GRANT THORNTON UK LLP ANNUAL REPORT 2016 FOR THE YEAR ENDED 30 JUNE 2016 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 2
CONTENTS
1. CEO STRATEGIC UPDATE Pg3 8 CONSOLIDATED STATEMENT OF CASH FLOW Pg26 2. BUSINESS AND FINANCIAL REVIEW Pg10 9. NOTES TO THE CONSOLIDATED Pg28 FINANCIAL STATEMENTS 3. MEMBERS’ REPORT Pg13 10. STATEMENT OF FINANCIAL POSITION Pg81 4. INDEPENDENT AUDITOR’S REPORT TO FOR THE PARENT ENTITY THE MEMBERS OF GRANT THORNTON UK LLP Pg15 11. STATEMENT OF CHANGES IN EQUITY Pg83 5. CONSOLIDATED STATEMENT OF FOR THE PARENT ENTITY COMPREHENSIVE INCOME Pg20 12. NOTES TO THE PARENT ENTITY Pg85 6. CONSOLIDATED STATEMENT OF Pg22 FINANCIAL STATEMENTS FINANCIAL POSITION 13. INDEPENDENT AUDITOR’S REPORT TO THE 7. CONSOLIDATED STATEMENT OF Pg24 MEMBERS OF GRANT THORNTON UK LLP Pg96 CHANGES IN EQUITY
Grant Thornton UK LLP is a limited liability partnership registered in England and Wales with registered number OC307742. A list of members’ names is available for inspection at Grant Thornton House, Melton Street, Euston Square, London NW1 2EP, the firm’s principal place of business and registered office. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 3
1. CEO STRATEGIC UPDATE CEO FOREWORD
We have set a bold strategic agenda anchored in our purpose of helping to shape a vibrant economy, grounded in the belief that great businesses work holistically to contribute to the system on which their sustainable growth depends. The energy and passion of our people, the support from our clients, challenge and insight from our wider stakeholders have all played a vital part in this first year of delivering on our agenda. At times it has felt hard – and yet we remain confident that our strategy remains the right one to create value for our clients, our people and the communities we serve. As they say, if it was easy it would have already been done.
As with any bold plan, the start requires WE HAVE STARTED TO PLAY OUR PART IN SHAPING investment and commitment to lay strong A VIBRANT ECONOMY foundations to deliver sustainable results into the future. This report is framed “We care about the work we do for significant – if the UK performed at the around three key aspects: clients, the way we treat our people same level as the G7 average then an and the impact we have in society. additional £479bn would be generated • how we have started to play our part By unlocking the potential for growth for the UK economy by 2025. in shaping a vibrant economy in our people, our clients and our We believe there are three areas where communities, we will work to shape • the work we have undertaken to ensure we can make most impact in shaping a a vibrant economy where businesses that quality, excellence and ethics are vibrant economy: at the heart of what we do and people can flourish.” • building trust and integrity in markets Our continued success and growth • how, as a progressive business, is vital in securing investment and for depends on us working with clients who we have delivered against the goals innovation to take hold we set this time last year. are growing and changing in an economy that is thriving. Living our purpose is our • making sure we have dynamic opportunity to ensure that we act to businesses growing, expanding, influence the system not just operate generating jobs and creating a positive within it. We know that we can achieve financial and social impact on the this through who we work with, the work communities they serve we do, what we speak out on and how • creating an environment where we are as a business ourselves. Given businesses and people can flourish – we advise over 56% of the FTSE 100, from transport and healthcare are the leading auditor in the public sector through to education. and our private sector clients employ more than 6.2m people in the UK, we This year we have made substantial know that we can use our power to progress in how we bring our purpose convene people from different walks of to life and you will notice this throughout life to work together to deliver change. our commentary on the implementation The unlocked potential in the UK is of our strategy.
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. ‘GTIL’ refers to Grant Thornton International Ltd (GTIL). Grant Thornton UK LLP is a member firm of GTIL. GTIL and each member firm of GTIL is a separate legal entity. GTIL is a non-practicing, international umbrella entity organised as a private company limited by guarantee incorporated in England and Wales. GTIL does not deliver services in its own name or at all. Services are delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s act or omissions. The name ‘Grant Thornton’, the Grant Thornton logo, including the Mobius symbol/ device, and ‘Instinct for growth’ are trademarks of GTIL. All copyright is owned by GTIL, including the copyright in the Grant Thornton logo; all rights are reserved. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 4
WHO WE WORK WITH Our focus is on All of our work in this area can impact on WHAT WE DO FOR CLIENTS We set out working with businesses across the our reputation – particularly as we move in our strategic review how we take an private, public and third sector that will to work with higher profile organisations. ‘outside in’ perspective on the world. To contribute to driving economic growth. We need to choose wisely who we work look at and anticipate themes that will be We call these dynamic organisations. with, what we do with them and continually important for a vibrant economy and for We are actively seeking to work more assess if any new information has arisen our clients within it. To purposefully invest with such businesses. We will stop working that changes our view. in new areas of service and capability to with businesses that are not interested support our clients growing into the future. To guide us in selecting the clients we in progression and who do not value This year we have been implementing work with, we have our Code of Conduct the services we can provide so we plans to expand our capabilities around and client take on processes which codify can focus our energy and resources five key areas that we believe are the considerations that go into choosing on those that do. important and valuable for our clients: to act for a particular client. We have We have also considered carefully who updated both of these in light of our • enabling clients to make better informed we work with, particularly where we work purpose and we are introducing additional decisions using robust economic data with those in the broader public interest. steps in documenting and challenging • supporting the leadership of our client Typically our work in this area can be our thinking around taking on work and organisations as they lead change and loosely categorised as follows: clients that fall into the public interest. improve governance • ORGANISATIONS THAT ARE GROWING, In such cases, there are multiple aspects • advising high growth firms through SCALING AND FACING CHALLENGES to consider beyond pure compliance every stage of their growth journey AS THEY GROW – often in how they with the basic requirements set out operate in a sustainable and profitable in legislation. • enabling our clients to maximise way. They won’t be perfect, they’ll be opportunities internationally through Specifically, we consider the on a journey and need support and our relationships with other firms circumstances of a particular client challenge to get there situation, the direction of travel of their • developing our assurance services to • BUSINESSES THAT ARE IN DISTRESSED business or organisation, the focus on maximise value to our clients’ strategic SITUATIONS – we have a strong track management of the business and their direction and operational efficiency. record of success in working with appetite and commitment to implementing We are also clear on what we do not do. businesses in need of turnaround and change. This is then set alongside an Specifically, we will not work with clients restructuring, as exemplified in our assessment of our capability, our ability who wish to avoid paying their fair share of award winning work with Kodak in the to influence, whether our people would tax through relying on artificial structures. restructure of their pension scheme want to work for the client and whether following the business entering Chapter we can deliver the work at a suitable 11. And yet such situations are not risk return to ensure we can dedicate the free, turnarounds don’t always work right level of resources to delivering despite our best efforts high quality work and advice. • WORKING WITH REGULATORS, The consequence of our approach is that INDUSTRY BODIES AND SOMETIMES we will continue to turn down opportunities INDIVIDUAL COMPANIES WHERE that do not fulfill these criteria. Adopting THERE HAVE BEEN FRAUDS, CRIMINAL this strategy ensures that we deliver ACTS OR MAJOR BREACHES OF sustainable growth. COMPLIANCE OR TRUST – here our role is in restoring trust and integrity, ensuring that the markets are able to bring to account those responsible and put in place measures to ensure that such situations don’t happen again in the future. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 5
WHAT WE SPEAK OUT ON This year The work that we are undertaking are groups now actively engaged in we have made significant progress to addresses the following key aspects: moving ideas forward to create lasting fundamentally change our engagement actions towards that vision. We continue • inspiring people and businesses to be with the marketplace through our vibrant to learn about how to bring more people involved in shaping a vibrant economy economy approach. The aim of the into the discussions and also what it approach is threefold, to: • inquiry to identify actions to shape a takes to turn ideas into action. vibrant economy • enable richer conversations with CEOs We have invested in an open platform on matters of importance to their future • providing a platform to enable in collaboration with 2degrees to enable sustained business success collaboration to take ideas into action. communities for action to form around ideas so that they can come together • forge valuable connections for our This year we have also launched the to share plans and resources to make clients through creating a community Faces of a Vibrant Economy which them happen. of our clients and contacts celebrates individuals from a diverse range of sectors who are taking To add rigour to our work we have • identify new areas for collaboration and a lead in shaping our economy – convened an external commission value creation – both between clients through leadership, contribution to wider to oversee this work and to ensure and also areas where we can develop society or innovation in their businesses. the insights create lasting value for our services and propositions. We hope that these will act as inspiration the UK economy. We have set in place a programme for people young and old to see what is Time and again clients and other of work to enable us to collaborate possible and to think about how they too stakeholders have said that what makes effectively across private, public and can make a difference and get involved. us stand out is how it feels working with third sector to shape a vibrant economy. In addition, we held our first inquiry in us. This approach to living our purpose This work is based on an approach of the city of Sheffield. Using an approach gives potential clients the opportunity to engagement and inquiry. To understand called appreciative inquiry to bring people experience how it feels to work with us. what is working well, to build on it and together to discover what is already It is proving an effective approach to us amplify it. Convening people from all great, dream about the possible vision securing more work with the types of walks of society to shape the future. for the future and then move into design dynamic organisations we wish to work We started by testing the ideas with over the actions to make it happen. This with and being able to contribute through 140 business leaders across the country, first inquiry was very positive – we great open collaboration with others to an overwhelmingly positive response. engaged people from across the city with similar goals. and importantly, in the follow up, there
DRIVING QUALITY AND EXCELLENCE Quality stands at the heart of a our work; by nature our people are very British Accountancy Awards, having professional services business and collaborative and consult with colleagues. being awarded the same honour in 2013. in last year’s report we talked about It is essential that this richness is captured The award was voted for solely by Finance substantial investment in continuous in our documented work with more rigour. Directors and CFOs who were asked to improvement in our tools, systems Secondly, continuing to streamline our rate the competing firms based on a and processes to deliver quality and business processes and to make it easy number of criteria, including knowledge excellence along with ongoing work to complete them and get them right first of sector, innovation, strength of into client satisfaction. This year our time; particularly in the area of global relationships and project regulators have noted the significant independence reporting it has been management skills. improvements in quality systems and challenging for people to speedily update There are many large firms in competition practice that our own internal reviews changes in investments, particularly and so to be recognised in this way had been showing. Equally, we remain those in pension funds, and we have once in a while would be good. To be committed to continual learning and put additional resource into this area recognised more often than that is great improvement of what we can do better. across the year. - as a direct measure of what our people There are two themes that stand out. We are also extremely pleased that do, day by day, quarter by quarter, for Firstly, ensuring that we fully document we were once again awarded ‘Global organisations that make Britain. all our deliberations in the course of Firm of the Year’ at the prestigious Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 6
PROGRESS IN IMPLEMENTING OUR STRATEGY
We have made substantive progress A great example of this is our partnership BUILD AN INNOVATION CULTURE across each area of our strategy: with CIPFA which now provides CFOs THAT CREATES VALUE This year has been with data about spend and place on a one of much change - as we seek to create BE THE VIBRANT FIRM FOR GROWTH subscription basis. Widely adopted already a real shift in ownership and responsibility. This year we launched our programme of in the public sector, our focus now is For some the pace has felt too fast, work which aims to lead UK thinking and continuing extension into the private for others too slow. We certainly are not solutions in key areas where a vibrant sector where early signs are strong. there yet. We have made big investments economy can be developed. Three in people this year – appointing 30 elements to the programme were INCREASING INTERNATIONAL new partners, 19 of whom are internal successfully kicked off this year: CONNECTIVITY: as a leading firm in promotions. We have invested over the Grant Thornton global network, • the first of our city inquiries, in Sheffield £17m in new people, promotions we have invested this year in building and increases for our people, building • the first of our thematic inquiries stronger capability in key trading routes, capacity for continued growth. on Housing in London particularly between the UK and US. We have also further developed our At the same time we have reduced • our Faces of a Vibrant Economy launch. support for business inbound to the UK. our voluntary employee turnover to 18% - Each element has shown the power simply we have got better at keeping our STRATEGIC ACCOUNTS FOCUS: this of convening people around a focused most talented people within the firm. year we have focused on 14 strategic agenda to share ideas, resources and We have also relaunched our Alumni accounts where we believe there is most capability to create action. Network this year; inevitably some mutual benefit to working in a long-term people will move on to develop their Next year we will be launching our partnership together. This has resulted careers beyond Grant Thornton and Vibrant Economy Commission to focus our in a 13% increase in activity with these it has been wonderful to reconnect work and to draw out and amplify insights clients as we become more finely attuned this community during the year. from the programme. We have a busy to how we can develop our capabilities programme of work with city inquiries in to meet their emerging strategic needs. We have also continued our Reading, Manchester, Birmingham, Leeds, commitment to building a more INNOVATION AND ENTERPRISE TEAMS: Bristol, Cambridge and Gatwick. Alongside diverse team – particularly in the area this year we have learned how best to these we will run inquiries into some key of social diversity. We were a bold first organise ourselves to have our ‘laboratory’ themes that are critical to the future of mover in changing our entry requirements and ‘greenhouse’ working effectively to the place of the UK in a global economy. for new trainees. Two years on this has develop new ideas into profitable streams significantly impacted the makeup of These inquiries will provide a rich source of business creating value for our clients. our intake – over 21% would not have of connections, ideas and actions to drive Specific areas of success this year have met our previous criteria – and this more value for our clients, our communities been the continued investment in growth diverse intake is performing well in role. and for our business. services – from Geniac, our offer to We have had great external validation on startup businesses, through to Growth SEIZE OPPORTUNITIES IN A our processes from The Bridge Group 365, a community of like-minded, fast CONNECTED WORLD This year we who have affirmed that our processes are growth entrepreneurs who start their have delivered on four key programmes among the least likely to disadvantage journey with an in depth growth to ramp up our ability to help our clients people of any they have seen. diagnostic to support them in to seize opportunities: furthering their growth ambitions. INSIGHTS AND ANALYTICS: we have As we go forward into next year our rationalised all our research and analytics focus will be on faster development of capability to create more value for clients. new propositions for clients, targeting Through strategic partnerships we have the strategic investment areas outlined been able to bring together unique data earlier in this report alongside in depth sets to inform better decision making. work to improve every aspect of our client experience. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 7
