110 John Lewis Partnership plc Annual Report and Accounts 2016 Notes to the consolidated financial statements (continued)


2 Partnership performance


In this section This section focuses on our performance during the year ended 30 January 2016. Information is provided on segmental performance, exceptional items, operating expenses, Partner-related costs and taxation. This section also includes a reconciliation of our profit before tax to the cash generated from operations, which shows how our performance translates into cash.


2.1 Segmental reporting


We analyse our performance between our three reporting segments. These are Waitrose, John Lewis and Partnership Services and Group. This analysis is consistent with how our Partnership Board reviews performance throughout the year.


Partnership Services and Group includes operating costs for our Group offices and shared services, as well as the costs for transformation programmes and certain pension operating costs. The operating profit of each segment is reported after charging relevant Partnership Services and Group costs based on the business segments’ usage of these facilities and services, and before the exceptional item.


Accounting policies


Revenue: Sales of goods and services are recognised as revenue when the goods have been delivered or the services rendered. Revenue in respect of ‘sale or return sales’ which represents concession income is stated at the value of the margin that the Partnership receives on the transaction. Revenue is also net of Partner discounts and VAT. Revenue is recognised in respect of sales under bill and hold arrangements when the goods are segregated for the customer’s benefit at their request, and made available for delivery.


Sales of gift vouchers and gift cards are treated as liabilities, and revenue is recognised when the gift vouchers or cards are redeemed against a later transaction. Certain companies within the Partnership sell products with a right of return, and experience is used to estimate and provide for the value of such returns at the time of sale.


The business is predominantly carried out in the United Kingdom and gross sales and revenue derive almost entirely from that source.


Partnership Bonus: The Partnership Bonus is announced and paid to Partners each March; it is determined in relation to the performance for the previous financial year. No liability is recorded for Partnership Bonus at the half year as the majority of the Partnership’s profit and cash flows are earned in the second half of the year. Consequently, it is not possible to make a reliable estimate of the liability until the annual profit is known.


A liability for the Partnership Bonus is included in the year-end accounts, with the amount confirmed by the Partnership Board shortly after the year-end.


It is recorded in the year it relates to rather than the year it was declared because there is a constructive obligation to pay a Partnership Bonus and it can be reliably estimated once the results for the year are known and prior to the approval of the Partnership’s financial statements.


Segmental reporting: The Partnership’s reporting segments are determined based on business activities for which operating results are reviewed by the chief operating decision maker (‘CODM’). The Partnership’s CODM is the Partnership Board and the reporting segments reflect the management structure of the Partnership. The Partnership’s reporting segments are: John Lewis, Waitrose and Partnership Services and Group.


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