_446 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 5 FINANCIAL PERFORMANCE 2023 consolidated financial statements For the majority of the assets, the recoverable amount corresponding to the value in use is assessed based on future discounted cash flows, using the forecasts set out in the Group’s five-year business plan. For the Distribution CGUs, the recoverable amount is measured based on the fair value of land and buildings, which represent most of their assets, less costs of disposal. We considered the measurement of goodwill allocated to sensitive CGUs with a risk of impairment to be a key audit matter due to its materiality in the Group’s consolidated statement of financial position and because the determination of its recoverable amount requires judgment, notably for the cash flow projections. How our audit addressed this risk With the assistance of our valuation experts, we performed the following procedures with respect to impairment tests: ● examined the compliance of the method applied by the Group with the provisions of IAS 36 "Impairment of Assets"; ● reconciled the value of goodwill subject to the impairment tests with the consolidated financial statements to ensure that the CGUs cover all of the Group’s assets; ● verified that the cash flow projections used are consistent with the budget forecasts validated by management and the governance bodies; ● assessed the reasonableness of the forecasts with respect to revenue, EBITDA and investments in renewals – which are the main assumptions underlying the future cash flow amounts – with the finance managers of the relevant businesses, in particular with respect to past performance and by performing sensitivity analyses on the various inputs; ● assessed the reasonableness of the discount rates and long-term growth rates used to perform the impairment tests, based on comparable market data; ● verified the appropriateness of the disclosures provided in Notes 2.6, 2.8.1, 3.17 and 13.1 to the consolidated financial statements. Measurement of the employee benefit obligations under defined benefit plans Risk identified The Group has set up several post-employment defined benefit plans, mainly pension and health insurance plans and end-of service benefits. A significant portion is comprised of defined benefit plans for which the Group undertakes to pay the agreed benefits to current or retired employees, mainly in North America and in certain European countries (mainly the United Kingdom, Germany and France). The actuarial value of the Group’s cumulative employee benefit obligations amounted to €7,554 million at December 31, 2023. Given that some of these liabilities are covered by dedicated assets (plan assets) with a fair value (after the application of the asset ceiling) of €5,212 million, mainly in North America and the United Kingdom. Taking into account other non-material components, the net obligation recognized in the consolidated statement of financial position at December 31, 2023 amounted to €2,421 million. In order to measure the Group’s obligations under the defined benefit plans and the expense to be recognized during the period, management must exercise significant judgment to determine, for each of the relevant countries and plans, the appropriate assumptions to be used, the main ones being the discount and inflation rates and demographic assumptions such as the long-term rate of change in salaries and mortality tables. These components are described in Note 3.24.1 to the consolidated financial statements. Changes in any of the key assumptions underlying the measurements can have a material impact on the measurement of the recognized net liability and on the Group’s total comprehensive income. Management calls upon external actuaries to assist in determining these assumptions. We considered the measurement of the employee benefit obligations under defined benefit plans to be a key audit matter given their amounts, the related judgment to determine the main actuarial or demographic assumptions. How our audit addressed this risk We made inquiries about the process implemented by management to measure the Group’s obligations under post-employment defined benefit plans for the main plans in North America, the United Kingdom, Germany and France. With the assistance of our experts, our procedures first consisted in assessing the reasonableness of the main assumptions used, in particular the discount and inflation rates, with regard to market conditions and the consistency of the assumptions relating to changes in salaries and demographic data (mortality tables, inflation rates for medical costs.) with the details of the plans. Our other procedures consisted in: ● assessing the impact of the main amendments made to certain plans and verifying their correct recognition; ● regarding plan assets, making inquiries about the process implemented by management to document the existence and measurement of these assets and, using sampling techniques, verifying their existence and the consistency of their measurement with the confirmations from third parties;
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