Finally, this commentary would not be As we head into the new year our In the year that we embarked on our complete without speaking about the focus is turning to sharing responsibility – shared enterprise model, which starts gender pay gap. We are reporting our this is now fully integrated into our with the premise that by tapping into data for the first time this year and it refreshed Code of Conduct and Quality, all our people we will be sustainably shows we have work to do. The underlying Ethics and Excellence agenda. A key successful, 82% of us are already challenge remains how we retain women element of this is how our monitoring willing to share our ideas to make to senior levels in our firm. As is common and control becomes even more our business better. across the profession, we typically lose embedded in self-correcting systems, Our employee net promoter score stands women as they begin to have families. where key metrics on compliance are at +15. It showed us that we have a strong We did a major revamp of our maternity shared openly throughout the firm to group of people who consistently rate and paternity policies this year to enable enable individuals to drive improvement us at 9 or 10 out of 10; we also have more choice and equally more load in their areas. many who rate us between 6 and 8 sharing between parents. This will As to shared reward, in addition to and our goal is to continue to work to continue to be an area of focus – put our investment in salaries and bonuses bring those into the higher levels of simply we cannot afford to lose talent for our people, £2m has been added engagement with the firm. (male or female) and will continue our to our shared reward pool which runs work to ensure that progression in the CHALLENGER LEADERSHIP This year in this first period to June 2018. firm is attractive. Redefining what we have started the next stage of our leadership looks like away from the BUSINESS SCHOOL This year we have leadership development in the firm, predominant ‘alpha’ model is a key evolved our learning and development building on the personal leadership part of this work. team into our Business School which development that we have invested brings together all our technical and in over the last few years. This work Specifically in respect of the areas differentiating behavioural development is closely interlinked with our vibrant of focus we set out last year: programmes to set our people up from economy inquiries. Building the capability SHARED ENTERPRISE This simple idea day one to build exceptional connections of our people to make sense of complex of unleashing the potential of over 4,500 and deliver valuable insights to clients. events impacting on our clients, the ability people through sharing ideas, sharing Our results in professional exams to inquire and explore new possibilities responsibility and sharing reward has considerably outperform our peer group and to convene people to design and drawn considerable attention. This year and that many of our people have been deliver actions as a consequence. We we have been experimenting with and recognised externally - for performance believe that building this transformational embedding new ways of working, building in exams and beyond. mindset across our business is critical on the foundations of the coaching culture to delivering value for our clients, PEOPLE MANAGERS BECOMING HIGH we have been laying for some years now. communities and people into the PERFORMANCE COACHES Our recent Our sharing ideas bursts over the first long term. Voice in Action feedback from people half of the year confirmed what we knew – across the business reflects the good The changes that we have started will we have smart people with great ideas progress we have made in some key take a while to become second nature aching to have a space for them to grow. areas. 85% of our people are proud to for us. This coming year therefore we Over 1,500 people came together face be part of the firm and more than 8 out will continue to focus on embedding to face; and we experienced more than of 10 would recommend our services. shared enterprise into how we operate 100,000 individual hits to our online In addition, 85% of the firm feels that our and developing our leadership capability platform. Numerous individual ideas structure is set up in the right way to take both through growing those with us and were developed and implemented locally. responsibility for our action, with 94% of through investment in high calibre Some bigger ideas are being developed us personally understanding that delivering individuals to join the firm. at a firm wide level. We have learnt that high quality service is critical to our future. to keep momentum we must develop new ways beyond the business cases of old that serve to sap energy. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 8
MAKE IT EASY AND REWARDING TO This year we have also invested in our take We have placed a considerable focus DELIVER SUPERIOR AND SUSTAINABLE on processes, centralising core aspects on how we work – trying to minimise RESULTS This year has been a year of which also make our international conflict unnecessary travel and make great investment: in people, processes and checking more efficient. The area we are use of our systems for connecting and systems, in laying down the foundations still working on is our Global Independence working remotely. This has commercial for the next phase of our growth. System. We have put additional resource and environmental benefits too with both into this team to support our people in our spend on travel and environmental We have grown the quality of our client recording all their investments (including footprint improving as a result. In this base which has resulted in an increase those through pension schemes) to respect we have secured ISO14001 in like for like revenues at 6.6% when ensure that globally we are able to identify accreditation across the UK. We are adjusted for our IVA business which in real time any conflicting investments also pleased to report that our IS we exited in the year. At the same time and ensure that individuals dispose security was assessed as excellent we have chosen to stop working with of them promptly. by an independent firm, reflecting the those clients who did not value our considerable investment we have work and were not committed to SUSTAINING PROFITABILITY BY DRIVING made in this area. their own progression. EFFICIENCY AND VALUE This year we streamlined our business unit reporting This year we will be continuing to extend Our commitment to invest in our people, into seven units reporting through to the information that we share with all our systems and new capabilities for our our Operations Leader. They have worked people to enable them to make informed clients is reflected in our underlying together to conduct a full review of decisions in our day-to-day operations profits which are £60m after employee our operating model and to identify to deliver better value for our clients bonuses of £10m. efficiencies in how we work to share and for our firm. DRIVING QUALITY AND EXCELLENCE resources across the firm. They have Earlier in this report we set out our also worked to exit from clients who work on Quality and Excellence. With the do not value the work that we do so that introduction of the new Ethical Standard we can focus our resources and energy. we have appointed a new leader of Quality, BUILDING SHARED ENTERPRISE INTO Ethics and Excellence. He will focus on OUR WORKING PRACTICES We have made embedding our three lines of defence, significant investments this year in our shared responsibility and ensuring that people systems to enable people to take quality is part of our DNA. Our investment more ownership for key decisions around in our audit quality programme continues people, including recruitment and pay with our new global audit software and reviews. As with any big system change methodology due to come on stream in we have learnt a lot from the first run 2017. This will streamline our approach, through and will be building this into make a much clearer link between on-going improvements into our system our testing and International Auditing and development of our culture. What Standards and make it easier to we know already is that the efforts have evidence discussions and review. been worthwhile – we are now able to turn an offer around in minutes which is appropriate to the social age in which we live and we have reduced our cost per hire by 31%. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 9
OUTLOOK As we said at the start of this report • embedding shared enterprise further something different in how you operate we have embarked on a bold journey into how we work and developing the as a firm, it can feel hard working against to become the go to firm for growth, leaders who are able to create the the prevailing model of how the world shaping a vibrant economy. What seemed environment where people are able to works. It is the daily encouragement from important pre Brexit seems critical in innovate and deliver their best work clients, people and others to strive to do a post Brexit world. Undoubtedly there something more, to create a progressive • driving our quality and excellence are uncertainties that will be reflected firm that is at the heart of shaping a agenda, with the roll out of our new in businesses’ appetite to progress their vibrant economy that spurs us on. audit tool and methodology alongside investment and growth plans. We have set So, thank you for reading and being other system improvements to make some clear priorities for the forthcoming part of our journey. it easier for us to do great quality work year which are highlighted in our commentary above. • streamlining our business model and systems further, including investment in We are committed to delivering long term a new finance system to give everyone sustainable profits and this year we will in the firm better information on which continue to make key investments to set to make decisions. us up to do just that. Our focus will be SACHA ROMANOVITCH around the following priority areas: We expect that this focus will lead to CHIEF EXECUTIVE OFFICER, sustainable improvements in profitability • continuing our programme of work GRANT THORNTON UK LLP in line with our Vision 2020 plans. on the vibrant economy agenda – and drawing out insights for us to work with Finally, we would like to express heartfelt and create more value with the dynamic thanks to all of our clients, our people client base we wish to continue to build and other stakeholders. When you seek to move from the short term, to do • building our capabilities in the key areas outlined earlier to enable us to meet the needs of our clients both now and in the future • developing our client experience so that we sustain and build on what we do well and continue to adjust how we work so that it creates most value for our clients Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 10
2. BUSINESS AND FINANCIAL REVIEW WHAT WE DO, OUR GOALS AND STRATEGY
WHO AND WHAT WE ARE Grant Thornton is a leading financial and business adviser. Our focus is on unlocking growth for dynamic organisations – those changing, growing and shaping the economy, from start-ups through to large corporates.
Our lens to serve our clients is through Consulting, Forensic Investigations, Ownership of the firm is vested in its the issues that they face. With a focus Financial Services Advisory and Recovery partners and in the year to 30 June on understanding what is important to & Reorganisation. More information 2016 the full time equivalent number of our clients and collaborating to bring the about all of our services is available partners was 179 (2015: 184). The full best team to work with them to address on our website. time equivalent number of employees their issues. It works because we have during the year was 4,450 (2015: 4,277) We are regulated by a number of bodies breadth and depth of capability across and the firm currently operates from 26 in the UK and overseas, the principal both geography and specialist service offices throughout the United Kingdom. ones being the Institute of Chartered lines. Our principal services are Audit In addition, we have subsidiary entities Accountants in England and Wales and Assurance, Tax and Advisory operating in the Cayman Islands and (the ICAEW - our lead regulator), Services, the latter including Business British Virgin Islands that are focused the Financial Conduct Authority, the Risk, Corporate Finance, Business on Insolvency and Restructuring services. Financial Reporting Council and the Insolvency Practitioners Association.
WHAT WE DO Grant Thornton helps dynamic organisations unlock their potential for growth by providing meaningful, forward looking advice.
Proactive teams, led by approachable and people thrive. We work with banks, In the UK, we provide services to partners, use insights, experience and regulators and government to re-build over 40,000 privately held businesses, instinct to understand complex issues trust through corporate renewal reviews, public interest entities and individuals. for privately owned, publicly listed and advice on corporate governance, Grant Thornton is led by around 180 public sector clients and help them and remediation in financial services. partners and employs approximately to find solutions. We work with dynamic organisations to 4,500 of the profession’s brightest minds. help them grow. We work with the public Our underlying purpose is to build a Our business is well balanced across sector to build a business environment vibrant economy, based on trust and private and public sector businesses at that supports growth, including national integrity in markets, dynamic businesses, different stages of their growth journey and local public services. and communities where businesses and also between advising businesses and those that regulate and govern them. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 11
% OF TOTAL FEES BILLED FY 2015/2016
22% 27% PILLAR 1 – TRUST AND INTEGRITY PILLAR 2 – DYNAMIC ORGANISATIONS PILLAR 3 – ENVIRONMENTS 25% OTHER ORGANISATIONS 26%
PILLARS DEFINITION
Trust & Integrity Financial Services and Large Corporates (not in Environments) Dynamic Organisations Mid-sized companies (Turnover £50m–£1bn) and Dynamic small companies Environments Public Sector & NFP, Large BSS and Property/Construction Other organisations Other clients
GLOBAL REACH More than 40,000 Grant Thornton people, across over 126 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work, through membership of Grant Thornton International Ltd (GTIL). More information on our global network is available on our website.
