INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF BOTSWANA TELECOMMUNICATIONS CORPORATION LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
We have audited the financial statements of Botswana Telecommunications Corporation Limited (the Company) set out on pages 12 to 82, which comprise the statement of financial position as at 31 March 2023, and the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements give a true and fair view of the financial position of Botswana Telecommunications Corporation Limited as at 31 March 2023 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), together with the ethical requirements that are relevant to our audit of the financial statements in Botswana, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide an opinion on these matters.
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INDEPENDENT AUDITOR'S REPORT - TO THE SHAREHOLDERS OF
BOTSWANA TELECOMMUNICATIONS CORPORATION LIMITED (CONTINUED)
Key Audit Matter | How the matter was addressed in the audit | ||||
Revenue recognition | |||||
The Company's revenue streams are characterised by | To address this risk, we performed various procedures, | ||||
small transactions and high data volumes. The billing | including the following: | ||||
processes are automated, and dependent on IT systems. | |||||
Due to the complexity involved and materiality of the | • Evaluated the design and implementation and | ||||
operating effectiveness of relevant controls around | |||||
revenue balance, revenue recognition has been | revenue recognition, focusing on the process used | ||||
identified as a key audit matter which is subject to | in the determination of deferred revenue for | ||||
significant audit effort. | unused airtime, determination of provision for | ||||
Revenue recognition with respect to fixed voice, data | revenue adjustments and processing of manual | ||||
revenue journals. | |||||
and mobile revenue streams is complex because of the | |||||
following: | • Discussed with management and evaluated the | ||||
• During the current year and prior years, | reasons for the revenue adjustments processed in | ||||
the current year and prior years. | |||||
management processed manual revenue | |||||
adjustments/reversals due to errors in billings | • Discussed with the Revenue Assurance Team and | ||||
previously made. Since these revenue | obtained an understanding of the controls in place | ||||
adjustments/reversals are material, this poses a risk | to ensure the completeness, accuracy, and | ||||
in relation to revenue recognition. Management | occurrence of the recorded revenue. | ||||
assessed that, because these billing errors will take | |||||
time to clean up and close process gaps, the | • Involved IT and Data Analytics specialists to test | ||||
Company developed an estimate of the future | controls in the overall IT environment around the | ||||
revenue adjustments/reversals to be processed | billing systems. | ||||
relating to revenues already billed as at year end | |||||
and build these into the revenue recognition | • Tested the design and implementation of certain | ||||
process. At year end, management exercises | automated controls with respect to routing of | ||||
significant judgement in relation to the proportion | billing data and calculation of invoices. | ||||
of future reversals which relate to revenue already | |||||
billed in the current year and prior years. | In addition, we performed the following substantive | ||||
• The deferral of prepaid revenue which is dependent | procedures: | ||||
on various automated systems and manual | • Performed detailed testing by selecting samples of | ||||
processes around unused airtime on scratch cards | the revenue adjustments processed in the current | ||||
sold to the dealers. | year and tracing them to supporting documentation | ||||
• The billing system does not have an automated end- | to analyse and evaluate their validity, nature, cause | ||||
and to assess historical trends. | |||||
to-end interface functionality with the general | |||||
ledger system resulting in manual upload of data | • Performed tests of detail on the revenue | ||||
using a preformatted csv file. | adjustments made after year end and evaluated | ||||
• The potential impact of small errors is significant | their impact on the current financial year and | ||||
evaluated whether their effect on the current year | |||||
due to the possibility of automated replication | was accurately adjusted for. | ||||
through the large volumes of transactions. | |||||
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INDEPENDENT AUDITOR'S REPORT - TO THE SHAREHOLDERS OF
BOTSWANA TELECOMMUNICATIONS CORPORATION LIMITED (CONTINUED)
Key Audit Matter | How the matter was addressed in the audit | ||||
Revenue recognition (continued) | |||||
• Revenue is a significant balance on the financial | • Performed analytical procedures and independently | ||||
determined the estimate of the future revenue | |||||
statements and is a key performance indicator. | reversals affecting the current and prior financial | ||||
years using the historical information. | |||||
Related disclosures in the financial statements: | |||||
• Revenue recognition and presentation section of the | • Performed a retrospective review of the prior year | ||||
revenue adjustments provisions and evaluated their | |||||
significant accounting judgements and estimates. | adequacy. | ||||
• Revenue Recognition accounting policy. | • Challenged management's assumptions made in the | ||||
estimation of the revenue adjustments provision. | |||||
• Note 1 - Revenue from contracts with customers. | • Performed test calls and compared these to the | ||||
• Note 15 - Trade and other receivables - Provision for | |||||
billing parameters to verify accuracy. | |||||
credit notes/revenue reversals. | • Tested reconciliations between the billing system | ||||
reports and the general ledger. | |||||
• Reviewed the revenue related journals processed | |||||
and assess them for validity and accuracy. | |||||
• Tested the reasonableness of assumptions and | |||||
judgements used by management in the | |||||
determination of unused airtime on scratch cards. | |||||
• Tested the completeness and accuracy of the data | |||||
used in the determination of deferred revenue. | |||||
• Reviewed and considered the adequacy of the | |||||
disclosures on the assumptions and judgements | |||||
applied in relation to revenue recognition. | |||||
In conclusion, we considered the amount recorded as | |||||
revenue and the related financial statements disclosures | |||||
to be appropriate. | |||||
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INDEPENDENT AUDITOR'S REPORT - TO THE SHAREHOLDERS OF
BOTSWANA TELECOMMUNICATIONS CORPORATION LIMITED (CONTINUED)
Key Audit Matter | How the matter was addressed in the audit | |||
Impairment of property, plant and equipment and intangible assets
Significant judgements are involved in the assessment and determination of impairment of the non-financial assets of the Company.
