Arçelik Anonim Sirketi : 2022 12 Month Financial Statements

(CONVENIENCE TRANSLATION OF THE INDEPENDENT AUDITORS' REPORT AND CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH)

ARÇELİK ANONİM ŞİRKETİ

FOR THE PERIOD 1 JANUARY - 31 DECEMBER 2022 CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITOR'S REPORT

CONVENIENCE TRANSLATION INTO ENGLISH OF

INDEPENDENT AUDITOR'S REPORT

ORIGINALLY ISSUED IN TURKISH

INDEPENDENT AUDITOR'S REPORT

To the General Assembly of Arçelik A.Ş.

1. Audit of the Consolidated Financial Statements

1. Our Opinion

We have audited the accompanying consolidated financial statements of Arçelik A.Ş. (the "Company") and its subsidiaries (collectively referred to as the "Group"), which comprise the consolidated statement of financial position as at 31 December 2022 and the consolidated statement of profit or loss, consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and the notes to the consolidated financial statements including a summary of significant accounting policies.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with Turkish Financial Reporting Standards ("TFRS").

2. Basis for Opinion

Our audit was conducted in accordance with the Standards on Independent Auditing (the "SIA") that are part of Turkish Standards on Auditing issued by the Public Oversight Accounting and Auditing Standards Authority (the "POA"). Our responsibilities under these standards are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements" section of our report. We hereby declare that we are independent of the Group in accordance with the Ethical Rules for Independent Auditors (including Independence Standards) (the "Ethical Rules") and the ethical requirements regarding independent audit in regulations issued by POA that are relevant to our audit of the financial statements. We have also fulfilled our other ethical responsibilities in accordance with the Ethical Rules and regulations. We believe that the audit evidence we have obtained during the independent audit provides a sufficient and appropriate basis for our opinion.

3. Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. Key audit matters were addressed in the context of our independent audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

PwC Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.

BJK Plaza, Süleyman Seba Caddesi No:48 B Blok Kat:9 Akaretler Beşiktaş 34357 İstanbul-Turkey

T: [phone], F: [phone], www.pwc.com.tr

Mersis Numaramız: 0-1460-0224-0500015

3. Key Audit Matters (Continued)

	How our audit addressed the key audit
Key audit matters	matter

Recoverability of trade receivables

Trade receivables from third parties amounting to TRY33,815,044 thousand as of

31 December 2022, constitute a significant portion of the consolidated assets of the Group. Furthermore, the assessment of the recoverability of these assets involves significant level of management estimates. Such estimation includes considering the following for each customer - the amount of guarantees/collateral held, past collection performance, creditworthiness and aging of receivables. Therefore, recoverability of trade receivables is a key matter for our audit.

Please refer to notes 2.3, 9 and 34 of the consolidated financial statements for the Group's disclosures on trade receivables, including the related accounting policy.

We performed the following auditing procedures in relation to the recoverability of trade receivables:

• Understanding the business processes for collections from customers, evaluating the operational effectiveness of controls embedded in the business processes and testing of selected key controls,
• Understanding and evaluating the customer and distributor collections process,
• Comparing trade receivable turnover days to the prior period,
• Inquiries with management in relation to any disputes with customers or distributors and written inquiries with the Group's legal counsels on outstanding litigation in relation to trade receivables,
• Testing receivables from third parties by obtaining confirmation letters from customers and distributors and reconciling them to the
  Group's accounting records,
• Testing collections in the subsequent period from selected customers and distributors,
• Testing, on a sample basis, guarantees/collaterals held and assessing the
  Group's ability to convert them to cash,
• Assessing the adequacy of disclosures around recoverability of trade receivables in the consolidated financial statements.

We had no material findings related to the recoverability of trade receivables as a result of these procedures.

3. Key Audit Matters (Continued)

	How our audit addressed the key audit
Key audit matters	matter

Provision for the impairment of inventories

The Group's inventories, amounting to TRY29,237,120 thousand as of

31 December 2022, carry a risk of diminution in value due to disruptive technological changes and macroeconomic developments. In addition, determining the provision for such diminution in value involves judgements and estimates. These judgments and estimates include evaluation of the slow-moving inventories due to various reasons such as technological changes and decrease in customer demands, and evaluation of the provision for obsolete and damaged inventories. Therefore, the provision for the impairment of inventories is a key matter for our audit.

Please refer to notes 2.3 and 11 of the consolidated financial statements for the Group's disclosures on this provision, including the related accounting policy.

Auditing procedures performed to ensure the adequacy of the provision for the diminution of the value of inventories are as follows:

• Understanding and evaluating the reasonableness of the provisioning policy and the assessment of its compliance,
• Inquiry with the Group management about the risk of diminution in value as a result of disruptive technological changes,
• Analytical procedures on inventory turnover rates compared to the prior year and determination of slow-moving inventories based on group of products if any,
• Evaluation of the adequacy of the provision recognized in the current period in comparison to the write downs realized in the prior period, test of mathematical accuracy of the calculation and reconciliation of the provision to the
  Group's consolidated financial statements,
• Observation of obsolete and damaged inventories during inventory counts,
• Testing, on a sample basis, the net selling prices used in the calculation for the net realizable value of inventories.

We had no material findings related to the provision for the impairment of inventories as a result of these procedures.

3. Key Audit Matters (Continued)

	How our audit addressed the key audit
Key audit matters	matter

Impairment tests of indefinite-life intangible assets

The carrying value of brands and goodwill which are accounted for under indefinite-life intangible assets amounted to TRY3,537,872 thousand and TRY3,781,614 thousand, respectively, in the consolidated financial statements as of 31 December 2022.

In accordance with TFRS, these indefinite-life intangible assets should be tested for impairment annually.

Brands and goodwill are material to the consolidated financial statements. In addition, significant judgements and estimates are used in the impairment tests performed by management. These are, for goodwill impairment tests; earnings before interest, tax, depreciation and amortization ("EBITDA") growth forecasts, long term growth rates and discount rates and in addition to these, royalty rates used in the relief from royalty method for the brand impairment tests. The outcome of such estimates is very sensitive to changes in market conditions. Therefore, these impairment tests are key matters for our audit.

Please refer to notes 2.3, 2.4, 14 and 15 of the consolidated financial statements for the relevant disclosures, including the accounting policy and sensitivity analysis.

We performed the following auditing procedures in relation to the impairment tests of brands and goodwill:

• Evaluating the appropriateness of the Cash
  Generating Units ("CGUs") determined by management,
• Evaluating management forecasts and future plans based on macroeconomic information for each relevant CGU,
• Comparing forecasted cash flows for each CGU with its historical financial performance,
• Through involvement of our valuation specialists, assessing the reasonableness of key assumptions, including long term growth rates, discount rates and royalty rates and benchmarking these against rates used in the durable goods and consumer electronics industries,
• Testing of the setup of the discounted cash flow models and their mathematical accuracy,
• Assessing management's sensitivity analysis for key assumptions,
• Testing of the disclosures in the consolidated financial statements in relation to indefinite-life intangible assets and evaluating the adequacy of these disclosures for TFRS' requirements.

We had no material findings related to the impairment tests of indefinite-life intangible assets as a result of these procedures.