NTUC Income AR 2018

Accounting for business combinations (Refer to Note 10 to the financial statements) The key audit matter As part of its growth strategy, the Group made an investment in an associate, FFMC Holdings Pte Ltd, during the year. This acquisition was effected primarily by transferring business in exchange for equity interests. Such transactions are complex and judgement is required in determining if this business acquisition resulted in the Group obtaining control, joint control or significant influence over the investee. There is also inherent uncertainty in the determination of the fair values of the contingent consideration, assets transferred, identifiable assets acquired and liabilities assumed in the transaction. How was the matter addressed in our audit We assessed the governance process over the determination of the appropriate accounting treatment to be adopted for the transaction. We assessed management’s processes for the selection of the external independent valuer, the determination of the scope of work of the independent valuer, and the review and acceptance of the external valuation reports. We evaluated the qualifications and competence of the external independent valuer. We also read the terms of engagement of the independent valuer with the Group to determine whether there were any matters that might have affected their objectivity or limited the scope of their work. We compared the valuation methodologies and key assumptions used in deriving this fair value to generally accepted market practices and market data, and tested the integrity of the inputs in the valuation to supporting documents. We examined legal and contractual documents to determine if the classification of the acquisitions as subsidiaries, joint ventures or associates and accounting treatment were appropriate. Findings The Group has control processes in place to ensure that acquisition are identified and, recorded and that relevant accounting treatment is applied for business combination and asset purchases. The judgement applied by the Group in determining whether significant acquisition are business combination or acquisition of assets was balanced. Estimates used in allocating the purchase price to assets and liabilities acquired in significant business combination and valuation of business transferred which constitute the purchase consideration were fair. We also found the disclosures of significant business combinations to be appropriate. Other information Management is responsible for the other information. The other information comprises information included in the annual report but does not include the financial statements and our auditors’ report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Independent Auditors’ Report For the Financial Year Ended 31 December 2018 36 HAND IN HAND