Experian 2014 Annual Report Download - page 79

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• Reviewing the effectiveness of
the Group’s system of risk
management and internal control,
including financial, operational,
compliance and risk management.
• Reviewing and approving the Group’s
treasury policy.
• Approving the Committee’s annual
meeting schedule and reviewing
the Committee’s terms of reference.
Some changes to ensure alignment
with the UK Corporate Governance
Code were recommended to the
Board and subsequently approved.
• Agreeing a process that would enable
the directors to conclude that the
annual report and financial statements
are fair, balanced and understandable
and provide information necessary
to assess performance, business
model and strategy, in line with the
new requirement in the UK Corporate
Governance Code. The Committee
received a paper detailing the new
requirement, and the external auditors
also briefed the internal management
team responsible for drafting the
annual report. The Committee
considers that it has sufficient
opportunity to review the annual
report and financial statements, and
that there is sufficient review by senior
management. It was also confirmed,
as part of the process, that the Board
would receive advice annually from
the Committee on reaching the
‘fair, balanced and understandable’
conclusion.
• Receiving an update on the existing
UK Corporate Governance Code
provision, and proposals from the
UK Competition Commission and
the European Union, in relation to
potential requirements to put the
external audit out to tender or rotate
external auditors.
• Reviewing the Group’s position in
relation to the integration plans for
acquired businesses, noting the
multitude of factors involved, the
importance of robust processes
and that different jurisdictions may
require elevated risk analysis.
The significant issues in relation to the
Group financial statements considered in
respect of the year ended 31 March 2014,
and the manner in which these issues
were addressed, can be summarised as
follows:
• The Committee considered
management’s impairment analysis
and the methodology adopted. It was
noted that the headroom within the
EMEA and Asia Pacific segments
had declined during the year due to
the loss of a significant contract in
EMEA, the delay in the launch of the
Australian credit bureau and the sale
of a business in Asia Pacific.
• The Committee considered the
accounting treatment of the
acquisition of Passport Health
Communications and The 41st
Parameter. The Committee
concluded that their provisional
acquisition balance sheets were
appropriately reported.
• The Committee considered the
accounting treatment of the sale of
a number of businesses in the year.
The Committee concluded that the
recognition of impairment charges
on goodwill (US$15m) and acquisition
intangibles (US$9m) was appropriate
in determining the assets held for
sale at 30 September 2013 and
subsequently disposed of.
• The Committee considered the
litigation against the Group in
Brazil relating to the use of credit
scores. The Committee reviewed
management’s analysis of the matter
and agreed with their conclusion
that the risk of loss was possible. The
Committee considered the disclosure
of the contingent liability and, given
the uncertainty surrounding the
possible outcomes, determined that it
was appropriate.
• The Committee considered two
specific tax issues. First, and in the
light of the further reduction in the
main rate of UK corporation tax, it
considered management’s analysis
of the carrying value of deferred
tax recognised in respect of tax
losses. The treatment of the asset
and resultant impact of US$23m
on the tax charge for the year, and
the exclusion of that impact from
the benchmark tax charge, were
considered to be appropriate.
Secondly, the Committee considered
an update on the claim by the
Brazilian tax authorities in respect
of the deduction for tax purposes
of goodwill amortisation arising
from the acquisition of the majority
stake in Serasa in 2007. In the
light of developments during the
year, it concluded that it remained
appropriate to regard this claim
as remote.
External auditors
Tenure and tendering
PricewaterhouseCoopers LLP have been
the Company’s auditors since the Group
was demerged from the former GUS plc
in October 2006. The next rotation of lead
audit engagement partner will take place
following the conclusion of the audit
for the year ended 31 March 2016. To
date, the Committee has not considered
it necessary to require the auditors to
tender for the audit work, and there are
no contractual obligations restricting the
Company’s choice of external auditor.
It remains the current intention that
Experian will, in due course, comply
with the UK Corporate Governance
Code’s recommendation that FTSE
350 companies put the external audit
out to tender at least every ten years.
Following its statement in January 2014
that it proposed to remove the reference
to tendering from the UK Corporate
Governance Code, in April 2014 the UK
Financial Reporting Council (‘FRC’)
stated its intention to defer consideration
of that proposal until 2016. In addition,
there have been recent developments
from the UK Competition Commission
and the European Union in relation to
tendering and mandatory rotation. The
Audit Committee is reviewing all of these
developments and the Group’s updated
plans will be disclosed in due course.
In the meantime, the annual process
of evaluating the effectiveness of the
external auditors (as described on the
following page) will continue.
Governance • Corporate governance report