Peachtree 2015 Annual Report Download - page 72

Significant accounting and reporting maers
Maer considered Action
Revenue Recognition
The Group sells its products in many different ways
across the globe. Ensuring that the Group’s revenue
recognition policies are both appropriate and
consistently applied is a key focus of the Commiee
with the transition in business model to selling
soware as a service and the increased focus on
recurring revenue. Consequently, the Commiee
requested that management undertake a detailed
review of the accounting practices for revenue
recognition across the Group.
The review performed by management covered the revenue accounting for all significant products
in the major territories across the Group, focussed on the timing of revenue recognition, and the
treatment of amounts paid to various business partners of the Group which are deducted from revenue.
The Commiee reviewed management’s report outlining conclusions from its review and:
– reviewed the nature and scope of the revenue recognition exercise undertaken by management
– reviewed and discussed with management the findings and conclusions arising from this exercise
– considered with management the accounting adjustments and related disclosures in the 2015
Group financial statements
As set out in note1 to the financial statements, the revenue recognition exercise led to a change
in the application of the Group’s accounting policy in two areas:
– the treatmentof payments to independent sales organisations who refer customers to the Group’s
payments business
– there-phasing of the upfront revenue received in relation to products where soware does not
function fully without the customer making on-going payments
The Commiee also considered the external auditor findings and reporting on this maer.
Goodwill impairment testing
Goodwill is an area of focus for the Commiee
given the materiality of the Group’s goodwill
balances, the evolution of Sage’s business
model and the impairment of goodwill in 2014
relating to the business in Brazil.
In addition, judgements andassumptions are applied
in calculating the recoverable amount of the Cash
Generating Units (“CGUs”) and determining the
on-going appropriateness of the CGUs being
used for the purpose of impairment testing.
The Commiee reviewed and considered a detailed report from management on the work undertaken
and the assessments made in relation to the impairment testing of goodwill. The report considered
the determination of CGUs, the future performance expectations of the businesses concerned and the
discount rates applied to future cash flow forecasts.
The Commiee also reviewed the assumptions underpinning the impairment of the goodwill relating
to the business in Brazil. The Commiee reviewed and discussed the sensitivity analysis performed by
management and discussed the impact of the macroeconomic environment in Brazil and its impact
on the cost of capital assumptions used. This included taking into consideration the views of external
audit and its valuations specialists.
More information on goodwill impairment is set out in note 1 to the financial statement.
Viability
Recent revisions to the UK Corporate Governance
Code introduced a new requirement for the Board
to consider the period over which they are able to
conclude that the Company will remain viable,
having taken into account severe but plausible risks
and risk combinations. On account of this being a
new requirement, the Commiee considered this
to be a significant reporting maer.
The Commiee spent time, at two meetings, reviewing the process undertaken by management to
support and allow the Directors to make the Group’s viability statement. At its September meeting the
Commiee considered and provided input into the determination of which of the Group’s principal
risks and combinations thereof might have an impact on the group’s liquidity and solvency.At its
November meeting, the Commiee reviewed the results of management’s scenario modellingand
the reverse stress testing of these models.
The Group’s approach to producing its viability statement can be found on page 43, with the viability
statement found on page 93.
Tax provisions
The Group recognises certain provisions and accruals
in respect of tax which involves a degree of estimation
and uncertainty for certain items whose tax treatment
cannot be finally determined until a resolution has
been reached with the relevant tax authority.
The Commiee requested and received a report from management detailing the key uncertain tax
exposures across the Group against which provisions had been made and the methodologies used
to determine the appropriate level of each provision based on management’s assessment of the facts
and circumstances and advice from our external tax advisers. The Commiee also received a report
during the year from the Group Tax Director on the Group’s tax policy, approach to tax management
and status of compliance.
A particular focus of the Commiee was on the recognition of deferred tax assets and in considering
management’s position, the Commiee took into account the work and views of external audit.
More information on tax and tax provisions is set out in note 1 to the financial statements.
In performing its review, the Commiee considered the work,
judgements and conclusions of the global finance team and received
reports from the external auditor seing outits view on the accounting
treatments included in the financial statements, based on a review
of the interim financial statements and audit of the annual financial
statements. This review included assessing the appropriateness of the
accounting policies and practices, compliance with external financial
reporting standards and relevant statutory requirements, and reviewing
the adequacy of disclosures in the financial statements.
The Commiee was also requested by the Board to review and advise
the Board on whether the Annual Report and Accounts taken as a
whole are fair, balanced and understandable and provide the information
necessary for shareholders to assess Sage’s position and performance,
business model and strategy. As part of this responsibility, the
Commiee has suggested improvements to, and reviewed the results
of processes put in place by management to provide the necessary
assurance including analyses of how the key events of the year have
been described in the Annual Report. The Commiee also received
representations from management, the output of a review of the
Strategic Report section of the Annual Report by Internal Audit
and considered the perspective of the external auditor.
Corporate governance report continued
Audit and Risk Commiee continued
The Sage Group plc | Annual Report & Accounts 2015
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