OVERALL FINANCIAL PERFORMANCE The financial performance for the year ended 30 June 2016 reflects a year of change and investment for the future. During this period, the firm continued to grow its revenues despite the absence of income from the Individual Voluntary Arrangement (IVA) business. As signalled in last year’s financial statements, the firm transferred its IVA business to a new entity, Aperture (NI) LLP (Aperture), retaining a 40% stake, with management having the controlling stake. Revenue growth in the year was 2.5%, but if the IVA revenues are excluded, then underlying growth was 6.6%.
Looking at a breakdown of the revenues there was good growth in our London Profit before tax reduced by around along operational reporting lines, all audit, tax and growth services business £10m, with the majority of this (£7m) areas grew in the year with the exception (£7m or 5%) where the growth was driven attributable to the decline in profits from of Scotland and Northern Ireland which from growth services and tax, and in the IVA business. The remainder of the fall contained the IVA business until its our Southern business which grew by in profits reflects investment for the future transfer to Aperture. The strongest 4% mainly from advisory work. There in Brand, IT, Enterprise & Innovation and growth was seen in the Operational was slower growth in our Transactional Quality processes. Advisory business which increased Advisory business (£2m or 2%), though GOING CONCERN The members believe its revenues by £17m (21%), with the this masked a very strong year within that it is appropriate to prepare these majority of this coming within the Financial Forensic which grew by over £5m, offset financial statements on a going concern Services Group which continues to be by a quieter year in Restructuring. Finally, basis after reviewing the firm’s future a major area of investment. There was North & Midlands had a quiet year, with anticipated trading results and cash flow strong growth in our Central business only marginal growth within this business. forecasts, and the bank credit facilities (£6m or 15%) on the back of a strong which are in place until December 2019. transactional performance. Elsewhere Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 12
MANAGEMENT JUDGEMENTS AND ESTIMATES Material elements of the financial statements which are highly dependent upon management judgements and estimates are summarised below. Further details can be found in the Notes to the Financial Statements.
DEFINED BENEFIT REVENUE RECOGNITION PROFESSIONAL NEGLIGENCE CARRYING VALUE OF GOODWILL PENSION SCHEMES Estimation of contract profitability CLAIMS PROVISIONS The carrying value regarding Assumptions regarding liabilities by discounting the estimated Assumption that claim provisions goodwill arising from the RSM saw the discount rate reduced profits attributable to the stage will provide adequate cover for Robson Rhodes LLP acquisition to 3% (3.8% last year) and also of assignment completion. liabilities and that appropriate (in 2007) was valued at £9.6m changes in RPI & CPI rates, information has been used in order as at 30 June 2016. The carrying mortality and asset returns. to establish the claim provisions. value of goodwill on less significant Overall the net result was a fall in RETIREMENT ANNUITIES acquisitions as at 30 June 2016 the net pension deficit of £27m. TO PARTNERS is £3.5m. Estimations regarding assumed discount rate, RPI and mortality, where assumptions are in line with defined benefit pension scheme, but reflect shorter timescales.
STATEMENT OF FINANCIAL POSITION Despite the reduction, the pension CAPITAL, TREASURY, LIQUIDITY ANALYSIS Net liabilities attributable to scheme liability remains a large item Liquidity risk is managed by periodically members (comprising total equity and on the balance sheet. We have continued undertaking reviews of short, medium loans and other debts due to members) our dialogue with the trustees around the and long term funding requirements as in the group balance sheet reduced by best way to balance meeting our employer well as continuously monitoring working £30.0m, giving rise to net liabilities of covenant to the pension scheme with capital usage. A significant part of £16.5m at the year end. The largest continuing to invest in the business the firm’s funding is from members’ single factor in the change to the balance for the long term. As such we remain capital, which is only repayable following sheet was once again the pension scheme confident that despite the quantum, retirement and borrowings which mainly liability which reduced by £26.8m to this liability is being effectively comprise revolving credit facilities. £111.0m. The reduction resulted from the managed over a suitable timescale. As noted above, net bank borrowings plan liabilities reducing by £6.5m, whilst increased by £20.6m to £29.1m as Elsewhere in the balance sheet, the the assets grew by £20.3m. The reduction at 30 June 2016 (£8.5m for last year). largest year on year movements were in liabilities reflects experience gains the new £19.5m investment in Aperture, on the liabilities exceeding the increase our associate which carries out IVAs in liabilities from a further reduction in and a £20.6m increase in net borrowings. the discount rate. Overall total assets increased by £14.0m whilst total liabilities reduced by £12.6m. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 13
3. MEMBERS’ REPORT
The members present their report together with the financial statements of Grant Thornton UK LLP (the LLP) and its subsidiary entities (together the Group) for the year ended 30 June 2016.
PRINCIPAL ACTIVITY The principal activity N MORRISON - Partnership Oversight The Limited Liability Partnerships of the LLP and the Group is the provision Board (appointed 1 July 2015) (Accounts and Audit) (Application of audit, tax and advisory services in of Companies Act 2006) Regulations P SECRETT - Partnership Oversight the UK. 2008 (the ‘2008 Regulations’) require the Board (appointed 1 July 2016) members to prepare financial statements DESIGNATED MEMBERS The designated MEMBERS’ DRAWINGS AND THE for each financial year. Under the law members during the year ended 30 June SUBSCRIPTION AND REPAYMENT the members have elected to prepare 2016, and those who have been appointed OF MEMBERS’ CAPITAL The LLP consolidated financial statements in or resigned subsequently, are as follows: operates a drawings policy based on accordance with International Financial S V ROMANOVITCH - CEO a prudent estimate of budgeted profits. Reporting Standards as adopted by the (from 1 July 2015) Drawings are restricted to prudent European Union (IFRSs), and solus entity levels, taking into account working capital financial statements under Financial M R BYERS - Strategic Leadership performance, until the results for the Reporting Standard 101 “Reduced Team Member (appointed 1 July 2015) year and individual members’ allocations Disclosure Framework”. The financial K J EDDY - Strategic Leadership Team have been determined. The Membership statements are required by law to give Member (appointed 1 July 2015) Agreement provides a framework for a true and fair view of the state of affairs further restriction of drawings under of the Group and the LLP and of the profit R HANNAH - Strategic Leadership circumstances where the cash or loss for that period. In preparing these Team Member requirements of the business need financial statements, the members are S J JONES - Strategic Leadership to take priority over the cash needs required to: Team Member of the members. • select suitable accounting policies N PICKAVANCE - Strategic Leadership Members’ capital requirements are and then apply them consistently Team Member (appointed 1 August 2015) determined from time to time by the • make judgements and accounting CEO based on the short, medium and S B BEVAN - Partnership Oversight estimates that are reasonable long term needs of the business. There Board (appointed 1 July 2015) and prudent are two levels of capital contribution K L CAMPBELL-WILLIAMS - Partnership depending on the member’s number of • state whether applicable IFRSs for the Oversight Board (appointed 1 July 2016) profit sharing units although members consolidated financial statements, and may opt to contribute up to the higher UK Accounting Standards for the solus P FLATLEY - Partnership Oversight Board level. Whilst the Membership Agreement entity, have been followed, subject to T D JAMES - Partnership Oversight Board provides power to the CEO to repay a any material departures disclosed and member’s capital before retirement, explained in the financial statements T J W LINCOLN - Partnership such discretion is only exercised in • prepare the financial statements on Oversight Board exceptional cases. the going concern basis unless it is S MASLIN - Partnership Oversight STATEMENT OF MEMBERS’ inappropriate to presume that the LLP Board (resigned 30 June 2016) RESPONSIBILITIES IN RESPECT or the Group will continue in business. M A M MERALI - Partnership OF THE FINANCIAL STATEMENTS Oversight Board The members are responsible for preparing the Members’ Report and S J MILLS - Partnership Oversight Board the financial statements in accordance with applicable law and regulations. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 14
The members are responsible for keeping The members are responsible for the adequate accounting records that disclose maintenance and integrity of the corporate with reasonable accuracy at any time the and financial information included on the financial position of the Group and the LLP’s website. Legislation in the United LLP and enable them to ensure that the Kingdom governing the preparation and financial statements comply with the 2008 dissemination of financial statements may Regulations. They are also responsible for differ from legislation in other jurisdictions. safeguarding the assets of the LLP and The members’ responsibilities set out hence for taking reasonable steps for the above are discharged by the Designated prevention and detection of fraud and Members on behalf of the members. other irregularities. On behalf of the members. The members confirm that: • so far as each member is aware, there is no relevant audit information of which the LLP’s auditor is unaware • the members have taken all the SIMON JONES steps that they ought to have taken as members in order to make themselves PARTNER – STRATEGIC LEADERSHIP TEAM aware of any relevant audit information 6 OCTOBER 2016 and to establish that the auditors are aware of that information. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 15
4. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GRANT THORNTON UK LLP
We have audited the financial statements of Grant Thornton UK LLP for the year ended 30 June 2016 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
RESPECTIVE RESPONSIBILITIES OF we have agreed to include in our report, OVERVIEW OF THE SCOPE OF MEMBERS AND AUDITOR As explained and for no other purpose. To the fullest OUR AUDIT Our audit scope included more fully in the Statement of members’ extent permitted by law, we do not accept an audit of the group financial statements responsibilities in respect of the financial or assume responsibility to anyone other of Grant Thornton UK LLP. All audit work statements set out on pages 13 and 14, than the partnership and the partnership’s on subsidiary undertakings undertaken the members are responsible for the members as a body for our audit work, for the purposes of our group audit preparation of the financial statements for this report, or for the opinions we opinion was performed by the group and for being satisfied that they give have formed. audit team at the group’s main a true and fair view. finance centre in Northampton. SCOPE OF THE AUDIT OF THE FINANCIAL Our responsibility is to audit and express STATEMENTS A description of the We identified and tested certain controls an opinion on the financial statements scope of an audit of financial statements over key financial systems identified in accordance with applicable law and is provided on the Financial Reporting as part of our risk assessment, including International Standards on Auditing (UK Council’s website at www.frc.org.uk/ a review of general IT controls, the and Ireland). Those standards require auditscopeukprivate. accounts production process, and us to comply with the Auditing Practices controls addressing critical accounting AUDITOR COMMENTARY The members Board’s Ethical Standards for Auditors. matters. From this work, we sought have engaged us to include within our This report is made solely to the to place reliance on the group’s auditor’s report commentary providing members of the partnership, as a body, internal controls wherever possible. an overview of: in accordance with Chapter 3 of Part 16 We undertook substantive testing of the Companies Act 2006, as applied • the scope of our audit; on significant transactions, balances, by regulations 39 and 40 of the Limited and disclosures, the extent of which • our application of the concept of Liability Partnerships (Accounts and Audit) was based on various factors such materiality in planning and performing (Application of Companies Act 2006) as our overall assessment of the our audit; and Regulations 2008. Our audit work has control environment, the effectiveness been undertaken so that we might state • the assessed risks of material of controls over individual systems, to the members those matters we are misstatement that were identified by and the management of specific risks. required to state to them in an auditor’s us and which had the greatest effect report and those additional matters that on our audit. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 16
OUR APPLICATION OF MATERIALITY of the members in assessing the financial OUR ASSESSMENT OF RISKS OF We apply the concept of materiality performance of the group. We determined MATERIAL MISSTATEMENT In arriving at in planning and performing our audit, materiality for the consolidated financial our audit opinion, the risks that had the in evaluating the effect of identified statements as a whole to be £6.4m (2015: greatest effect on our audit, and the key misstatements on the financial £7.7m), representing approximately procedures we applied to address them, statements, and in forming our audit 10% of the profit before members’ are set out below. Our comments below opinion. The level of materiality we remuneration and profit shares. should be read in conjunction with the set is based on our assessment of members’ description of these areas on We agreed with the Risk & Audit the magnitude of misstatements that, pages 36 to 37. Our audit procedures Committee that we would report to individually or in aggregate, could relating to these risks were designed in that committee all identified corrected reasonably be expected to have the context of our audit opinion as a and uncorrected audit differences influence on the economic decisions whole, and not to express an opinion in excess of £0.19m (2015: £0.23m) of the users of the financial statements. on individual transactions, account (representing 3% of financial statement balances, or disclosures. We established materiality by reference to materiality) together with differences the profit before members’ remuneration below that threshold that, in our and profit shares, which we consider to view, warranted reporting on be one of the principal considerations qualitative grounds.
