2020 Annual Report

2020 ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT (Translation from Spanish Language Original) To the Board of Directors and Shareholders Megacable Holdings, S.A.B. de C.V. Evaluation of the goodwill impairment test See note 11 to the consolidated financial statements (In thousands of Mexican Pesos) The Key Audit Matter MEGACABLE. Opinion We have audited the consolidated financial statements of Megacable Holdings, S.A.B. de C.V. and subsidiaries (the Group), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, the consolidated statements of comprehensive income, changes in stockholders' equity, and cash flows for the years then ended, and notes, including a summary of significant accounting policies, and other explanatory information. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Megacable Holdings, S.A.B. de C.V. and subsidiaries as at December 31, 2020 and 2019, and its consolidated results and its consolidated cash flows for the years then ended, in accordance with International Financial Reports Standards (IFRS). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Mexico, and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key Audit Matters (KAM) 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 were addressed in the context of our 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. The goodwill as at December 31, 2020 was $4,378,397, and represented 8.8% of the Group's total consolidated assets as at that date, of which $4,054,576 corresponded to the following Cash Generating Units (CGU): $1,242,205 to the Bajío CGU; $1,104,865 to the Central CGU, $693,805 to the Southeast CGU, $429,492 to the Pacific CGU, $318,640 to the Michoacán CGU and $265,569 to the Western CGU. The Group analyzes the impairment of goodwill due to the occurrence of internal or external impairment indicators, or at least once a year. We have identified the goodwill impairment test evaluation of these six CGUs as a key matter in our audit because the recovery value determination involves significant judgments. Specifically, the assumptions of the long-term growth rate, discount rate and reasonableness of cash flow projections used to calculate the recoverable value of CGUS are complex and any minor change to these assumptions would represent a significant impact. The recovery value has been determined through the value in use. How our matter was addressed in our audit The main procedures we performed to address this key audit matter included the following: We performed a sensitivity analysis on the long-term growth rate and discount rate assumptions to assess their impact on determining the recovery value of the CGUS mentioned above. We evaluated the long-term growth rates projected by the Group for these CGUs, comparing the growth assumptions with publicly available information. We compared the Group's historical cash flow projections with current results to assess the Group's ability to make projections. We also involved our valuation specialists, who assisted us with: Evaluating the discount rate used in the valuation, when comparing it with a range of discount rate that was estimated independently using public information available for comparable entities; and • Calculating the recovery value of the CGUS mentioned above, using the Group's cash flow projections and previously evaluated and using the discount rate calculated independently, and compare the results with the estimates made by the Group. 29

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