IMF Bentham Limited Annual Report 2019

Independent Auditor’s Report continued A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation RK:DA:IMF:081 Impairment assessment of intangible assets Why significant How our audit addressed the key audit matter Litigation contracts in progress are recognised as intangible assets and assessed for impairment by the Group using cash flow forecasts. The carrying value of litigation contracts are contingent on future cash flows and there is a risk that if these cash flows do not meet the Group’s expectations, or if significant judgments such as the discount rates change, the assets will be impaired. This was a key audit matter because it requires a high level of judgment and changes in these assumptions might lead to a significant change in the carrying values of the related assets. Refer to Note 10 of the financial report for the amounts recognised by the Group as at 30 June 2019 and related disclosures. We evaluated the Group’s assessment of the carrying value of intangible assets. Our audit procedures included the following:  Assessed, through testing a sample, the effectiveness of the Group’s controls in relation to the review of carrying values for intangible assets, including controls over the valuation model and assumptions applied.  Examined the Group’s impairment assessment model and tested the reasonableness of key assumptions including cash flow forecasts considering the accuracy of previous forecasts, estimated completion dates and discount rates, with the involvement of our valuation specialists.  We tested the mathematical accuracy of the cash flow models.  Conducted sensitivity analyses to ascertain the impact of reasonably possible changes to key assumptions on the available headroom.  Discussed significant case matters with respective Case Investment Managers, in order to understand case status and assess judgements made by the Group that impacted the impairment model including litigation completion timing, litigation revenue, budgeted costs to complete and intention to continue the litigation funding.  Assessed the adequacy of the financial statement disclosures regarding impairment and the recoverable amount of the Group’s intangible assets. Overview Directors’ Report Financial Report Shareholder Information 129 IMF Bentham Limited Annual Report 2019