REVENUE RECOGNITION AND & Reorganisation (R&R) practice has a • testing the integrity of revenue THE VALUE OF UNBILLED WORK higher concentration of such contracts recognition models utilised for complex and accounts for 73% of amounts engagements, such as those in the THE RISK: The group’s accounting policy recoverable on contracts. The level R&R practice; in respect of revenue recognition is set of uncertainty is also considered to be out in the accounting policy notes on • assessing the related internal control higher in the early stages of a long term ‘Revenue’ and ‘Rendering of services’ environment, including testing certain engagement, and estimated profits on on pages 30 and 31. Unbilled work is controls that we considered to be key long term engagements are discounted included on the balance sheet as ‘Amounts in the determination of revenue to based on stage of completion to reflect recoverable on contracts’ within Trade be recognised; and this uncertainty. and other receivables. The group’s • analytical procedures, enquiry commentary on the related judgements Reflecting the judgemental nature of the of engagement teams and and estimates is set out on page 37 under assessments required by engagement management, and corroboration ‘Revenue recognition’. Under this policy, teams and the complex nature of some of explanations provided. the amount of revenue recognised in a contractual arrangements, we have year will represent the fair value of the identified revenue recognition as Substantive sampling procedures group’s entitlement to consideration in a significant risk that requires special included, but were not limited to: respect of professional services provided audit consideration. • selection of a sample of engagements, in that year. In determining the entitlement OUR RESPONSE: Our audit procedures focusing on but not limited to to consideration, engagement teams over revenue recognition and unbilled longer term and more complex estimate both the proportion of each work included general procedures on engagements including large GIA engagement that is complete at the year the methodology adopted and related practice assignments; end, and the total consideration expected control environment and control to be received under the engagement. • for each sample engagement, procedures, and substantive testing assessing the right to consideration Some engagements, such as those on a sample of engagements. by reference to contractual terms; and that are longer term or that have General procedures included, but were complex contractual criteria determining • discussing and challenging the not limited to: entitlement to revenue, have a higher assumptions and estimates applied degree of uncertainty over the level of • considering the appropriateness of by engagement teams in determining billable fees and/or assignment costs, the methodology adopted, including the level of revenue recognised. and hence over profitability. The Recovery the application of early-stage discounting of profit recognition on longer term engagements; Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 17
OUR FINDINGS: We concluded that No significant deficiencies in the operation the methodology and models used of related controls were detected that in estimating the level of revenue required us to revise the nature and/or and the valuation of unbilled work were scope of planned audit procedures. appropriate. We consider the judgement On the basis of our audit procedures, exercised in the deferral of revenue we consider that the estimates applied relating to the risk of retrospective result in a consistent and appropriate adjustment to billed revenue on one level of revenue and unbilled work large contract to be overly prudent, recognised in the financial statements. and recommended an immaterial adjustment to reduce the deferral.
PROFESSIONAL NEGLIGENCE CLAIMS OUR RESPONSE: Our audit procedures OUR FINDINGS: We found the nature and included, but were not limited to: level of insurance held to be consistent THE RISK: The group’s accounting policy with the provision methodology. We did in respect of professional claims is set • confirming the nature and level not identify any significant deficiencies out in the accounting policy notes on of insurance in place by reference in the operation of the professional claim ‘Professional negligence claims provisions’ to insurance certification, and notification and identification procedures. on page 34. The group’s commentary on considering the financial strength Based on our audit work on claims in the related judgements and estimates is of the insurance providers; progress and claims settled during the set out on page 36 under ‘Professional • reviewing the nature and level year, and taking into account information negligence claims provisions’. of insurance provision in place available to management, we consider The group makes a provision on the and considering the impact on that appropriate judgement has been balance sheet for regulatory matters the provision methodology; exercised in determining the level of and for uninsured and self-insured costs provision made. • assessing the professional for settling negligence claims as ‘Claims claim notification and provisions’ within ‘Provisions’, as set out identification procedures; in note 19. The determination of provisions required is highly judgemental. Generally, • consideration of a sample of claims the level of provision in respect of claims in progress, reviewing publicly available considered to have merit is limited to the information and information held insurance excess plus any self-insured in-house, and challenging the group’s amount. The level of provision for legal counsel on the level of provision regulatory matters is determined through made; and assessment on a case by case basis. • considering the outturn of claims A claim with a value exceeding the settled during the year that were group’s insurance cover, or a claim that provided for in prior years. is not covered by the group’s insurance, could require an additional and potentially significant provision to be made which, in turn, could impact the ability of the group to continue as a going concern. We have therefore identified the provisioning for professional claims and regulatory matters as a significant risk requiring special audit consideration. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 18
PENSION SCHEMES AND OUR RESPONSE: Our audit procedures OUR FINDINGS: Based on our audit PARTNERS’ ANNUITIES included, but were not restricted to: procedures, we found the actuarial assumptions to be both balanced and THE RISK: The group’s accounting • assessing the qualification and consistent with the expectations of policy in respect of pension schemes objectivity of the Grant Thornton our internal actuarial specialists when and partners’ annuities is set out in internal actuarial team, and the considered individually and when taken the accounting policy notes on ‘Post- scope of their work; as a suite of assumptions. For the employment benefits and short-term • reviewing the handover arrangements partners’ annuities arrangements, as employee benefits’ on page 35. from the previous third party in the prior year, we recommended the The group’s commentary on the actuarial advisors; use of a discount rate consistent with related judgements and estimates is that adopted for the pension schemes, set out on page 36 under ‘Defined • in conjunction with our internal and note that an adjustment was made benefit pension schemes’ and actuarial specialists, considering to adopt this recommendation. We ‘Retirement annuities to partners’. the appropriateness of the valuation consider the valuation methodologies methodologies and challenging the The pension arrangements include to be appropriate. No exceptions were actuarial team on the appropriateness two defined benefit schemes for which noted from our testing of scheme assets. of the valuation assumptions; a significant provision has been included We consider that the related disclosures on the group balance sheet as a ‘Pension • agreeing scheme asset values to are appropriate and adequately disclose and other employee obligations’. The the underlying asset manager the significant degree of sensitivity of measurement of the pension scheme statements; and the actuarial assumptions. liabilities in accordance with IAS 19 is • reviewing the associated financial performed by Grant Thornton’s internal statement disclosures in the context actuarial team, and is subject to of requirements and best practice. complex assumptions that involve significant judgement. Details of the assumptions used and the calculation of the liabilities are included in note 18 ‘Post-employment benefits and short-term employee benefits. The group’s obligations under partners’ annuity arrangements also give rise to a significant provision which is included on the group balance sheet as ‘Former members’ annuities’ within ‘Provisions for liabilities’, as set out in note 19. The calculation of the liability in respect of these obligations is performed by Grant Thornton’s internal actuarial team and is subject to complex assumptions that involve significant judgement. We have therefore identified liabilities in respect of the defined benefit pension schemes and the partners’ annuity arrangements as a significant risk requiring special audit consideration. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 19
GOING CONCERN As noted in the OPINION ON THE FINANCIAL MATTERS ON WHICH WE ARE REQUIRED Business and Financial Review to the STATEMENTS In our opinion the TO REPORT BY EXCEPTION We have financial statements, the members financial statements: nothing to report in respect of the have assessed whether it is appropriate following matters where the Companies • give a true and fair view of the state to prepare the financial statements Act 2006 as applied to limited liability of the group’s affairs as at 30 June on a going concern basis. The going partnerships requires us to report to 2016 and of the group’s profit for concern basis presumes that the group you if, in our opinion: the year then ended; will continue in operational existence for • adequate accounting records have the foreseeable future (being a period • have been properly prepared in not been kept by the group, or returns of at least one year from the signature accordance with IFRSs as adopted adequate for our audit have not been date of the financial statements) without by the European Union; and received from branches not visited a significant curtailment of operations. • have been prepared in accordance by us; or We reviewed the members’ assessment with the requirements of the Companies and conclusion, and concluded that • the group’s financial statements are Act 2006 as applied to limited liability the use of the going concern basis of not in agreement with the accounting partnerships by the Limited Liability preparation is appropriate. Because records and returns; or Partnerships (Accounts and Audit) not all future events or conditions can (Application of Companies Act 2006) • we have not received all the be foreseen, these conclusions are not Regulations 2008. information and explanations a guarantee that the group will be able we require for our audit. to continue as a going concern. OTHER MATTER We have reported separately on the parent company financial statements of Grant Thornton UK LLP for the year ended 30 June 2016.
WILLIAM NEALE BUSSEY (SENIOR STATUTORY AUDITOR) FOR AND ON BEHALF OF MAZARS LLP CHARTERED ACCOUNTANTS AND STATUTORY AUDITOR TOWER BRIDGE HOUSE ST KATHARINE’S WAY LONDON E1W 1DD 6 OCTOBER 2016 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 20
5. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
30 JUNE 2016 30 JUNE 2015 NOTE £’000 £’000
Revenue 533,785 520,544 Other external charges: client expenses and disbursements (26,615) (24,259) Net revenue 507,170 496,285 Other income 7 1,152 1,009 Operating expenses 6 (430,944) (407,654) Operating profit 77,378 89,640 Share of profit from equity accounted investments 10 3,083 - Finance costs 21 (8,817) (8,342) Finance income 21 1,131 970 Loss on sale of property plant and equipment 22 (384) (173) Other financial items 22 (153) (131) Profit before tax and members’ remuneration 72,238 81,964 Tax expense 23 (3,986) (3,377) Profit for the year from continuing operations before members’ remuneration 68,252 78,587 Members’ remuneration charged as an expense 25 (6,162) (9,521) Profit for the year available for discretionary division among members 62,090 69,066 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 21
30 JUNE 2016 30 JUNE 2015 NOTE £’000 £’000
Profit for the year available for discretionary division among members 62,090 69,066
OTHER COMPREHENSIVE INCOME:
Items that will not be reclassified subsequently to profit or loss Remeasurement gains/(losses) on defined benefit obligation 18 26,493 (32,008) Items that may be reclassified subsequently to profit or loss Available-for-sale financial assets -current year gains 66 154 Exchange differences on translating foreign operations 977 1,139 Other comprehensive income for the year, net of tax 27,536 (30,715) Total comprehensive income for the year 89,626 38,351 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 22
6. CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 ASSETS NOTE £’000 £’000 £’000
NON-CURRENT ASSETS Goodwill 11 13,096 13,076 12,506 Other intangible assets 12 5,106 2,703 979 Property, plant and equipment 13 26,623 25,526 26,226 Investments accounted for using the equity method 10 19,516 - - Other long term financial assets 15 7,950 8,533 10,179 72,291 49,838 49,890
CURRENT ASSETS Trade and other receivables 16 212,645 207,582 209,939 Derivative financial instruments 15 - 27 158 Cash and cash equivalents 17 11,404 24,927 20,633 Current assets 224,049 232,536 230,730 296,340 282,374 280,620 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 23
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 EQUITY AND LIABILITIES NOTE £’000 £’000 £’000
EQUITY Members’ other interests – other reserves classified as equity 25 (71,701) (97,195) (69,386) Translation reserve 25 1,917 940 (199) Revaluation reserve 25 (322) (388) (542) Total equity (70,106) (96,643) (70,127)
LIABILITIES Non-current liabilities Loans and other debts due to members after more than one year 36 31 80 Pension obligation 18 110,991 137,800 106,939 Borrowings 15 11,647 14,842 17,782 Provisions 19 39,283 40,826 43,414 161,957 193,499 168,215
CURRENT LIABILITIES Loans and other debts due to members within one year Members’ capital classified as a liability 25 42,975 40,575 44,475 Other amounts 25 10,662 9,557 7,312 53,637 50,132 51,787 Other current liabilities Borrowings 15 28,825 18,537 19,914 Trade and other payables 20 120,130 115,121 109,305 Derivative financial instruments 15 127 - - Current tax liabilities 1,770 1,728 1,526 204,489 185,518 182,532
Total liabilities 366,446 379,017 350,747
Total equity and liabilities 296,340 282,374 280,620
The financial statements were approved by the Partnership Oversight Board and authorised for issue on 6 October 2016
Sacha Romanovitch Simon Jones Chief Executive Officer Partner – Strategic Leadership Team Registered no. 0C307742 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 24
7. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
REVALUATION TRANSLATION OTHER TOTAL RESERVE RESERVE RESERVES EQUITY £’000 £’000 £’000 £’000
Balance at 1 July 2015 (388) 940 (97,195) (96,643) Allocated profits in respect of the prior year - - (63,756) (63,756) Tax adjustments on payment of annuities to former members - - 667 667 Transactions with members - - (63,089) (63,089)
Profit for the financial year available for discretionary division among members - - 62,090 62,090 Other comprehensive income 66 977 26,493 27,536 Total comprehensive income for the year 66 977 88,583 89,626 Balance at 30 June 2016 (322) 1,917 (71,701) (70,106) Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 25
REVALUATION TRANSLATION OTHER TOTAL RESERVE RESERVE RESERVES EQUITY £’000 £’000 £’000 £’000
