IGO Interactive Annual Report 2018

INDEPENDENT AUDITOR’S REPORT Valuation of Inventory Key audit matter How the matter was addressed in our audit We consider accounting for inventory to be a key audit matter because of the: x Quantitative significance of the inventory balance; x Complexity involved in determining inventory quantities on hand due the assumptions used such as grades, volumes and densities; x Significant judgement in applying an appropriate costing methodology in accordance with the Group’s accounting policy and estimates for calculating stockpiles and concentrate on hand; x Judgemental aspect of the carrying amount of the non-current stockpile at Tropicana; and x Significant judgements made in determining net realisable value, including estimating the future sales price of commodities, less any estimated costs to complete production. Refer to Note 9 for the detailed disclosures which include the related accounting policies, including a description of the major estimates management are required to make. Our work included but was not limited to the following procedures: x Testing the controls over the appropriate allocation of costs to ensure that they are absorbed into inventory accurately; x Reconciling ore stockpile and concentrate inventory balances held at 30 June 2018 to supporting documentation; x Verifying the physical inputs included in the cost models as at 30 June 2018 to stockpile survey and technical reports; x Assessing the competence and objectivity of the experts used by management in the preparation of stockpile surveys; x Assessing the methodology applied by management to record all appropriate costs into the calculation of inventories on hand; and x Testing the net realisable value by assessing management’s calculation including: x Future commodity pricing; x Expected cost to complete; and x In the case of the non-current stockpile at Tropicana, a review of management’s plans to blend the low grade stockpile with future high grade production over several years. We also assessed the adequacy of related disclosures in Note 9 to the financial statements. IGO ANNUAL REPORT 2018— 129