The Company's shares trade at a discount to their book value. The market capitalisation was below the net asset value throughout the financial year. This, together with a current depressed economy are indicators of possible impairment of the entity's non- financial assets.
IAS 36: Impairment of Assets (IAS 36) requires that an entity's assets should not be carried at a value more than their recoverable amount and therefore requires an assessment at the end of each reporting period if there are any indicators that non-financial assets may be impaired.
The Directors carried out an impairment assessment and used the Discounted Cash Flows Model (DCF) to determine the recoverable amount of the assets. The value in use amount calculated using the DCF is particularly sensitive to changes in future cash flow assumptions, future growth rates, terminal growth rates and the Weighted Average Cost of Capital (WACC) discount rate.
Property plant and equipment and intangible assets consist mainly of network equipment together with the related software infrastructure. The network equipment within the Company does not generate cash inflows that are independent of those from other assets. This resulted in property plant and equipment and intangible assets being assessed for impairment as part of the company cash generating unit. The recoverability of property plant and equipment and intangible assets is largely dependent on macro-economic factors, which include cash flows to be generated through the network assets, as well as internal assumptions and estimates related to income generation and operating costs. The impairment test included assessing the recoverable amount of property, plant and equipment and intangible assets, with reference to all cash flows and comparing this to the carrying amount of the property, plant and equipment and intangible assets.
In evaluating the impairment assessment of property, plant and equipment and intangible assets, we reviewed the accuracy of the value in use calculations and reasonableness of inputs used by management. We performed various procedures, including the following:
- Discussed with management and obtained their understanding and justification of the financial and non-financial reasons why the Company's market value is significantly discounted compared to the book value.
- Tested the design and implementation of management's controls around the impairment assessment process.
In addition, we performed the following substantive procedures:
- We tested the mathematical accuracy of the value in use model used by management.
- Through involvement of our internal valuation specialists, assessed the appropriateness of the valuation model applied by management, and assumptions adopted for reasonableness with reference to market practice and the requirements of IAS 36.
- Obtained and reviewed for reasonableness, the quantitative and qualitative factors included in the reconciliation of the market value to the book value.
- Performed recalculations and tested the underlying data used in the assessment for accuracy and completeness.
- Reviewed and compared the projected cash flows against the historical performance to test the reasonableness of management's projections.
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INDEPENDENT AUDITOR'S REPORT - TO THE SHAREHOLDERS OF
BOTSWANA TELECOMMUNICATIONS CORPORATION LIMITED (CONTINUED)
Key Audit Matter | How the matter was addressed in the audit | |||
Impairment of property, plant and equipment and intangible assets (continued)
Due to the materiality of the non-financial assets' account balances, the complexity of the cash flow forecasts, significant judgements and estimation uncertainty involved in the determination of the value in use and impairment assessment, this is considered a key audit matter.
Related disclosures in the financial statements:
- Impairment of non-financial assets section of the significant accounting judgements and estimates.
- Note 10 - Property, plant, and equipment.
- Note 11 - Intangible assets.
- Note 12 - Asset impairment.
- Using valuation specialist, we independently calculated a WACC discount rate using our independently sourced data. This was compared to the discount rate used by management. We found the discount rate used by management to be within an acceptable range of our independent calculations.
- Tested the reasonableness of the key inputs used in the computations which included the future growth rates, and Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and took into consideration the impact of current macroeconomic factors on future projections.
- Compared the revenue growth rates and EBITDA margins used to calculate the cash flow forecasts to the latest board approved budgets, both of which cover a period of five years. We further benchmarked the revenue growth rate assumptions to industry data and historical trends to assess comparability.
- Evaluated whether the assumptions used, such as working capital and capital expenditure, had been determined and applied consistently. We evaluated the appropriateness of capital expenditure by comparing to the approved budget and historical trends of maintenance capital expenditure.
- Compared the terminal growth rates to forecast industry trends and to past growth rate trends.
- Reviewed and assessed the impact of contradictory evidence as well as subsequent events which may have an impact on the recorded amounts.
- Performed sensitivity analysis of the headroom using key inputs (discount rates, future growth rates and volatility in future cash flows).
- Evaluated the computations and disclosures in the financial statements for compliance with IAS 36.
In conclusion, the inputs used in the calculation of the value in use were appropriate. We considered the valuation of property, plant and equipment and intangible assets impairment disclosures to be appropriate.
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BTC - Botswana Telecommunications Corporation Ltd. published this content on 29 June 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 June 2023 13:38:31 UTC.