Balance at 1 July 2014 (542) (199) (69,386) (70,127) Allocated profits in respect of the prior year - - (65,601) (65,601) Tax adjustments on payment of annuities to former members - - 734 734 Transactions with members - - (64,867) (64,867)
Profit for the financial year available for discretionary division among members - - 69,066 69,066 Other comprehensive income 154 1,139 (32,008) (30,715) Total comprehensive income for the year 154 1,139 37,058 38,351 Balance at 30 June 2015 (388) 940 (97,195) (96,643) Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 26
8. CONSOLIDATED STATEMENT OF CASH FLOW
30 JUNE 2016 30 JUNE 2015 NOTE £’000 £’000
OPERATING ACTIVITIES Profit for the year available for discretionary division among members 62,090 69,066 Members’ remuneration charged as an expense 6,162 9,521 Taxation 3,986 3,377 Non-cash adjustments 24 9,601 11,978 Contributions to defined benefit plans (5,461) (6,453) Net changes in working capital 24 (11,169) 1,484 Net cash from operations 65,209 88,973 Taxes paid (3,944) (3,175) Net cash from operating activities 61,265 85,798
INVESTING ACTIVITIES Purchase of property, plant and equipment (3,438) (2,369) Proceeds from disposal of property, plant and equipment 538 561 Purchase of other intangible assets (3,264) (1,397) Acquisition of subsidiaries, net of cash acquired - (638) Purchase of investments (7,884) (17,437) Proceeds from disposal of investments 8,533 19,168 Interest received 1,131 756 Net cash used in investing activities (4,384) (1,356) Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 27
CONSOLIDATED STATEMENT 30 JUNE 2016 30 JUNE 2015 OF CASH FLOW (CONTINUED) NOTE £’000 £’000
FINANCING ACTIVITIES Proceeds from borrowings 40,473 - Repayment of borrowings (33,379) (4,490) Interest paid (2,923) (2,487) Payments on behalf of members (66,999) (64,751) Capital contribution by members 7,350 2,750 Annuity payments to former partners (90) (2,710) Repayments to former members (15,496) (8,612) Net cash used in financing activities (71,064) (80,300)
Net change in cash and cash equivalents (14,183) 4,142 Cash and cash equivalents at the beginning of the year 24,927 20,633 Exchange differences on cash and cash equivalents 660 152 Cash and cash equivalents at the end of the year 11,404 24,927 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 28
9. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS The consolidated financial statements 4. CHANGES IN for the year ended 30 June 2016 The principal activities of Grant Thornton ACCOUNTING POLICIES (including comparatives) were UK LLP (the LLP) and its subsidiary entities approved and authorised for issue NEW AND REVISED STANDARDS THAT (together the Group) are the provision by the Partnership Oversight Board ARE EFFECTIVE FOR ANNUAL PERIODS of audit, tax and advisory services on 6 October 2016. BEGINNING ON OR AFTER 1 JULY 2015 within the UK. As these are the first financial statements For all periods up to and including 30 prepared under IFRS, all accounting 2. GENERAL INFORMATION June 2015, the Group has prepared its standards effective for annual periods AND STATEMENT OF financial statements under UK GAAP. beginning on or after 1 July 2015 have COMPLIANCE WITH IFRSs These financial statements for the year been applied consistently to the current ended 30 June 2016 are the first that The LLP, the Group’s ultimate parent year and the comparatives. the Group has prepared in accordance entity, is a limited liability partnership with IFRS. Note 30 explains how the STANDARDS, AMENDMENTS AND registered in England and Wales. Its Group has applied IFRS on transition. INTERPRETATIONS TO EXISTING registered office and principal place of STANDARDS THAT ARE NOT YET business is Grant Thornton House, Melton 3. GOING CONCERN EFFECTIVE AND HAVE NOT BEEN Street, Euston Square, London, NW1 2EP. ADOPTED EARLY BY THE GROUP After reviewing the Group’s forecasts At the date of authorisation of these The consolidated financial statements and projections, the members have a of the Group have been prepared in financial statements, certain new reasonable expectation that the Group standards, and amendments to existing accordance with International Financial has adequate resources to continue in Reporting Standards (IFRSs) and IFRS standards have been published by the operational existence for the foreseeable International Accounting Standards Intrepretation Committee interpretations, future and therefore continues to adopt as adopted by the European Union Board (IASB) that are not yet effective, the going concern basis in preparing and have not been adopted early by the and with those parts of the Companies its consolidated financial statements. Act 2006 as applied by LLPs and the Group. Information on those expected relevant principles of the Statement to be relevant to the Group’s financial of Recommended Practice (SORP), statements is provided below. Accounting by Limited Liability Management anticipates that all relevant Partnerships, issued in July 2014, pronouncements will be adopted in the applicable to companies reporting Group’s accounting policies for the first under IFRS. period beginning after the effective date of the pronouncement and EU endorsement. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 29
IFRS 9 ‘FINANCIAL INSTRUMENTS’ (2014) IFRS 15 ‘REVENUE FROM CONTRACTS 5. SUMMARY OF The IASB has published IFRS 9 ‘Financial WITH CUSTOMERS’ IFRS 15 presents ACCOUNTING POLICIES Instruments’ (2014), representing the new requirements for the recognition completion of its project to replace IAS of revenue, replacing IAS 18 ‘Revenue’, OVERALL CONSIDERATIONS 39 ‘Financial Instruments: Recognition IAS 11 ‘Construction Contracts’, IFRIC The consolidated financial statements and Measurement’. The new standard 13 ‘Customer Loyalty Programmes’, have been prepared using the significant introduces extensive changes to IAS IFRIC 15 ‘Agreements for the Construction accounting policies and measurement 39’s guidance on the classification of Real Estate’, IFRIC 18 ‘Transfers of bases summarised below. and measurement of financial assets Assets from Customers’, and SIC‑31 BASIS OF CONSOLIDATION The Group and introduces a new ‘expected credit ‘Revenue-Barter Transactions Involving financial statements consolidate those loss’ model for the impairment of Advertising Services’. The new standard of the LLP and all entities over which financial assets. establishes a control-based revenue the LLP has control as of 30 June 2016. recognition model and provides additional Management has started to assess All Group entities have a reporting guidance in many areas not covered the impact of IFRS 9 but is not yet date of 30 June. in detail under existing IFRSs, including in a position to provide quantified how to account for arrangements with All transactions and balances information. At this stage, the main multiple performance obligations, between Group entities are eliminated areas of expected impact are as follows: variable pricing, customer refund on consolidation, including unrealised • the classification and measurement of rights, supplier repurchase options gains and losses on transactions between the Group’s financial assets will need to and other common complexities. Group entities. Where unrealised losses be reviewed based on the new criteria on intra-group asset sales are reversed IFRS 15 is effective for annual reporting that consider the assets’ contractual on consolidation, the underlying asset is periods beginning on or after 1 January cash flows and the business model in also tested for impairment from a group 2018, subject to EU endorsement. This which they are managed perspective. Amounts reported in the will be effective for the first time in the financial statements of Group entities have year ending 30 June 2019. Management • an expected credit loss-based been adjusted where necessary to ensure has started to assess the impact of IFRS impairment may need to be recognised consistency with the accounting policies 15 but is not yet in a position to provide on the Group’s trade receivables adopted by the Group. quantified information. • it will no longer be possible to Profit or loss and other comprehensive IFRS 16 ‘LEASES’ IFRS 16 sets out measure equity investments at cost income of Group entities acquired the principles for the recognition, less impairment and all such or disposed of during the year are measurement, presentation and investments will instead be measured recognised from the effective date disclosure of leases, replacing IAS at fair value. Changes in fair value will of acquisition, or up to the effective 17 ‘Leases’. The objective of the new be presented in profit or loss unless date of disposal, as applicable. the Group makes an irrevocable standard is to enable lessees to enable designation to present them in users to assess the effect that leases other comprehensive income have on the financial position, financial
performance and cash flows of an entity. • if the Group elects to take the fair Under the new standard most operating value option for certain financial leases, included in note 14, will be liabilities, fair value movements will included on the balance sheet. be presented in other comprehensive income to the extent those changes IFRS 16 is effective for annual reporting relate to the Group’s own credit risk. periods beginning on or after 1 January 2019, subject to EU endorsement. This will IFRS 9 is effective for annual reporting be effective for the first time in the year periods beginning on or after 1 January ending 30 June 2020. Management has 2018, subject to EU endorsement. started to assess the impact of IFRS 16 This will be effective for the first time but is not yet in a position to provide in the year ending 30 June 2019. quantified information. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 30
BUSINESS COMBINATIONS The Group FOREIGN CURRENCY TRANSLATION the average rate over the reporting period. applies the acquisition method in Exchange differences are charged or FUNCTIONAL AND PRESENTATION accounting for business combinations. credited to other comprehensive income CURRENCY The consolidated financial The consideration transferred by and recognised in the currency translation statements are presented in Pounds the Group to obtain control of a business reserve in equity. On disposal of a foreign Sterling (£), which is also the functional is calculated as the sum of the acquisition- operation, the related cumulative currency of the LLP, and have been date fair values of assets transferred translation differences recognised presented in round thousands (£’000). and liabilities incurred by the Group, in equity are reclassified to other which includes the fair value of any FOREIGN CURRENCY TRANSACTIONS comprehensive income and are asset or liability arising from a contingent AND BALANCES Foreign currency recognised as part of the gain consideration arrangement. Acquisition transactions are translated into the or loss on disposal. costs are expensed as incurred. functional currency of the respective REVENUE Revenue arises from the Group entity, using the exchange Assets acquired and liabilities assumed rendering of services. It is measured rates prevailing at the dates of the are measured at their acquisition-date at the fair value of consideration received transactions (spot exchange rate). fair values. or receivable, excluding sales taxes, Foreign exchange gains and losses and reduced by any rebates and trade Control of a business is identified when resulting from the settlement of such discounts allowed. the Group has power over the investee; transactions and from the remeasurement exposure, or rights to variable return of monetary items denominated in foreign The Group often enters into sales from its involvement with the investee; currency at year-end exchange rates transactions involving a range of the and has the ability to use its power over are recognised in profit or loss. Group’s services. The Group applies the investee to affect the amounts of its the revenue recognition criteria Non-monetary items are not retranslated returns. Control is reassessed wherever set out below to each separately at year-end and are measured at historical facts and circumstances indicate that identifiable component of the sales cost (translated using the exchange there may be a change in any of these transaction. The consideration received rates at the transaction date), except elements of control. from these multiple-component for non-monetary items measured at transactions is allocated to each INVESTMENTS IN ASSOCIATES fair value which are translated using separately identifiable component in AND JOINT VENTURES Investments the exchange rates at the date when proportion to its relative fair value. in associates and joint ventures are fair value was determined. accounted for using the equity method. Full provision is made for losses FOREIGN OPERATIONS In the Group’s on contracts in the year in which the They are initially recognised at cost financial statements, all assets, liabilities loss is first foreseen, these losses and subsequently the carrying amount and transactions of Group entities with are categorised as ‘Provisions for of the investment in associates and a functional currency other than the foreseeable losses’ within trade joint ventures is increased or decreased Pounds Sterling are translated into and other payables. to recognise the Group’s share of the Pounds Sterling upon consolidation. profit or loss and other comprehensive The functional currency of the entities income of the associate and joint venture, in the Group has remained unchanged adjusted where necessary to ensure during the reporting period. consistency with the accounting policies On consolidation, assets and liabilities of the Group. have been translated into Pounds Sterling Unrealised gains and losses on at the closing rate at the reporting date. transactions between the Group and Goodwill and fair value adjustments arising its associates and joint ventures are on the acquisition of a foreign entity have eliminated to the extent of the Group’s been treated as assets and liabilities of interest in those entities. Where unrealised the foreign entity and translated into losses are eliminated, the underlying Pounds Sterling at the closing rate. asset is also tested for impairment. Income and expenses have been translated into Pounds Sterling at Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 31
