Auditors' Report

To Borussia Dortmund GmbH & Co. Kommanditgesellschaft auf Aktien, Dortmund

Report on the Audit of the Consolidated Financial Statements and of the Group Management Report

Opinions

We have audited the consolidated financial statements of Borussia Dortmund GmbH & Co. Kommanditgesellschaft auf Aktien ("Borussia Dortmund") and its affiliated companies ("the Group"), which comprise the consolidated statement of financial position as at 30 June 2019, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the financial year from 1 July 2018 to 30 June 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group management report of Borussia Dortmund GmbH & Co. Kommanditgesellschaft auf Aktien for the financial year from 1 July 2018 to 30 June 2019.

In our opinion, on the basis of the knowledge obtained during the audit,

  • the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Section 315e (1) HGB [Handelsgesetzbuch: German Commercial Code] and, in compliance with these requirements, give a true and fair view of the assets, liabilities, and financial position of the Group as at 30 June 2019, and of its financial performance for the financial year from 1 July 2018 to 30 June 2019, and
  • the accompanying group management report as a whole provides an appropriate view of the Group's position. In all material respects, this group management report is consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development.

Pursuant to Section 322 (3) sentence 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the group management report.

Basis for the Opinions

We conducted our audit of the consolidated financial statements and of the group management report in accordance with Section 317 HGB and EU Audit Regulation No. 537/2014 (referred to subsequently as "EU Audit Regulation") and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report" section of our auditor's report. We are independent of the group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2)(f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the consolidated financial statements and on the group management report.

Key Audit Matters in the Audit of the Consolidated Financial Statements

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the financial year from 1 July 2018 to 30 June 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.

Measurement of player registrations as well as the completeness and measurement of liabilities from transfers

We refer to the information in the notes to the consolidated financial statements on accounting policies (Section: Intangible assets) and to the explanatory notes to the consolidated statement of financial position (Section (1) Intangible assets, (8) Assets held for sale and (12) Trade payables).

The consolidated financial statement risk

Player registrations in the amount of EUR 161.4 million are presented under intangible assets in the consolidated financial statements of Borussia Dortmund. Player registrations rose to EUR 161.4 million in the financial year ended due to additions of EUR 130.4 million, disposals of EUR 2.5 million, write-downs of EUR 71.6 million and reclassifications of EUR 14.3 million. Trade payables include transfer liabilities of EUR 48.5 million.

In the financial year, there was a retrospective adjustment made to the accounting for agent fees, brokerage commission and other expenses related to contract extensions or the signing of professional players on a free transfer. They are now recognised as intangible assets.

The acquisition cost of player registrations is determined based on individual and complex transfer agreements between the transferring and receiving clubs as well as any agreements with players and players' agents concluded in this context. Due to the heterogeneity and complexity of the contract provisions, there is generally the risk that the intangible asset and the related transfer liability are not measured appropriately on initial recognition in the consolidated financial statements.

Furthermore, there is generally the risk of inappropriate subsequent measurement of the intangible assets and transfer liabilities, as well as of the completeness of transfer liabilities that may arise if conditional contractual components or contract modifications materialise.

Our audit approach

By examining material transfer and agent agreements for new player additions, we assessed player registrations in terms of how the acquisition costs and related liabilities were determined.

In addition, we assessed the admissibility of the change to the accounting method regarding the recognition of agent fees, brokerage commission and other expenses for contract extensions or the signing of professional players on a free transfer. We evaluated the effects resulting from the retrospective change to accounting on the individual items of the prior year's financial statements as well as the necessary disclosures in the notes to the consolidated financial statements.

As part of subsequent measurement, we checked material transfer and agent agreements to assess whether conditions had occurred in financial year 2018/2019 triggering subsequent acquisition costs and additional liabilities from transfers and if there was corresponding recognition in the financial statements.

Furthermore, we examined material contract modifications or contract extensions for subsequent acquisition costs and additional liabilities and the appropriateness of adjustments to useful lives.

Our observations

Transfer and agent agreements were appropriately assessed in terms of measuring player registrations and the related transfer liabilities.

Existence and accuracy of transfer receivables as well as revenue from transfers

We refer to the information in the notes to the consolidated financial statements on accounting policies (Section: Impairment of financial assets and Recognition of income and expenses), the explanatory notes to the consolidated statement of financial position (Section (5) Trade and other financial receivables) and the explanatory notes to the statement of comprehensive income (Section (15) Revenue).

The consolidated financial statement risk

In addition to the player registrations recognised, the transfer agreements also impact receivables and revenue from transfers. EUR 32.6 million of transfer receivables are shown under trade receivables in the consolidated financial statements of Borussia Dortmund. Revenue from transfers amounted to EUR 120.2 million in financial year 2018/2019.

