WildBrain Ltd.
Consolidated Financial Statements June 30, 2021
(expressed in thousands of Canadian dollars)
September 14, 2021
Management's Responsibility for Financial Reporting
The accompanying consolidated financial statements of WildBrain Ltd. (the "Company") are the responsibility of management and have been approved by the Board of Directors (the "Board"). The Board is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries out this responsibility through its Audit Committee. The Audit Committee reviews the Company's consolidated financial statements and recommends their approval by the Board.
The Audit Committee is appointed by the Board and all of its members are independent directors. It meets with Company's management and reviews internal control and financial reporting matters to ensure that management is properly discharging its responsibilities before submitting the consolidated financial statements to the Board for approval.
The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. When alternative methods of accounting exist, management has chosen those it deems most appropriate in the circumstances. The consolidated financial statements include amounts based on informed judgments and estimates of the expected effects of current events and transactions with appropriate consideration to materiality. In addition, in preparing the consolidated financial statements, management must make determinations as to the relevancy of information to be included, and make estimates and assumptions that affect reported information. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.
(signed) "Eric Ellenbogen" | (signed) "Aaron Ames" |
Chief Executive Officer | Chief Financial Officer |
New York, New York | Toronto, Ontario |
Independent auditor's report
To the Shareholders of WildBrain Ltd.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of WildBrain Ltd. and its subsidiaries (together, the Company) as at June 30, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).
What we have audited
The Company's consolidated financial statements comprise:
- the consolidated balance sheets as at June 30, 2021 and 2020;
- the consolidated statements of income (loss) for the years then ended;
- the consolidated statements of comprehensive loss for the years then ended;
- the consolidated statements of changes in equity for the years then ended;
- the consolidated statements of cash flows for the years then ended; and
- the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.
PricewaterhouseCoopers LLP
Cogswell Tower, 2000 Barrington Street, Suite 1101, Halifax, Nova Scotia, Canada B3J 3K1 T: +1 902 491 7400, F: +1 902 422 1166
"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
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 for the year ended June 30, 2021. These matters were addressed in the context of our 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.
Key audit matter
Impairment assessment of goodwill and intangible assets with indefinite useful lives of the WildBrain Television and Peanuts cash generating units (CGUs)
Refer to note 3 - Summary of significant accounting policies, judgments and estimation uncertainty, note 10 - Intangible assets and note 11 - Goodwill to the consolidated financial statements.
As at June 30, 2021, the Company had goodwill and indefinite life intangible assets of $53.2 million and $397.6 million respectively related to the Company's WildBrain Television and Peanuts CGUs. Goodwill and indefinite life intangible assets are tested for impairment annually or more frequently if events or circumstances indicate that the assets might be impaired. In assessing the goodwill and indefinite life intangible assets for impairment, management groups assets into CGUs and compares the carrying values of the CGUs to their recoverable amounts. The recoverable amount is the higher of fair value less costs of disposal ("FVLCD") and value-in-use ("VIU"). Management applied the VIU model to determine the recoverable amount of both the WildBrain Television and Peanuts CGUs.
The VIU of both the WildBrain Television and Peanuts CGUs were determined by discounting three year cash flow projections prepared from business plans reviewed by senior management, extended for two additional years using industry outlook growth rate assumptions for a total forecast period of five years. The cash flow
How our audit addressed the key audit matter
Our approach to addressing the matter included the following procedures, among others:
- Evaluated how management determined the recoverable amount of the CGUs, which included the following:
- Tested the appropriateness of the method used for determining the VIU for the WildBrain Television and Peanuts CGUs and the mathematical accuracy of the discounted cash flow models.
- Tested the significant assumptions used by management in the discounted cash flow models. The following procedures were performed:
- compared the fiscal year 2022 detailed revenue and profit forecast to historical results and external industry data;
- for the WildBrain Television CGU, for fiscal 2022 we also compared the detailed revenue forecast to underlying contracts with broadcasters and historical subscription level trends;
- assessed the reasonableness of the revenue and profit in management's detailed cash flow forecasts for years 2 to 5 by comparing the implied revenue and EBITDA growth rates to external industry data; and
- assessed the reasonableness of the forecast capital expenditures in
Key audit matter | How our audit addressed the key audit matter | ||
projections reflect management's expectations and | management's cash flow forecasts by | ||
best estimate of revenue, profit and capital | comparing to the historical levels. | ||
expenditures, based on past experience and future | - Professionals with specialized skill and | ||
expectations of operating performance. Cash flows | |||
knowledge in the field of valuation assisted in | |||
beyond the five-year period were extrapolated | |||
testing the reasonableness of the discount | |||
using a terminal growth rate. The discount rate | |||
rates and terminal growth rates used in the | |||
applied to the cash flow projections was derived | |||
discounted cash flow models. | |||
from the Company's weighted average cost of | |||
capital and other external sources. | - Tested the underlying data used in the | ||
No impairment of goodwill or indefinite life | discounted cash flow models. | ||
• Tested the disclosures made in the consolidated | |||
intangible assets was required for either the | |||
financial statements, particularly with regard to | |||
WildBrain Television CGU or the Peanuts CGU. | |||
the significant assumptions used by management | |||
We considered this a key audit matter due to (i) | in the discounted cash flow models. | ||
the significance of the goodwill and indefinite life | |||
intangible asset balances and (ii) the significant | |||
judgment made by management in determining | |||
the recoverable amounts of the related CGUs, | |||
including the use of significant assumptions | |||
related to the cash flow projections, terminal | |||
growth rates and discount rates. This has resulted | |||
in a high degree of subjectivity and audit effort in | |||
performing procedures to test the significant | |||
assumptions. Professionals with specialized skill | |||
and knowledge in the field of valuation also | |||
assisted us in performing our procedures. |
Valuation of investment in film and television programs as well as acquired and library content
Refer to note 3 - Summary of significant accounting policies, judgments and estimation uncertainty, note 7 - Investment in film and television programs and note 8 - Acquired and library content to the consolidated financial statements.
At June 30, 2021, the Company's Investment in film and television programs and Acquired and
Our approach to addressing the matter included the following procedures, among others:
- Tested how management determined the net realizable values and recoverable amounts of the Investment in film and television programs and Acquired and library content assets, which included the following:
-
Tested the reasonableness of estimated future revenues on a title-by-title basis by:
o inspecting license contracts with customers for future periods, when
-
Tested the reasonableness of estimated future revenues on a title-by-title basis by:
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WildBrain Ltd. published this content on 14 September 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 September 2021 22:41:08 UTC.