Investor Presentaiton

138 A.P. Møller-Mærsk A/S Annual Report 2020 Financials Independent Auditor's Report =1 Revenue recognition Key audit matter Recognition of revenue is complex due to the volume of transactions and the variety of different revenue streams within the segments. We focused on this area due to the significance of amounts involved and because recognition of revenue involves accounting policy decisions, and judgements made by Management originating from different customer behavior, market con- ditions, terms and nature of services in the various segments. Further, the volume of transactions and extent of different revenue streams require various IT setups to ensure correct revenue recognition, which are complex and introduce an inher- ent risk to the revenue recognition process. Reference is made to notes 1 and 23 in the consolidated financial statements. How our audit addressed the key audit matter Our audit procedures included considering the appropriateness of the revenue rec- ognition accounting policies and assessing compliance with applicable accounting standards. We tested the IT setups supporting the revenue recognition as well as relevant inter- nal controls and Management's monitoring of internal controls. We used data analytics on selected revenue streams and performed substantive pro- cedures over invoicing and relevant contracts in order to assess the accounting treat- ment and principles applied, and tested journal entries on revenue. Further, we tested timing to ensure that the revenue is recognised in the correct financial year. Recoverability of the carrying amount of property, plant and equipment Key audit matter The most significant risks in relation to Management's assessment of the recov- erability of the carrying amount of property, plant and equipment relate to the definition of cash-generating units (CGUS), identification of CGUS with indicators of impairment and, where relevant, the estimate of the fair values less costs to sell and the values in use, including determination of key assumptions. Bearing in mind the generally long-lived nature of the assets, the most critical assumptions in estimating the future cash flows are Management's long-term outlook for freight and terminal rates, volume growth, bunker price and capital expenditures as well as determining the discount rates. We focused on this area, as the carrying amounts are significant and because Management is required to exercise considerable judgement because of the inherent complexity in estimating the fair values less costs to sell or the values in use. Reference is made to notes 7 and 23, 24 in the consolidated financial statements. How our audit addressed the key audit matter In addressing the risks, we considered the appropriateness of the defined CGUS within the businesses. We examined the methodology used by Management to assess the car- rying amount of property, plant and equipment assigned to CGUs, and the process for identifying CGUs that required impairment testing to determine compliance with IFRS as adopted by the EU. We performed detailed testing for the assets where indicators of impairment were identified. For those assets, we reviewed Management's testing of the fair values less costs to sell or the values in use, including analysed the reasonableness of key assump- tions in relation to the ongoing operation of the assets. We corroborated Management's estimates of future cash flows and challenged whether these are appropriate in respect of key assumptions, such as freight and terminal rates, volume growth, bunker price and capital expenditures. We used our internal valuation specialists to independently challenge the discount rates. In calculating the discount rates, the key inputs used were independently sourced from market data, and we assessed the methodology applied. Further, we tested the mathematical accuracy of the relevant fair value less cost to sell and value in use models prepared by Management. Statement on Directors' Report Management is responsible for Directors' Report (pages 3-62, 142-143 and 149, respectively). Our opinion on the financial statements does not cover Directors' Report, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read Directors' Report and, in doing so, consider whether Directors' Report is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Directors' Report includes the disclosures required by the Danish Financial Statements Act. Based on the work we have performed, in our view, Directors' Report is in accordance with the consol- idated financial statements and the parent com- pany financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Directors' Report. Management's responsibilities for the financial statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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