Annual Report and Accounts 2016


John Lewis Partnership plc


109


1 Accounting information (continued) 1.1 Accounting principles and policies (continued)


1.1.7 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other relevant factors, including management’s reasonable expectations of future events.


The preparation of the financial statements requires management to make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, be likely to differ from the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are:


a Retirement benefits: Details of estimates, judgements and assumptions are given in note 6.1


a Provisions and liabilities: Details of estimates, judgements and assumptions are given in notes 4.3 and 4.4


a Impairment: Details of estimates, judgements and assumptions are given in note 3.2


a Depreciation and amortisation: Details of estimates, judgements and assumptions are given in notes 3.1 and 3.2


1.2 Non-GAAP measures


Our financial statements disclose financial measures which are required under IFRS. We also report additional financial measures that we believe enhance the relevance and usefulness of the financial statements. These are important for understanding underlying business performance, and they are described as non-GAAP measures. In this note, we have explained what the non-GAAP financial measures are and why we use them.


1.2.1 Gross sales


Gross sales represents the amounts receivable by the Partnership for goods and services supplied to customers, net of discounts but including sale or return sales and VAT. This measure shows the headline sales trend.


1.2.2 Exceptional items


Items which are both material and non-recurring are presented as exceptional items within their relevant consolidated income statement category. The separate reporting of exceptional items helps provide an indication of the Partnership’s underlying business performance.


1.2.3 Profit before Partnership Bonus and Tax


Profit before Partnership Bonus and Tax is presented as a separate financial statement caption within the consolidated income statement. This measure provides further information on the Partnership’s underlying profitability, and is a core measure of performance for Partners.


1.2.4 Net debt


Net debt incorporates the Partnership’s consolidated borrowings, bank overdrafts, fair value of derivative financial instruments and obligations under finance leases, less cash and cash equivalents, short-term investments and unamortised bond transaction costs. This measure indicates the Partnership’s debt position.


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