John Lewis Partnership Annual Report and Accounts 2015

Annual Report and Accounts 2015

John Lewis Partnership plc 105

Work performed by the Committee during the reporting period

Financial reporting

The Partnership prepares consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union which form part of the Annual Report and Accounts. Additionally, an interim review is prepared at the end of the first six months of the year.

The Partnership has an internal control and risk management framework in place under which the Partnership operates, and which supports the preparation of consolidated financial statements. This includes policies and procedures to ensure that adequate accounting records are maintained and transactions accurately recorded. The Committee reviewed the draft Annual Report and Accounts including assessing whether they provide a fair, balanced and understandable assessment of the Partnership’s performance, business model and strategy.

During the year, the Committee reviewed and agreed the scope of the external audit work to be undertaken by the external auditors and agreed the fees to be paid to the external auditors for their audit of the 2014/15 consolidated annual financial statements.

The Committee also reviewed and monitored the integrity of the 2014/15 interim report and the 2014/15 Annual Report and Accounts, including considering the following six significant financial reporting issues and accounting judgements and reporting to the Partnership Board on them.

Our six significant financial reporting issues and our responses

1 Exceptional item for holiday pay Issue

Note 3 Response

Following a review of the Partnership’s holiday pay policy in the prior year an exceptional charge of £47.3m was recorded. The charge included payments to Partners, a provision for associated expenses and an increase in pension entitlements.

The Committee reviewed the papers prepared by management, detailing how the original charge was utilised. By the end of the 2014/15 year, the majority of the work had been completed and finalised and the Committee agreed the remaining unutilised provision should be released.

2 Impairment Issue

Note 10 and 11 Response

The Partnership has significant non-current assets, both tangible and intangible. Judgement is exercised in reviewing their carrying value to ensure that they are not impaired. There were indicators of potential impairment within Waitrose to which trigger tests needed to be applied.

The Committee reviewed methodology and results of the trigger tests and the sensitivity of the proposed impairment charge to movements in key assumptions. The Committee considered how key assumptions compared externally and satisfied itself that the assumptions used were reasonable.

3 Supplier income Issue

Note 13 Response

The Partnership receives supplier income mainly in the form of volume and marketing rebates. Judgement is exercised in ensuring that rebates are recognised in the accounting period to which they relate and that any estimates of rebates are accurately calculated.

The Committee reviewed the approach to recording the different types of supplier income, including the work of Internal Audit. The Committee decided to enhance the disclosures in relation to supplier income by publishing the accounting policy and quantifying the estimated supplier income at year end.

4 Liability for unredeemed Issue

The Partnership issues gift vouchers and gift cards and records a liability on the balance sheet for unredeemed vouchers. Judgement is exercised in estimating the value of this liability, based on redemption patterns.

gift vouchers and gift cards Note 18

Response

The Committee reviewed the papers prepared by management detailing the methodology, actual experience and key assumptions used in calculating the liability for unredeemed gift vouchers and gift cards, and accepted management’s estimates.

5 Provisions in relation to long leave, service Issue

Response

As in previous years, the Partnership has significant provisions in relation to the Partnership’s long leave scheme, which provides up to six months paid leave after 25 years of service to all Partners; expected future customer refunds; service guarantees and insurance claims. Management judgement is exercised in preparing the estimates and assumptions that form the basis of the provision calculations.

Summary

In respect of the six significant financial reporting issues described above, the Committee concluded that the judgements were reasonable and the presentation and disclosures in the financial statements were appropriate.

The Committee also discussed these matters with the external auditor.

The Committee considers the Annual Report and Accounts presents the items listed above on a fair, balanced and understandable basis.

The Committee reviewed the methodology and key assumptions used in determining significant provisions. The Committee considered past use of each provision, as well as the sensitivity of the assumptions when reviewing the appropriateness of the provision.

guarantee costs, customer refunds, insurance claims Note 20

6 Employee benefits Issue

Note 23 Response

The Partnership operates a defined benefit pension scheme, open to all Partners, subject to length of service. The pension scheme liability is calculated using an actuarial model using a number of key assumptions, notably the discount rate and inflation rate, which are sensitive to small changes in market conditions.

Significant judgement is exercised in determining these actuarial assumptions. The Committee reviewed the papers prepared by management, including the advice obtained by management from independent actuarial specialists on the appropriateness of the assumptions used. The Committee satisfied itself as to the acceptability of the key assumptions, including the discount rate and inflation, and reviewed the sensitivities.

Introduction

Partnership difference

Principles

Strategy

Performance

Governance

Financial statements

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