RENDERING OF SERVICES The Group OPERATING EXPENSES Operating • the Group has the ability to use generates revenues from a wide variety expenses are recognised in profit or sell the software of contracts for the provision of audit, or loss upon utilisation of the service • the software will generate probable tax and advisory services. Revenue or as incurred. future economic benefits. is recognised when the stage of BORROWING COSTS Borrowing completion of the contract, the Development costs not meeting these costs directly attributable to the consideration to be received and criteria for capitalisation are expensed acquisition, construction or production the costs incurred to complete the as incurred. of a qualifying asset are capitalised during contract can be measured reliably and the period of time that is necessary to Directly attributable costs include it is probable that consideration will be complete and prepare the asset for its employee costs incurred on software received. It is measured by reference intended use or sale. Other borrowing development along with an appropriate to the stage of completion of the costs are expensed in the period in portion of relevant overheads. contract at the estimated fair value which they are incurred and reported of the consideration to be received. SUBSEQUENT MEASUREMENT in finance costs. Stage of completion requires estimates All finite-lived intangible assets, including to be made as to the remaining time and GOODWILL Goodwill represents the capitalised internally developed software, costs to be incurred on a contract-by- future economic benefits arising from are accounted for using the cost model contract basis. This consideration a business combination that are not whereby capitalised costs are amortised represents amounts chargeable individually identified and separately on a straight-line basis over their to clients, including expenses recognised. Goodwill is carried at cost estimated useful lives. Residual values and disbursements, but excluding less accumulated impairment losses. and useful lives are reviewed at each value added tax. Refer to note 11 for a description of reporting date. The following lives impairment testing procedures. are applied: Revenue is generally recognised as contract activity progresses; although Where the fair value of identifiable • Software: 4-5 years where it is contingent on events outside assets, liabilities and contingent liabilities Any capitalised internally developed our control, it is recognised when the exceed the fair value of consideration software that is not yet complete is not contingent event occurs. paid, the excess is credited in full to the amortised but is subject to impairment consolidated statement of comprehensive Revenue not billed to clients is testing as described in note 11. income on the acquisition date. This is included in amounts recoverable known as a gain on bargain purchase. Amortisation has been included within on contracts, within trade and other depreciation, amortisation and impairment receivables. Payments on account OTHER INTANGIBLE ASSETS of non-financial assets. in excess of the relevant amount INITIAL RECOGNITION OF OTHER of revenue are included in excess Subsequent expenditure on maintenance INTANGIBLE ASSETS payments received on account is expensed as incurred. within trade and other payables. INTERNALLY DEVELOPED SOFTWARE When an intangible asset is disposed of, Expenditure on the research phase of INTEREST AND DIVIDENDS Interest the gain or loss on disposal is determined projects is recognised as an expense income and expenses are reported as the difference between the proceeds as incurred. Costs that are directly on an accrual basis using the effective and the carrying amount of the asset, attributable to a project’s development interest method. Dividends, other than and is recognised in profit or loss within phase are recognised as intangible those from investments in associates other income or other expenses. assets, provided they meet the and joint ventures, are recognised at following recognition requirements: the time the right to receive payment is established. Dividends from investments • the development costs can be in associates and joint ventures are measured reliably reflected in the equity accounting of • the project is technically and these investments. commercially feasible • the Group intends to and has sufficient resources to complete the project Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 32
PROPERTY, PLANT AND EQUIPMENT For leases of land and buildings, Cash-generating units to which Property, plant and equipment are initially the minimum lease payments are first goodwill has been allocated are tested recognised at acquisition cost, including allocated to each component based on for impairment at least annually. All other any costs directly attributable to bringing the relative fair values of the respective individual assets or cash-generating the assets to the location and condition lease interests. Each component is units are tested for impairment whenever necessary for them to be capable of then evaluated separately for possible events or changes in circumstances operating in the manner intended by treatment as a finance lease, taking indicate that the carrying amount may the Group’s management. They are into consideration the fact that land not be recoverable. subsequently measured at cost less normally has an indefinite economic life. An impairment loss is recognised for accumulated depreciation and impairment Depreciation methods and useful lives the amount by which the asset’s (or losses. Property, plant and equipment for assets held under finance leases cash-generating unit’s) carrying amount categories: leasehold property and are described under property, plant exceeds its recoverable amount, which motor cars contains assets held and equipment. The interest element is the higher of fair value less costs of under finance leases. of lease payments is charged to profit disposal and value-in-use. To determine Depreciation is recognised on a straight- or loss, as finance costs over the the value-in-use, management estimates line basis to write down the cost less period of the lease. expected future cash flows from each estimated residual value. The following cash-generating unit and determines a The cost of incentives received in useful lives are applied: suitable discount rate in order to calculate connection with property leases are the present value of those cash flows. • leasehold property period of allocated over the lease term on a The data used for impairment testing the lease straight line basis, or to the period procedures are directly linked to the to the next break clause, if shorter. • furniture and equipment 5-8 years Group’s latest approved budget, adjusted OPERATING LEASES All other leases are as necessary to exclude the effects • office equipment 3-5 years treated as operating leases. Where the of future reorganisations and asset • motor cars 4 years. Group is a lessee, payments on operating enhancements. Discount factors are lease agreements are recognised as an determined individually for each cash- Material residual value estimates and expense on a straight-line basis over the generating unit and reflect current estimates of useful life are updated lease term. Associated costs, such as market assessments of the time value as required, but at least annually. maintenance and insurance, are expensed of money and asset-specific risk factors. Gains or losses arising on the disposal as incurred. Impairment losses for cash-generating of property, plant and equipment are IMPAIRMENT TESTING OF GOODWILL, units reduce first the carrying amount determined as the difference between OTHER INTANGIBLE ASSETS AND of any goodwill allocated to that cash- the disposal proceeds and the carrying PROPERTY, PLANT AND EQUIPMENT generating unit. Any remaining impairment amount of the assets and are recognised For impairment assessment purposes, loss is charged pro-rata to the other in the profit or loss. assets are grouped at the lowest levels assets in the cash-generating unit. With LEASED ASSETS for which there are largely independent the exception of goodwill, all assets are cash inflows (cash-generating units). As a subsequently reassessed for indications FINANCE LEASES Management applies result, some assets are tested individually that an impairment loss previously judgement in considering the substance for impairment and some are tested at recognised may no longer exist. An of a lease agreement and whether it cash-generating unit level. Goodwill is impairment loss is reversed if the asset’s transfers substantially all the risks and allocated to those cash-generating or cash-generating unit’s recoverable rewards incidental to ownership of the units that are expected to benefit amount exceeds its carrying amount. leased asset. Key factors considered from synergies of a related business include the length of the lease term in combination and represent the lowest relation to the economic life of the asset, level within the Group at which the present value of the minimum lease management monitors goodwill. payments in relation to the asset’s fair value, and whether the Group obtains ownership of the asset at the end of the lease term. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 33
FINANCIAL INSTRUMENTS LOANS AND RECEIVABLES Loans AFS FINANCIAL ASSETS AFS financial and receivables are non-derivative assets are non-derivative financial assets RECOGNITION, INITIAL MEASUREMENT financial assets with fixed or determinable that are either designated to this category AND DERECOGNITION Financial assets payments that are not quoted in an active or do not qualify for inclusion in any of and financial liabilities are recognised market. After initial recognition, these are the other categories of financial assets. when the Group becomes a party to the measured at amortised cost using the The Group’s AFS financial assets include contractual provisions of the financial effective interest method, less provision investments held by Fulwood Insurances instrument and are measured initially for impairment. Discounting is omitted Limited, the Groups insurance captive. at fair value adjusted for transaction where the effect of discounting AFS financial assets are measured at fair costs, except for those carried at fair is immaterial. The Group’s cash value. Gains and losses are recognised value through profit or loss which and cash equivalents, trade and in other comprehensive income and are measured initially at fair value. most other receivables fall into this reported within the revaluation reserve Subsequent measurement of financial category of financial instruments. within equity, except for interest and assets and financial liabilities is dividend income, impairment losses and described below. Individually significant receivables are foreign exchange differences on monetary considered for impairment when they Financial assets are derecognised when assets, which are recognised in profit are past due or when other objective the contractual rights to the cash flows or loss. When the asset is disposed evidence is received that a specific from the financial asset expire, or when of or is determined to be impaired, counterparty will default. Receivables the financial asset and substantially all the cumulative gain or loss recognised that are not considered to be individually the risks and rewards are transferred. in other comprehensive income is impaired are reviewed for impairment A financial liability is derecognised when reclassified from the equity reserve in groups, which are determined by it is extinguished, discharged, cancelled to profit or loss. reference to the industry and region or expires. of the counterparty and other shared CLASSIFICATION AND SUBSEQUENT CLASSIFICATION AND SUBSEQUENT credit risk characteristics. The impairment MEASUREMENT OF FINANCIAL LIABILITIES MEASUREMENT OF FINANCIAL ASSETS loss estimate is then based on recent The Group’s financial liabilities include For the purpose of subsequent historical counterparty default rates borrowings, trade and other payables measurement financial assets are for each identified group. and derivative financial instruments. classified into the following categories FINANCIAL ASSETS AT FVTPL Financial Financial liabilities are measured upon initial recognition: assets at FVTPL include financial assets subsequently at amortised cost using • loans and receivables that are either classified as held for the effective interest method except trading or that meet certain conditions for derivatives and financial liabilities • available for sale (AFS) financial assets and are designated at FVTPL upon initial designated at FVTPL, which are carried • financial assets at fair value through recognition. All derivative financial subsequently at fair value with gains or profit or loss (FVTPL). instruments fall into this category. losses recognised in profit or loss. All income and expenses relating to Assets in this category are measured at All interest-related charges and, if financial assets that are recognised in fair value with gains or losses recognised applicable, changes in an instrument’s profit or loss are presented within finance in profit or loss. The fair values of financial fair value that are reported in profit or costs, finance income or other financial assets in this category are determined loss are included within finance costs items, except for impairment of trade by reference to active market transactions or finance income. receivables which is presented within or using a valuation technique where other expenses. no active market exists. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 34
INCOME TAXES The income taxation PROFESSIONAL NEGLIGENCE CLAIM Consolidation of the results of certain payable on the LLP profits is the personal PROVISIONS Within the captive insurance subsidiary undertakings, the provision liability of the members, although payment subsidiary, provision is made at the best for annuities to current and former of such liabilities is administered by estimate for claims notified in relation members, pension scheme charges and the LLP on behalf of the members. to each complete underwriting year. the treatment of long leasehold interests Consequently, neither partnership In respect of open underwriting years, are all items which generate differences taxation nor related deferred taxation are provision is made for potential claims between profits calculated for the purpose accounted for in the financial statements. up to the value of specific claims notified of allocation and those reported within Sums set aside in respect of members’ or an amount equivalent to the level of the financial statements. Where such tax obligations are included in the balance premium income recognised, whichever differences arise, they have been included sheet within loans and other debts due is the greater. within other reserves in the balance sheet. to members or set against amounts Within the LLP, provision is made for Depreciation and profits or losses due from members as appropriate. the best estimate of claims notified to on disposal of cars used by members, Amounts identified as income taxation the captive insurance subsidiary up to the together with members’ other motor in these financial statements relate limit of the self-insured deductible amount. expenses, are charged through the to corporate subsidiaries. statement of comprehensive income All reasonable steps are taken to ensure in arriving at profit before members’ Tax expense recognised in profit or that the Group has appropriate information remuneration and profit shares. For profit loss comprises the sum of deferred regarding its claims exposures. However, sharing purposes, such members’ motor tax and current tax not recognised in given the uncertainty in establishing expenses are automatically charged to other comprehensive income or claims provisions, it is likely that the each member on the basis of specific directly in equity. final outcome will prove to be different costs incurred. Members’ fixed shares from the original liability provided. Calculation of current tax is based on tax of profits (excluding discretionary fixed rates and tax laws that have been enacted CASH AND CASH EQUIVALENTS Cash share bonuses) and interest earned on or substantively enacted by the end of the and cash equivalents comprise cash on members’ balances are also automatically reporting period. Deferred income taxes hand and demand deposits, together with allocated and, together with members’ are calculated using the liability method. other short-term, highly liquid investments motor expenses, are treated as members’ maturing within 90 days from the date remuneration charged as an expense Deferred tax assets are recognised of acquisition that are readily convertible to the statement of comprehensive to the extent that it is probable that into known amounts of cash and which income in arriving at profit available for the underlying tax loss or deductible are subject to an insignificant risk of discretionary division among members. temporary difference will be utilised changes in value. against future taxable income. This is The remainder of profit shares, which assessed based on the Group’s forecast DIVISIBLE PROFITS AND PARTNERS’ have not been allocated until after the of future operating results, adjusted AND MEMBERS’ REMUNERATION balance sheet date, are treated in these for significant non-taxable income and For an LLP, the basis of calculating financial statements as unallocated at expenses and specific limits on the profits for allocation may differ from the balance sheet date and included use of any unused tax loss or credit. the profits reflected through financial within equity reserves. statements prepared in compliance Deferred tax liabilities are generally with recommended practice, given the recognised in full, although IAS 12 established need to seek to focus profit ‘Income Taxes’ specifies limited allocation on ensuring equity between exemptions. As a result of these different generations and populations exemptions the Group does not recognise of members. deferred tax on temporary differences relating to goodwill, or to its investments in subsidiaries. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 35