Since 1 July 2018, Borussia Dortmund has been required to apply IFRS 15 Revenue from Contracts with Customers, which specifies a five-step model for recognising revenue. The transition to the new standard was carried out by applying the modified retrospective method.

Due to the heterogeneity and complexity of the contract provisions, recognition of revenue from transfers is complex and there is generally the risk for the consolidated financial statements that in the case of player disposals, receivables from transfers and the related revenue are presented at too high an amount or not in the correct period.

Our audit approach

Due to the first-time application of IFRS 15, we focused our audit procedures on the conformity of the accounting policies applied by Borussia Dortmund for the recognition of revenue from transfers with the five-step model of IFRS 15 for the recognition of revenue from contracts with customers.

With regard to player disposals from the professional squad, we substantiated the amount of transfer receivables and revenue by examining the material concluded transfer and agent agreements. The accuracy of transfer receivables and revenue recognised was assessed by verifying the calculation of receivables based on the contract provisions.

When examining the concluded transfer agreements, we focused mainly on the date of recognition in order to assess whether the receivables and related revenue were recognised in the correct period.

Our observations

Transfer and agent agreements were appropriately assessed in terms of transfer receivables and revenue from transfers.

Completeness and accuracy of personnel expenses of the professional squad

We refer to the information in the explanatory notes to the statement of comprehensive income (Section (18) Personnel expenses).

The consolidated financial statement risk

Among other expenses, the salaries of the professional squad are disclosed under personnel expenses in the consolidated financial statements of Borussia Dortmund. These include, besides the base salaries, also performance-related remuneration, such as appearance bonuses and annual performance bonuses, as well as individual special payments. Due to individually agreed remuneration components and remuneration amounts, there is generally the risk for the consolidated financial statements that the personnel expenses of the professional squad were not completely reported or not reported at the correct amount.

Our audit approach

Our audit procedures in particular included an inspection and assessment of the currently valid employment contracts with their remuneration components and amounts as well as individual cancellation agreements. We checked the consistency of contracts consciously selected according to certain risk criteria with the corresponding salary calculations. For the selected contracts, we checked to what extent contractually agreed conditions now apply for the variable remuneration components. Furthermore, we examined whether events had occurred that would have resulted in higher expenses. In terms of agreed special or one-off payments, we examined whether personnel expenses were recognised in the proper period regardless of the payment date.

Our observations

The individually agreed remuneration components and compensation amounts were appropriately recognised as personnel expenses of the professional squad.

Other Information

Management is responsible for the other information. The other information comprises the annual report, with the exception of the audited consolidated financial statements and group management report, the audited financial statements and management report and our auditor's reports.

Our opinions on the consolidated financial statements and on the group management report do not cover the other information, and consequently we do not express an opinion or any other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information

  • is materially inconsistent with the consolidated financial statements, with the group management report or our knowledge obtained in the audit, or
  • otherwise appears to be materially misstated.

Responsibilities of Management and the Supervisory Board for the Consolidated Financial Statements

Management is responsible for the preparation of consolidated financial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Section 315e (1) HGB and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position, and financial performance of the Group. In addition, management is responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.

Furthermore, management is responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group's position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, management is responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the group management report.

The Supervisory Board is responsible for overseeing the Group's financial reporting process for the preparation of the consolidated financial statements and of the group management report.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group management report as a whole provides an appropriate view of the Group's position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our opinions on the consolidated financial statements and on the group management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Section 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group management report.

We exercise professional judgement and maintain professional scepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the consolidated financial statements and of the group management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
  • Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor's report to the related disclosures in the consolidated financial statements and in the group management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Section 315e (1) HGB.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions.
  • Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with [German] law, and the view of the Group's position it provides.
  • Perform audit procedures on the prospective information presented by management in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by management as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not provide a separate audit opinion on the prospective information or the underlying assumptions. There is a substantial unavoidable risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.

Other Legal and Regulatory Requirements

Further information pursuant to Article 10 of the EU Audit Regulation

We were elected as group auditor at the annual general meeting on 26 November 2018. We were engaged by the Supervisory Board on 27 November 2018. We have been the group auditor of Borussia Dortmund GmbH & Co. Kommanditgesellschaft auf Aktien without interruption since financial year 2009/2010.

We declare that the opinions expressed in this auditor's report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).

German Public Auditor Responsible for the Engagement

The German Public Auditor responsible for the engagement is Ralph Fischer.

Dortmund, 13 August 2019
KPMG AG Wirtschaftsprüfungsgesellschaft

 

Fischer
Wirtschaftsprüfer
[German Public Auditor]

Huperz
Wirtschaftsprüfer [
German Public Auditor]

KPMG AG Berlin (test seal)

7th match day / 06.10.2018

BVB - FC Augsburg 4:3

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