Independent auditor’s report to the members of Bank of Georgia Group PLC continued Risk Our response to the risk Key observations communicated to the Audit Committee Revenue recognition • We gained an understanding of the revenue Based on the results of processes and assessed the design and our audit procedures, Gross revenue GEL 1,687m operating effectiveness of key controls. we concluded that (2017: GEL 1,420m) • We performed substantive testing of revenue revenue for the year transactions including key items testing and ended 31 December 2018 In applying IFRS 15 ‘Revenue from Contracts with representative sampling where we agreed has been recognised in Customers’, judgment is required to be exercised transactions to the underlying documentation, accordance with IFRS. by management in determining the point at testing manual and topside adjustments which it is appropriate to recognise revenue, and cut-off testing (by selecting a sample of and in particular the nature of performance transactions either side of year-end). obligations and the allocation of the contract • For non-automated transactions, we agreed price to those obligations. Specific considerations them on a sample basis to supporting include the timing of recognition of revenue in evidence, including underlying contracts and respect of card servicing fees, bundled products cash receipts to determine whether revenue and customer loyalty schemes. had been recognised in accordance with the Group’s accounting policies and IFRS. Where The Group’s accounting systems are not appropriate, we re-computed revenue and configured to allow automated IFRS 15 compared to reported amounts. The samples accounting for revenue and the adjustments used for this testing were increased to reflect to conform to the requirements of IFRS 15 that revenue recognition is a significant risk. are booked as an overlay. • We specifically considered the timing of recognition of revenue in respect of card These factors mean that there is a greater risk servicing fees, bundled products and customer of misstatement in revenue balances, either by loyalty schemes – we analysed the terms fraud or error, including through the potential and conditions of new and existing products, override of controls by management. reconciled these to the accounting data and validated the IFRS 15 adjustment calculation. As a result of the Demerger of Banking and • We performed substantive audit procedures Investment Businesses of the Group in May over the IFRS 15 adjustments, covering 2018, certain revenue streams where revenue the timing of satisfaction of performance recognition followed a significantly more complex obligations, allocation of transaction price to pattern than banking revenue, were transferred each performance obligation and estimation out of the Group. Consequently, the risk has been of variable consideration amounts, if applicable, decreased in the current year. including analytical procedures, testing of key items and representative sample testing. Refer to the Accounting policies (page 199); and • We performed analytical procedures for Notes 3, 21, and 22 to the financial statements. revenue to consider unusual trends that could indicate material misstatements, including monthly fluctuations analysis and analysis of changes in key drivers of revenue. • We performed journal entry testing in order to identify and test the risk of misstatement arising from management override of controls. • We considered whether the presentation and disclosure of revenue in the financial statements are in accordance with relevant accounting standards. 158 Annual Report 2018Bank of Georgia Group PLC