COMPONENTS OF EQUITY Members’ DEFINED BENEFIT PLANS Under the RETIREMENT BENEFITS OF FORMER other interests – other reserves classified Group’s defined benefit plans, the MEMBERS AND PARTNERS OF THE as equity represents profits not yet amount of pension benefit that an PREDECESSOR FIRM LLP members allocated and differences between employee will receive on retirement is for the time being have a contractual reported profit and profit to be allocated defined by reference to the employee’s obligation to provide certain former and to members under the membership length of service and final salary. The legal current members and certain partners agreement. The principal differences obligation for any benefits remains with of the predecessor partnership with relate to retained profits in subsidiary the Group, even if plan assets for funding annuities following their retirement. entities and retirement annuities. the defined benefit plan have been set The obligation for all annuities remains aside. Plan assets may include assets Translation reserve represents exchange with the members for the time being specifically designated to a long-term differences charged or credited to other and the financial statements include benefit fund as well as qualifying comprehensive income on the translation obligations for retirement annuities insurance policies. of overseas operations. payable in the future to current and The liability recognised in the statement retired members. The obligation has Revaluation reserve represents the of financial position for defined benefit been discounted to its net present value. unrealised gains and losses on the plans is the present value of the defined The nature of the annuities contractually revaluation of investments. benefit obligation (DBO) at the reporting payable in the future to current members MEMBERS’ INTERESTS Members’ capital date less the fair value of plan assets. is such that no further rights will accrue to is repayable and is therefore classified those members based on further service. Management estimates the DBO as a liability. Other than in exceptional The obligation for annuities to former annually with the assistance of cases, it is not repaid until after members is included within provisions for actuaries. This is based on standard retirement. Because members may liabilities because the annuities carry life rates of inflation, salary growth rate and retire with less than one year’s notice contingent elements. The annuity provision mortality. Discount factors are determined and typically have their capital repaid has been actuarially calculated using a close to each year-end by reference to within one year of serving notice, discount rate based on Government bonds high quality corporate bonds that are members’ capital is shown as being and estimates of the expected payment denominated in the currency in which due within one year notwithstanding period covered by the annuities. the benefits will be paid and that have repayment could be made after more The obligation for annuities to current terms to maturity approximating the than one year at the discretion of the CEO. members is included within loans and terms of the related pension liability. other debts due to/(from) members. Amounts due to members after more Service cost on the Group’s defined than one year comprise provisions for New obligations granted to members on benefit plan is included in employee annuities to current members which their retirement and changes in estimates benefits expense. Employee contributions, are not payable within twelve months and assumptions in respect of existing all of which are independent of the of the balance sheet date. obligations, together with the unwinding number of years of service, are treated of the discount, are dealt with through POST-EMPLOYMENT BENEFITS AND as a reduction of service cost. Net interest the statement of comprehensive income. SHORT-TERM EMPLOYEE BENEFITS expense on the net defined benefit liability is included in finance costs. Gains and SHORT-TERM EMPLOYEE BENEFITS POST-EMPLOYMENT BENEFIT PLANS losses resulting from remeasurements Short-term employee benefits, including The Group provides post-employment of the net defined benefit liability are holiday entitlement, are current liabilities benefits through various defined included in other comprehensive income. included in pension and other employee contribution and defined benefit plans. obligations, measured at the undiscounted DEFINED CONTRIBUTION PLANS amount that the Group expects to pay The Group pays fixed contributions as a result of the unused entitlement. into group operated defined contribution pension schemes for the benefit of certain employees. The Group has no legal or constructive obligations to pay contributions in addition to its fixed contributions, which are recognised as an expense in the period that related employee services are received. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 36
PROVISIONS, CONTINGENT ASSETS SIGNIFICANT MANAGEMENT The next triennial valuation of the pension AND CONTINGENT LIABILITIES JUDGEMENTS IN APPLYING ACCOUNTING scheme will be at 30 June 2017 and the Provisions for legal disputes, commercial POLICIES AND ESTIMATION UNCERTAINTY scheme actuary will give consideration settlements, professional indemnity When preparing the financial statements, to the most appropriate mortality tables claims, dilapidations and onerous property management makes a number of to use going forward as part of that leases are recognised when the Group has judgements, estimates and assumptions review. The review has not yet been a present legal or constructive obligation about the recognition and measurement concluded but we are not anticipating as a result of a past event, it is probable of assets, liabilities, income and expenses. any significant changes to the mortality that an outflow of economic resources assumptions or tables. SIGNIFICANT MANAGEMENT will be required from the Group and JUDGEMENTS The following are significant RETIREMENT ANNUITIES TO PARTNERS amounts can be estimated reliably. management judgements in applying The Group also obtains actuarial advice Timing or amount of the outflow the accounting policies of the Group for the purpose of evaluating its annuity may still be uncertain. that have the most significant effect obligations to certain current and former Restructuring provisions are recognised on the financial statements. members and certain partners in the only if a detailed formal plan for the predecessor partnership. Key areas DEFINED BENEFIT PENSION SCHEMES restructuring exists and management of estimate include the discount rate The Group operates two defined benefit has either communicated the plan’s main and mortality, where the firm has used pension schemes - The Grant Thornton features to those affected or started assumptions consistent with those Pensions Fund and the much smaller implementation. Provisions are not adopted for its defined benefit pension Robson Rhodes Retirement Benefit recognised for future operating losses. scheme. Unlike The Grant Thornton Scheme. Both schemes are closed to Pensions Fund where we expect total Provisions are measured at the estimated new members. The assumptions used liabilities to grow for some time before expenditure required to settle the present to value the schemes are adopted by they reduce, for the retirement annuities obligation, based on the most reliable the firm following discussion with the we expect the liabilities to reduce from evidence available at the reporting date, schemes’ actuarial advisers. Key year to year as the scheme consists including the risks and uncertainties assumptions include those in relation almost entirely of annuitants already associated with the present obligation. to the discount rate to be applied to in payment. Where there are a number of similar liabilities as well as those in relation obligations, the likelihood that an to mortality. PROFESSIONAL NEGLIGENCE CLAIMS outflow will be required in settlement PROVISIONS The Group insures itself The assumptions in respect of discount is determined by considering the class against professional negligence claims rate are consistent with the requirements of obligations as a whole. Provisions through policies underwritten by its of IAS 19 and this requires the use of an are discounted to their present values, captive insurance subsidiary and by the applicable yield on AA Corporate Bonds to where the time value of money is material. external insurance market. All claims are be applied. The discount rate used at 30 subject to a policy excess (also referred Any reimbursement that the Group is June 2016 has decreased by 0.8% points to as a self-insured deductible amount) virtually certain to collect from a third from 3.8% to 3.0%, largely reflecting a which is borne by the LLP. The next tier party with respect to the obligation is narrowing of the extra return on corporate of cover for a particular undertaking recognised as a separate asset. However, bonds relative to gilts as investors have year is typically borne by the captive this asset may not exceed the amount begun to favour corporate bonds relative insurance subsidiary, with claims of the related provision. to gilts. This has increased liabilities by beyond that typically falling into the approximately £30m. This was offset No liability is recognised if an outflow cover provided by the external market, by assets outperforming expectations of economic resources as a result of although the captive does occasionally (£28m), lower than expected pension present obligations is not probable. cover some of this too. All reasonable increases (£10m) and other expectation Such situations are disclosed as steps are taken to ensure that the group changes (£19m). contingent liabilities unless the outflow has appropriate information regarding of resources is remote. its claim exposures so that provisions are made on a best estimate basis. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different, albeit not materially so, from the original liability provided for.
Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 37
REVENUE RECOGNITION In determining 2014) the value of goodwill from previous CAPITALISATION OF INTERNALLY the amount of revenue to be recognised GAAP became the deemed cost under DEVELOPED SOFTWARE Distinguishing on incomplete contracts, it is necessary IFRS and will no longer be amortised. the research and development phases to estimate the stage of completion by Goodwill is now tested for impairment of a new customised software project reference to the remaining time and cost on an annual basis. This requires an and determining whether the recognition to be incurred to complete them and the estimation of the value in use of the requirements for the capitalisation of consideration that will be paid. These cash generating units to which the development costs are met requires estimates are made on a contract-by- goodwill is allocated. As the Robson judgement. After capitalisation, contract basis and a different assessment Rhodes business was fully integrated management monitors whether the of these factors would result in a change into Grant Thornton at an early stage, recognition requirements continue to the amount of revenue recognised. an assessment of the cash generating to be met and whether there are any units currently benefiting from the indicators that capitalised costs CARRYING VALUE OF GOODWILL goodwill requires judgement. This may be impaired. The transaction with RSM Robson Rhodes combined with the future estimation LLP in July 2007 gave rise to a goodwill of the future cash flows of these units balance which was amortised under and selection of a suitable discount rate previous GAAP. On transition (1 July mean that the determination of any impairment to this goodwill is highly subjective.
30 JUNE 2016 30 JUNE 2015 6. OPERATING EXPENSES £’000 £’000
COST OF SERVICES RENDERED Employment and related costs of fee earners 207,642 194,448 Other cost of services rendered 67,978 63,519 275,620 257,967
OTHER OPERATING COSTS: Employment and related costs of non-fee earners 53,078 48,372 Other operating costs 102,246 101,315 155,324 149,687
Other operating expenses 430,944 407,654
Other operating expenses are stated after charging: 30 JUNE 2016 30 JUNE 2015 £’000 £’000
AUDITOR’S REMUNERATION Audit services – Group and LLP 155 127 Other services – subsidiary LLP and company audits 31 29 Depreciation, amortisation and impairment of non-financial assets 4,449 3,928 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 38
30 JUNE 2016 30 JUNE 2015 7. OTHER INCOME £’000 £’000
Property sub-let income 1,152 1,009
The total of future minimum sublease payments expected to be received under non-cancellable subleases at the end of the reporting period are as follows:
MINIMUM LEASE RECEIPTS DUE
WITHIN 1 TO 5 AFTER 1 YEAR YEARS 5 YEARS TOTAL £’000 £’000 £’000 £’000
30 June 2016 650 1,123 - 1,773
30 June 2015 709 1,773 - 2,482
8. ACQUISITIONS ACQUISITION OF GENIAC In the year ended 30 June 2015 (22 May 2015), a subsidiary entity of the partnership acquired 100% of the share capital of Geniac Holdings Limited and its subsidiary Geniac UK Limited, a technology start-up that has developed a platform to support small businesses. The details of the business combination are as follows: £’000
FAIR VALUE OF CONSIDERATION TRANSFERRED Amount settled in cash 250
RECOGNISED AMOUNTS OF IDENTIFIABLE NET ASSETS Intangible assets 808 Trade and other receivables 41 Cash and cash equivalents 25 Total current assets 66 Borrowings (27) Trade and other payables (402) Identifiable net assets 445
Gain on bargain purchase (195)
Consideration transferred settled in cash 250 Cash and cash equivalents acquired (25) Net cash outflow on acquisition 225
Acquisition costs charged to expenses 160 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 39
CONSIDERATION TRANSFERRED GOODWILL A gain on a bargain purchase GENIAC’S CONTRIBUTION TO THE The acquisition of Geniac was settled of £195,000 has been recognised in the GROUP RESULTS In the accounting in cash amounting to £250,000. consolidated statement of comprehensive period prior to acquisition, Geniac’s The purchase agreement did not income, in other operating expenses. results after tax were a profit of include any deferred consideration. The reason for the bargain purchase is £604,000. Following acquisition, considered to be the financial constraints Geniac’s results since acquisition to Acquisition-related costs amounting on the operation of the standalone 30 June 2015 were a loss of £71,000 to £160,000 are not included as part business. The acquisition by the Group (with turnover of £5,000). The total of consideration transferred and have will provide Geniac with significant further profits for its accounting period (17 been recognised as an expense in the investment in the development and scaling months to 30 June 2015) were a profit consolidated statement of comprehensive of the offering to be a market-leading of £533,000 (with turnover of £18,000), income, as part of other expenses. platform for growth businesses. as a result of the derecognition (and IDENTIFIABLE NET ASSETS The fair subsequent recognition) of a substantially value and book value of this business modified financial instrument. were considered to be equivalent, so no fair value adjustments have been made.
