Peachtree 2013 Annual Report Download - page 67

Committee meetings
All non-executive directors are members of the Committee and
attend each meeting. In addition, meetings are usually attended
by the Chairman, the Chief Executive, the CFO, the Director of
Finance and the Group Risk and Assurance Director. Other senior
executives will attend as required to provide information on matters
being discussed which fall into their area of responsibility. The external
auditors, PricewaterhouseCoopers LLP, also attend each meeting.
During the year, the Committee meets individually with the external
auditors, the CFO and the Group Risk and Assurance Director
without executives present.
The Committee is required, in accordance with its terms of reference,
to meet at least four times per year. During this financial year, the
Committee met four times.
In order to fulfil its objectives and responsibilities, the Committee
is satisfied that it receives sufficient, reliable and timely information
from management.
Activities of the Committee
The main activities of the Committee during the year are set out below:
Financial reporting
The Committee reviewed and considered the following areas in respect
of financial reporting and the preparation of the interim and annual
financial statements:
– The appropriateness of accounting policies used;
– Compliance with external and internal financial reporting standards
and policies;
– Significant judgements made;
– Disclosures and presentations; and
– Whether the Annual Report & Accounts are fair, balanced
and understandable.
In carrying this out, the Committee considered the work and
recommendations of the Group Finance Team. In addition, the
Committee received reports from the external auditors setting out
their view on the accounting treatments and judgements included
in the financial statements. The external auditors’ reports are based
on a full audit of the annual financial statements and a high-level
review of the interim financial statements.
The significant judgements considered by the Committee were:
– Revenue recognition. The key area of judgement in respect
of recognising revenue is the timing of recognition, specifically in
relation to recognition and deferral of revenue on support contracts
where management assumptions and estimates are necessary.
The Committee considered a revenue recognition paper prepared
by management which concluded that no changes to the fair value
allocation methodology had been made in the current year. The
Committee have concluded that the timing of recognition continues
to be in line with IFRS requirements. External audit performed detailed
audit procedures on revenue recognition and reported their findings
to the Committee;
– Goodwill impairment. The judgements in relation to goodwill
impairment testing relate to the assumptions applied in calculating the
value in use of the operating companies being tested for impairment.
The key assumptions applied in the calculation relate to the future
performance expectations of the business. Business plans prepared
by management supporting the future performance expectations
used in the calculation were approved by both the Executive
Committee and the Board. The Committee received a detailed report
on the outcome of the impairment review performed by management.
The impairment review was also an area of focus for the external
auditor, who reported their findings to the Committee;
– Disposals. The calculation of the loss on disposal of businesses
of is an area of complexity where management applies judgement.
The Committee discussed the methodology proposed by
management, including the judgements made, to allocate goodwill.
External audit reported to the Committee on the disposals, including
the goodwill disposed of; and
– Archer Capital litigation. The claim for damages made by Archer
Capital in relation to the potential purchase of MYOB is strongly
rejected by management. On that basis, and with supporting expert
legal advice, management do not currently consider there to be
a present obligation and the possibility of an outflow of resources
is remote. As such, no provision or contingent liability has been
recognised in these financial statements. The Committee received
a report of the last status for the claim and agreed the approach with
management. External audit discussed the matter with internal and
external legal counsel and reported their findings to the Committee.
Internal controls and risk management
The Committee reviews the framework of internal controls and the
processes by which the Group’s control environment is evaluated.
In this regard, the Committee received reports from internal audit on the
operation of, and issues arising from, the Group’s internal controls and
procedures. External audit has also provided input and observations
on the internal control environment and on any specific control issues
that occurred during the year. The Committee monitored whistleblowing
reports and other significant control issues or incidents that occurred.
In reviewing whistleblowing, fraud and incident reports, the Committee
assessed the cause of situations, along with actions taken to resolve
and prevent recurrence. The Committee also reviewed compliance
activities in relation to the Group’s policies and received a report on
the status of compliance with these policies.
The Committee reviews the Group’s risk management framework
(detailed on pages 68 to 69) in order to ensure it is appropriate and
operating effectively. In doing so, the Committee received reports
from the Group Risk and Assurance Director, which covered:
– The Group’s risk appetite;
– The effectiveness of the risk management processes and their
adoption across the Group; and
– A summary of the top risks to the Group, controls identified to
mitigate these risks and actions planned to reduce risks where
considered necessary.
The current top risks to the Group are set out on page 47. For
discussion and review, these top risks are split into two, with the top
four risks being assessed by the Board and the remaining risks being
assessed by the Committee.
As part of its agenda, the Committee allowed time for in-depth reviews
of particular risk areas. During the year, the risk areas considered were
the provision of online services, information security, risks within the
Group’s payments businesses and the impact of changes to corporate
governance rules.
In addition to the internal controls and risk management activities
outlined above, the Committee also received regular reports from
the Group Tax Director on the Group’s tax policy, approach to tax
management and status of compliance.
65The Sage Group plc | Annual Report & Accounts 2013
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