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83
ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
OUR BUSINESSOUR PERFORMANCEFINANCIAL STATEMENTS GOVERNANCE
OUR APPLICATION OF MATERIALITY
We determined materiality for the
Group to be £30 million.
We reported all audit di erences
in excess of £1 million.
We defi ne materiality as the magnitude of
misstatement in the fi nancial statements
that makes it probable that the economic
decisions of a reasonably knowledgeable
person would be changed or infl uenced.
We use materiality both in planning the
scope of our audit work and in evaluating
the results of our work.
We determined materiality for the Group
to be £30 million, based on a calculation
of 5% of profi t before tax adjusted for
certain non-underlying items due to the
nature and signifi cance of these non-
recurring items.
The adjusted profi t used in our
determination of materiality was £587
million, which is £98 million higher than
statutory profi t before tax of £489 million.
The items we excluded from our calculation
are listed below, and explained further
in note 5 to the fi nancial statements:
> Store closure costs and impairments
in the international business –
£32 million charge;
> Impairment of goodwill in
the international business –
£19 million charge;
> Other international impairments –
£52 million; and
> Net gain on acquisition of joint
venture holding Bradford warehouse
of £5 million.
Our materiality of £30 million represented
6% of statutory profi t before tax. For the
previous year, we determined materiality
for the Group to be £32 million based on
5% of profi t before tax without adjustment
for non-underlying items.
The materiality applied by the component
auditors (see below) ranged from
£2 million to £27 million (2015: £2 million
to £30 million), depending on the scale
of the component’s operations and
our assessment of risks specifi c to
each location.
We agreed with the Audit Committee
that we would report to the Committee
all audit di erences in excess of £1 million
(2015: £1 million) as well as di erences
below that threshold that, in our view,
warranted reporting on qualitative grounds.
We also report to the Audit Committee on
disclosure matters that we identifi ed when
assessing the overall presentation of the
fi nancial statements.
Materiality
PBT
Group materiality
Group materiality
£30m
Component
materiality range
£2m to £27m
Audit Committee
reporting threshold
£1m