(Notes 1.3 “Revenue”, “Assets on contracts” and “Liabilities on contracts” and 25 “Assets and Liabilities on contracts” to the consolidated financial statements)
Risk identified | Total revenue amounts to €11,001 M as of December 31, 2019 in the consolidated financial statements. Service contracts between the Group and its clients include specific contractual terms. Accounting standards related to the recording of this type of contracts require a detailed analysis of contractual obligations and criteria when control of a service is passed to the customer, particularly in case of complex contracts. An error in the analysis of contractual obligations and terms for determine when control of a service is passed to the customer may lead to an error in revenue recognition. Consequently, we consider revenue recognition to be a key audit matter. |
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Our response | • For each type of contract, we obtained an understanding of the revenue recognition process established by the management, from the conclusion of the agreement, through the performance of the services, invoicing and booking the corresponding entries in the accounts, to the receipt of payment. • We evaluated the key controls concerning the processes and information systems relating to revenue. • We assessed the appropriateness and correct application of the accounting principles and methods relating to revenue recognition. • We performed tests of details on accounting for revenue by reference to the signed agreements as well as other external supporting evidence. We also assessed the proper cut-off of accounting periods. • We have assessed the contractual documentation and the analysis made by the Groupe, including the recoverability of trade receivables and WIP balances (Apex mainly). |
(Note 2.1.1 “Acquisition of Epsilon” to the consolidated financial statements)
Risk identified | • On July 1, 2019, Publicis Groupe acquired the data-driven marketing company, Epsilon Data Management LLC (“Epsilon”), from Alliance Data Systems Corporation, for €3,912 M. • In accordance with IFRS 3, Publicis Groupe identified and valued the assets acquired and liabilities assumed, including in particular its customer relationships and technologies. • As of December 31, 2019, the resulting provisional goodwill totals €2,392 M. • We considered the provisional allocation of the Epsilon purchase price to constitute a key audit matter due to: • The degree of judgment required to identify the assets acquired and liabilities assumed, and estimates used in measuring their fair value; • The significance of the assets valued and the amount of goodwill arising from the acquisition. |
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Our response | • We assessed the relevance of the methodology used by the Group to identify the assets and liabilities assumed. • We assessed with the support of our valuation experts the key assets and liabilities valued and the assumptions used in estimating their fair value, notably key assumptions inherent in the methods used to measure the value of the customer relationships and technologies, as specified in note 2.1.1 to the consolidated financial statements • We corroborated the external appraiser’s calculations of the fair value of the customer relationships and the technologies though an arithmetical review and a sensitivity analysis. • We assessed the appropriateness of information disclosed in the notes to the consolidated financial statements. |
