Danone // 2020 Universal Registration Document

4 115 DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 4.1 Consolidated financial statements and notes to the consolidated financial statements STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS Revenue recognition DESCRIPTION OF RISK HOW OUR AUDIT ADDRESSED THIS RISK As of December 31, 2020, the total net sales were recorded for an amount of €23,620million in the consolidated financial statements. As indicated in Note 6.1 to the consolidated financial statements, your group’s sales are stated net of trade discounts and rebates granted to customers (including costs relating to trade support and listing agreements or occasional promotional actions invoiced by retailers). Revenue recognition therefore involves estimates related to such agreements or actions. We deemed the valuation of trade discounts and rebates to be a key audit matter given (i) the Group’s broad customer base across different countries and with varying contractual relationships (based on sales volumes, promotional agreements or trade practices), (ii) the significance of trade discounts and rebates, and (iii) the complexity of valuating these amounts at the year end. We assessed the compliance of the revenue recognition rules applied by the Group with international financial reporting stan- dards (IFRS).Given the large number of sales transactions carried out by the Group’s various entities, we gained an understanding of the internal control procedures relating to the estimation of trade discounts and rebates as part of the revenue recognition process and tested the controls, which we determined are key, in the main operating entities. We also performed substantive procedures to assess: • the amounts to be refunded to customers beingmeasured and recognized on the reporting date by (i) reconciling the estimates with the contractual data in the information systems used to manage trade terms and conditions or in the contracts with the relevant customers, and (ii) analyzing for selected amounts, the assumptions used, where applicable, with regard to actions taken or specific situations and customary trade practices; • whether revenuewas being recognized in the appropriate period by (i) testing the transactions booked after the reporting date to identify any non accrued discounts and rebates as of closing date and (ii) analyzing the change in accruals and their ageing.