Marks and Spencer 2015 Annual Report Download - page 51

OUR PERFORMANCE
FINANCIAL STATEMENTS GOVERNANCE OUR BUSINESS
49
ANNUAL REPORT AND FINANCIAL STATEMENTS 2015
GOVERNANCE
PRESENTATION OF THE
FINANCIAL STATEMENTS
The Committee gave consideration to the
presentation of the fi nancial statements and in
particular the presentation of the Non-GAAP
measures in accordance with the Group
accounting policy. This policy states that
adjustments are only made to reported profi t
before tax where income and charges are
one-o in nature, signifi cant, and distort the
Group’s underlying performance. In the
current year, management has included
profi t on property disposal, one-o pension
credits, interest income on tax repayments,
restructuring costs, international store
review, fair value movement of embedded
derivatives, strategic programme costs and
the reduction in M&S Bank income for the
impact of the fi nancial product mis-selling
provision within this category. The Committee
has concluded that this presentation is
appropriate. See note 5 on p100
RETIREMENT BENEFITS
The Committee has reviewed the actuarial
assumptions such as discount rate, infl ation
rate, expected return of scheme assets and
mortality which determine the pension cost
and the UK defi ned benefi t scheme valuation,
and has concluded that they are appropriate.
The assumptions have been disclosed in the
fi nancial statements. See note 11 on p104
REVENUE RECOGNITION IN
RELATION TO REFUNDS, GIFT CARDS
AND LOYALTY SCHEMES
Revenue accruals for sales returns and
deferred income in relation to loyalty scheme
redemptions and gift card and credit voucher
redemptions are estimated based on historical
returns and redemptions. The Committee
has considered the basis of these accruals,
along with analysis of historical returns and
redemption rates and has agreed with the
judgements reached by management.
SUPPLIER INCOME (NEW DISCLOSURE)
The Committee has considered the
assessment made by management over the
accounting for supplier rebate arrangements
and has been actively involved in reviewing
the Group’s controls in place in this area.
The Committee has reviewed in detail
management’s paper, which set out the
nature and value of these arrangements
and the timing of recognition in the fi nancial
statements, along with the related Internal
Audit fi ndings reported. The Committee is
satisfi ed with management’s conclusion that
there is no risk of material misstatement in the
current and previous period. In addition,
the Committee decided to enhance the
disclosures in relation to supplier income by
publishing the accounting policy and disclosing
the e ects of suppl ier income on certain
balance sheet accounts. See note 17 on p112
At the request of the Board, the Committee
has considered whether, in its opinion, the
2014/15 Annual Report and Financial
Statements is fair, balanced and
understandable, and whether it provides the
information necessary for shareholders to
assess the Group’s performance, business
model and strategy.
As the Chairman advised in his opening
statement, the structure of the report has
been updated this year to provide greater
focus on the key strategic messages in the
Strategic Report. Therefore, it was important
for the Committee to ensure these changes
did not dilute the level of transparency
in disclosure that we know is useful for
stakeholders, and that the business
continued to provide a clear message that
was refl ective of the Company as a whole.
A broad outline of the proposed changes
to the Annual Report was given to the
Committee early in the planning process,
along with a similarly broad indication of
content. The Committee received a full draft
of the report some two weeks prior to the
meeting at which it would be requested
to provide its fi nal opinion. Feedback was
provided by the Committee in advance of
that meeting, highlighting any areas where
the Committee believed further clarity was
required. The draft report was then amended
to incorporate this feedback prior to being
tabled at the Audit Committee meeting for
fi nal comment and approval.
The Committee was provided with a list of the
key messages included in the Annual Report,
highlighting which were positive and which
were refl ective of the challenges from the
year. A supporting document was also
provided specifi cally addressing the following
listed points, highlighting where these could
be evidenced in the report.
When forming its opinion, the Committee
refl ected on the information it had received
and its discussions throughout the year.
In particular, the Committee considered:
IS THE REPORT FAIR?
> Is the whole story presented and has
any sensitive material been omitted that
should have been included?
> Is the reporting on the business segments
in the narrative reporting consistent with
those used for the fi nancial reporting in
the fi nancial statements?
> Are the key messages in the narrative
refl ected in the fi nancial reporting?
> Are the KPIs disclosed at an appropriate
level based on the fi nancial reporting?
IS THE REPORT BALANCED?
> Is there a good level of consistency
between the narrative reporting in the
front and the fi nancial reporting in
the back of the report, and does the
messaging refl ected in each remain
consistent when read independently
of each other?
> Is the Annual Report properly a document
for shareholders?
> Are the statutory and adjusted measures
explained clearly with appropriate
prominence?
> Are the key judgements referred to in
the narrative reporting and the signifi cant
issues reported in this Audit Committee
Report consistent with the disclosures
of key estimation uncertainties and
critical judgements set out in the
fi nancial statements?
> How do these compare with the risks that
Deloitte plan to include in their report?
IS THE REPORT UNDERSTANDABLE?
> Is there a clear and understandable
framework to the report?
> Are the important messages highlighted
appropriately throughout the document?
> Is the layout clear with good linkage
throughout in a manner that refl ects
the whole story?
CONCLUSION
Following its review, the Committee was of
the opinion that the 2015 Annual Report
and Acco u nts i s re p resent ative of t he
year and presents a fair, balanced and
understandable overview, providing the
necessary information for shareholders to
assess the Group’s performance, business
model and strategy.
FAIR, BALANCED AND UNDERSTANDABLE