EasyJet 2014 Annual Report Download - page 64

62 easyJet plc Annual report and accounts 2014
Main activities and responsibilities of the Committee during the financial year continued:
Responsibilities How the Committee has discharged its responsibilities
The adequacy and security of the Group’s arrangements
for its employees and contractors to raise concerns,
in confidence, about possible wrongdoing in financial
reporting or other matters
During the year, the Committee reviewed:
• whistleblower reports;
• reports on anti-bribery and corruption procedures;
• reports on procedures on fraud and loss prevention; and
• reports on revenue protection.
The Group’s systems and controls for the prevention
of bribery and detection of fraud, including receiving
reports on non-compliance
Other duties of the Committee include:
• updating their terms of reference;
• assessing potential conflicts of interest of Directors
on behalf of the Board; and
• as requested by the Board, providing advice on
whether the Annual report and accounts is fair,
balanced and understandable.
The Committee updated its terms of reference and
considered potential conflicts of interests of the Directors
during the year.
Further information on the Committee’s role on providing
advice on whether the Annual report and accounts is fair,
balanced and understandable, is provided in the Financial
reporting and significant financial issues section below.
Other items which the Committee looked at during
the financial year in addition to its core responsibilities
included reviewing:
• the management of change initiatives in the business;
• information security policies and procedures, including
mitigations around cyber attacks and incidents;
• the delegation of authorities within the Group and the
business; and
• payroll processes.
Financial reporting and significant financial issues
The Committee assesses whether suitable accounting
policies have been adopted and whether management
has made appropriate estimates and judgements. The
Committee reviews accounting papers prepared by
management which provide details on the main financial
reporting judgements. The Committee also reviews reports
by the external auditors on the full year and half year
results which highlight any issues with respect to the
work undertaken on the audit.
The Committee reviews financial issues through
discussion with management and the external auditors
and comparison to other organisations. The number of
such issues currently considered as significant are, however,
limited given easyJet’s relatively simple business model
and group structure, which are unencumbered with legacy
issues. The significant issues considered in relation to the
accounts are detailed below:
• The Committee reviewed the maintenance provision at
the year end. A number of judgements are used in the
calculation of the provision, primarily pricing, utilisation
of aircraft and timing of maintenance checks. The
Committee addressed these matters using reports
received from management which underlie the basis of
assumptions used. The Committee also discussed with
the external auditors their review of the assumptions
underlying the estimates used.
• The Committee considered whether the carrying value
of goodwill and landing rights held by easyJet should be
impaired. The judgement in relation to impairment largely
relates to the assumptions underlying the calculation of
the value in use of the business being tested for
impairment; primarily whether the strategic plan is
achievable and the overall macroeconomic assumptions
which underlie the valuation process. The Committee
addressed these matters using reports received from
management outlining the basis for assumptions used.
The strategic plan used in the calculation was approved
by the Board.
• The Committee considered the key treasury transactions
and balances, and the application of hedge accounting.
easyJet hedges forward, on a rolling basis, between 65%
and 85% of the next 12 months’ anticipated fuel and
currency requirements and between 45% and 65% of the
following 12 months’ anticipated requirements, and does
not operate any other significant derivative financial
instruments. However, this area remains significant due
to the quantity of fuel price and exchange rate hedges.
• The Committee reviewed the level and calculation of key
accruals which are judgemental in nature (for example
customer claims in respect of flight delays, cancellations
and Air Passenger Duty).
The Committee is satisfied that the judgements made
by management are reasonable, and that appropriate
disclosures have been included in the accounts.
At the request of the Board, the Committee also
considered whether the Annual report and accounts was
fair, balanced and understandable and whether it provided
the necessary information for shareholders to assess the
Company’s performance, business model and strategy. The
Committee is satisfied that, taken as a whole, the Annual
report and accounts is fair, balanced and understandable.
In reaching this conclusion, the Committee considered the
overall review and confirmation process around the Annual
report and accounts, including:
Corporate governance report continued