AmazonScience/document-haystack

1analyzing deviations. Since even minor changes to the discount rate can have a material 2effect on the results of the impairment test, we compared the assumptions and parameters 3underlying the discount rate, in particular the risk-free rate, the market risk premium and the 4beta factor, with our own assumptions and publicly available data.5We verified the computational accuracy of the valuation model used by the Company.6In order to take account of the existing forecast uncertainty and the earlier deadline selected 7for impairment testing, we examined the effects of possible changes in the discount rate, the 8earnings trend and the long-term growth rates on the recoverable amount (sensitivity 9analysis), by calculating alternative scenarios and comparing them with the values stated by 10the Company.11Furthermore, we scrutinized the final analysis of the measurement results made by the 12Company, including the assessment of the relation between the recoverable amount as well 13as the carrying amount of equity and the market capitalization.14Finally, we assessed whether the disclosures in the notes regarding impairment of goodwill 15are appropriate.16OUR OBSERVATIONS17The calculation method used for impairment testing of goodwill is appropriate and in line 18with the accounting policies to be applied. The Company's assumptions and parameters used 19for measurement are appropriately derived overall. The factors used to identify a single 20business segment were applied appropriately. The related disclosures in the notes are 21appropriate.22Impairment testing of the “Scudder” intangible asset23Please refer to note 2 in the notes to the consolidated financial statements for information on 24the accounting policies applied and the assumptions used. Disclosures on the amount of 25other intangible assets can be found under note 12 and information on the economic 26development of the asset management industry is presented in the section “Economic and 27Competitive Environment” in the summarized management report.28THE FINANCIAL STATEMENT RISK29As of December 31, 2023, other intangible assets of EUR 716 million consist of contractual 30agreements granting temporary exclusive rights to manage American mutual funds. These 31contractual arrangements can be extended without significant costs and, moreover, have a 32long history of extensions. The Company therefore recognized an intangible asset with an 33indefinite useful life and reviews annually this assessment.34The “Scudder” intangible asset is tested for impairment annually. In addition, it is tested 35whenever there is an indication that the intangible asset may be impaired. The effective date 36for the impairment test is October 1, 2023 For this purpose, the carrying amount is compared 37with the recoverable amount of the contractually agreed exclusive rights. If the recoverable 38amount is below the carrying amount, an impairment loss is recognized. If the recoverable 39amount exceeds the carrying amount, an assessment is performed, if an indication that an 40impairment loss recognized in prior periods may no longer exist or may have decreased and if 41that results from a significant change in the estimates used to determine the recoverable 42amount. 43The impairment test of the “Scudder” intangible asset is complex and is based on a number of 44assumptions that require judgment. These include the asset mix, the expected net changes in 45cash flows of the managed mutual funds, the effective fee rate, the assumed long-term 46growth rates and the discount rate used.47As a result of the annual impairment test performed as of October 1, 2023, the Company 48identified a need for an impairment. Further the Company has identified as of December 31, 492023 indications which could lead to a need of a reversal of an impairment. As a result, an 50impairment reversal analysis has been performed. This analysis resulted in a recoverable 51amount being above the carrying amount and for that reason a need for an impairment 52reversal.. Prior period impairments were correspondently revised. 53There is the risk for the consolidated financial statements that an impairment or reversal of 54impairment existing at the reporting date was not identified because the valuation method 55was not implemented appropriately and in accordance with the applicable valuation 56principles and the assumptions and parameters underlying the valuation were not 57appropriately derived. There is also the risk that the related disclosures in the notes are not 58appropriate.59OUR AUDIT APPROACH60Based on our risk assessment of material misstatements we have performed audit procedures 61to assess the design and implementation as well as test of operating effectiveness of the 62Company’s processes and controls. Furthermore, we have performed substantive audit 63procedures. Hence, we have performed the following audit procedures:64         65To our 66Shareholders67Summarised 68Management Report69Consolidated 70Financial Statements Compensation Report Corporate Govern-71ance Statement72Supplementary 73Information DWS 2023 Annual Report74 75Confirmations76135 Independent Auditor’s Report