Group to
determine
at each reporting date the impairment loss
of
its financial assets, based on a change, if any, in
the
credit risk of the financial instrument. As
disclosed
in note 38 “Related party transactions at
year-end”,
the Group has determined that no
impairment
loss on loans and receivables from Prista
Oil
Holding AED is required, based on the
assessment
of the recoverability as at 31 December
2021.
This assessment is related to a complex
analysis
and numerous judgments by the Group's
management,
regarding the expected time and
amount
of repayments by the related party based on
different
scenarios, as well as considerations for the
existence
of additional non-operational sources of
repayment
(e.g. possible sales of businesses or
assets
outside the core business.) Management's
analysis
and judgments focus on a recoverability
assessment
scenario that includes repayment over a
period
of time and is based on the projected cash
flows
of "Prista Oil" Group's lubricants business for
the
period 2022 - 2026, as well as an assessment of
the
capacity for distribution of dividends of "Monbat"
Group's
operations.
We
also
received
confirmation
letters of balances and related party
transactions,
as well as statements from
management,
which we analysed in the context
of
the available documentation for these
transactions.
In addition, we performed analysis
of
specific documents and databases in order to
identify
relationships and transactions with
related
parties that have not been previously
identified
or disclosed by management.
Also,
we focused on the assessment of the
presentation
and disclosure of transactions and
balances
with related parties in view of their
consistency
with our understanding of the
business
model of the Group, as well as the
results
of our audit procedures in other relevant
areas.
Regarding
management's assessment of the
recoverability
of loans and receivables from
related
parties outside "Monbat" Group, we
added
to the audit team our internal business
modeling
and valuation specialists to perform