ACQUISITION OF THE TRADE OF RECOVERY COST AUDITING LIMITED In the year ended 30 June 2015 (on 23 December 2014), the trade of Recovery Cost Auditing Limited was acquired, the trade comprises identifying refunds and savings opportunities in the Telecom and Energy sectors. The details of the business combination are as follows: £’000
FAIR VALUE OF CONSIDERATION TRANSFERRED Amount settled in cash 413 Fair value of deferred consideration 137
RECOGNISED AMOUNTS OF IDENTIFIABLE NET ASSETS 550 Identifiable net assets -
Goodwill on acquisition 550
Consideration transferred settled in cash at date of purchase 413 Net cash outflow on acquisition 413
Acquisition costs charged to expenses 69 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 40
CONSIDERATION TRANSFERRED been recognised as an expense in the RECOVERY COST AUDITING’S The acquisition of the trade of Recovery consolidated statement of profit or CONTRIBUTION TO THE GROUP RESULTS Cost Auditing Limited was settled in loss, as part of other expenses. The trade has been included within the cash amounting to £413,000. partnership and it is therefore not practical IDENTIFIABLE NET ASSETS to provide the comprehensive income The purchase agreement included an No identifiable net assets were acquired. analysis showing the contribution of the additional consideration of £137,000, GOODWILL Goodwill of £550,000 acquisition during the year. payable one year after completion. is primarily related to growth The additional consideration was expectations, expected future paid on 23 December 2015. profitability, the substantial skill Acquisition-related costs amounting and expertise of Recovery Cost to £69,000 are not included as part Auditing Limited’s workforce. of consideration transferred and have
9. INTERESTS IN SUBSIDIARIES COMPOSITION OF THE GROUP Set out below are details of the subsidiaries controlled by the Group:
PROPORTION OF OWNERSHIP 2 COUNTRY OF INCORPORATION INTERESTS HELD BY THE AND PRINCIPAL PLACE GROUP AT YEAR END NAME OF THE SUBSIDIARY OF BUSINESS PRINCIPAL ACTIVITY 2016 2015
Fulwood Insurances Limited1 Guernsey Insurance services 100% 100% Geniac UK Limited England Provision of a platform for 100% 100% small businesses support Grant Thornton (British British Virgin Islands Provision of insolvency and 100% 100% Virgin Islands) Limited1 restructuring services Grant Thornton England Provision of personnel 100% 100% Business Services1 to the group Grant Thornton Employee England Provision of benefits 100% 100% Benefits Consultancy LLP1 consultancy services Grant Thornton Services LLP England Provision of personnel 100% 100% to the group Grant Thornton Specialist Cayman Islands Provision of insolvency and 100% 100% Services (Cayman) Limited1 restructuring services The Local Futures England Licensing of 100% 100% Group Limited intellectual property
1 directly owned by the LLP; 2 ownership is in the ordinary share capital of the unlimited company and limited companies, and membership of LLP’s. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 41
At 30 June 2016, the group also held 100% of the ordinary share capital of, or interest in, the following companies and LLPs incorporated or registered in England, which are either dormant or non-trading:
Barfreston Limited1 Grant Thornton Personal Financial Planning Limited1 Geniac Holdings Limited Grant Thornton Property Nominees* Grant Thornton Limited1 Grant Thornton Trust Company Limited1 Grant Thornton Acquisitions Limited1 GTN1 Limited1 Grant Thornton Acquisitions No.2 Limited1 GTN2 Limited1 Grant Thornton Consulting Limited1 GTPN1 Limited1 Grant Thornton Contracts LLP1 GTPN2 Limited1 Grant Thornton Corporate Finance Limited1 Inderies Limited1 Grant Thornton Management Consultants Limited1 Local Knowledge (UK) Limited Grant Thornton Nominees1* Thornton Baker Limited1 Grant Thornton Pension Trustees Limited1 Thornton Baker UK LLP1
1 directly owned by the LLP; * Unlimited liability nominee companies in which the LLP has a 100% interest.
10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD The carrying amount of investments accounted for using the equity method is as follows:
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 £’000 £’000 £’000
Investment in joint venture - - - Investments in associates 19,516 - - Total investments accounted for using the equity method 19,516 - -
The Group’s share of profit from equity accounted investments is as follows:
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 £’000 £’000 £’000
Investment in joint venture - - - Investments in associates 3,083 - - Total share of profit from equity accounted investments 3,083 - - Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 42
INVESTMENT IN JOINT VENTURE The Group has one material joint venture, Grant Thornton Debt Solutions Limited:
PROPORTION OF OWNERSHIP COUNTRY OF INCORPORATION INTERESTS HELD BY THE NAME OF THE AND PRINCIPAL PLACE GROUP AT YEAR END JOINT VENTURE OF BUSINESS PRINCIPAL ACTIVITY 2016 2015
Grant Thornton Debt Ireland Provision of personal 50% 50% Solutions Limited debt advisory services
The investment in Grant Thornton Debt Solutions Limited is accounted for using the equity method in accordance with IAS 28.
Summarised financial information for Grant Thornton Debt Solutions Limited is set out below:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Non-current assets 2 3 Current assets 268 193 Total assets 270 196
Non-current liabilities - - Current liabilities (1,634) (907) Total liabilities (1,634) (907) Net liabilities (1,364) (711)
Continues on following page Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 43
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Revenue 362 72
Loss and total comprehensive income for the year (484) (401)
Depreciation and amortisation (2) (2)
Tax expense - -
Group losses not recognised are: 30 JUNE 2016 30 JUNE 2015 £’000 £’000
At 1 July 355 - For the year 242 400 Exchange adjustment 85 (45) At 30 June 682 355
A review of carrying amount against the net liabilities is set out below: 30 JUNE 2016 30 JUNE 2015 £’000 £’000
Total net liabilities (1,364) (711) Proportion of ownership interests held by the Group 50% 50% Carrying amount of the investment - -
No dividends were received from Grant Thornton Debt Solutions Limited during the years 2016 and 2015. Grant Thornton Debt Solutions Limited is a private company, therefore no quoted market prices are available for its shares. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 44
INVESTMENTS IN ASSOCIATES On 14 August 2015, the Group transferred its IVA business to Aperture Debt Solutions LLP, a new entity in which the Group retains a 40% equity interest. The profit sharing arrangements on certain contracts differ to this equity interest. This entity’s principal place of business is Ireland.
Summarised financial information for Aperture Debt Solutions LLP is set out below: 30 JUNE 2016 30 JUNE 2015 £’000 £’000
Non-current assets 82 - Current assets 10,428 - Total assets 10,510 -
Non-current liabilities (5,475) - Current liabilities (1,417) - Total liabilities (6,892) - Net assets 3,618 -
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Revenue 12,261 -
Profit from continuing operations 3,618 - Other comprehensive income - -
Total comprehensive income 3,618 -
Aggregate carrying amount of the Group’s interests in this associate 19,516 -
No dividends were received from Aperture Debt Solutions LLP during the period it has been an associate. Aperture Debt Solutions LLP is a partnership, therefore no quoted market prices are available for it. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 45
11. GOODWILL The movements in the net carrying amount of goodwill are as follows: 30 JUNE 2016 30 JUNE 2015 £’000 £’000
GROSS CARRYING AMOUNT Balance at 1 July 13,076 12,506 Acquired through business combination - 550 Net exchange difference 20 20 Balance at 30 June 13,096 13,076
IMPAIRMENT TESTING For the purpose of annual impairment testing, goodwill was generated on the acquisition of the following entities, all of these acquisitions have been integrated into the LLP:
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 £’000 £’000 £’000
RSM Robson Rhodes LLP 9,557 9,537 9,517 Inderies Limited 1,831 1,831 1,831 Thomas May 1,041 1,041 1,041 Recovery Cost Auditing Limited 550 550 - Grant Thornton FSBC Limited (formerly Navigant Consulting (Europe) Limited) 117 117 117 13,096 13,076 12,506
The smallest cash generating unit (CGU) In reviewing for impairment, the Management is not currently aware of any reviewed by the chief operating decision recoverable amount for each CGU has probable changes that would necessitate maker and expected to benefit from the been compared to the carrying amount changes in its key estimates, and as the goodwill on each acquisition has been of both goodwill and corporate assets recoverable amounts are less than two identified. Goodwill is allocated across assigned to it. The recoverable amount years of the current year expected a number of CGU’s, none of which is has been calculated on a value-in-use cashflows, not particularly sensitive to considered individually significant in basis, using an extrapolation of budgeted either the discount rate or growth rate. comparison to the total carrying cashflows, and assuming steady state value of goodwill. growth of 3% in future years. Future cashflows have been discounted at between 8 and 11% to reflect the relative risk profile of the relevant CGU. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 46
12. OTHER INTANGIBLE ASSETS Details of the Group’s other intangible assets and their carrying amounts are as follows:
SOFTWARE £’000
GROSS CARRYING AMOUNT Balance at 1 July 2015 7,787 Addition, separately acquired 1,155 Addition, internally developed 2,109 Balance at 30 June 2016 11,051
AMORTISATION AND IMPAIRMENT Balance at 1 July 2015 5,084 Amortisation 861 Balance at 30 June 2016 5,945
Carrying amount at 30 June 2016 5,106
GROSS CARRYING AMOUNT Balance at 1 July 2014 5,582 Addition, separately acquired 114 Addition, internally developed 1,283 Acquisition through business combination 808 Balance at 30 June 2015 7,787
AMORTISATION AND IMPAIRMENT Balance at 1 July 2014 4,603 Amortisation 481 Balance at 30 June 2015 5,084
Carrying amount at 30 June 2015 2,703
Carrying amount at 30 June 2014 979 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 47
13. PROPERTY, PLANT AND EQUIPMENT Details of the Group’s property, plant and equipment and their carrying amounts are as follows:
LEASEHOLD FURNITURE AND OFFICE MOTOR PROPERTY EQUIPMENT EQUIPMENT CARS TOTAL £’000 £’000 £’000 £’000 £’000
GROSS CARRYING AMOUNT Balance at 1 July 2015 38,106 11,967 9,939 4,699 64,711 Additions 1,563 1,041 675 2,294 5,573 Disposals (385) (390) - (1,961) (2,736) Net exchange differences 60 18 20 - 98 Balance at 30 June 2016 39,344 12,636 10,634 5,032 67,646
DEPRECIATION AND IMPAIRMENT Balance at 1 July 2015 18,428 9,501 9,151 2,105 39,185 Disposals (385) (390) - (1,039) (1,814) Net exchange differences 33 14 17 - 64 Depreciation 1,666 687 468 767 3,588 Balance at 30 June 2016 19,742 9,812 9,636 1,833 41,023 Carrying amount 30 June 2016 19,602 2,824 998 3,199 26,623
GROSS CARRYING AMOUNT Balance at 1 July 2014 37,177 11,044 9,672 5,175 63,068 Additions 1,084 1,000 279 1,101 3,464 Disposals (181) (84) (19) (1,577) (1,861) Net exchange differences 26 7 7 - 40 Balance at 30 June 2015 38,106 11,967 9,939 4,699 64,711
DEPRECIATION AND IMPAIRMENT Balance at 1 July 2014 16,965 8,860 8,747 2,270 36,842 Disposals (181) (82) (19) (845) (1,127) Net exchange differences 10 6 7 - 23 Depreciation 1,634 717 416 680 3,447 Balance at 30 June 2015 18,428 9,501 9,151 2,105 39,185 Carrying amount at 30 June 2015 19,678 2,466 788 2,594 25,526
Carrying amount at 30 June 2014 20,212 2,184 925 2,905 26,226 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 48
All depreciation and impairment The net book value of assets held under relate to leasehold property, charges are included within depreciation, finance leases and similar hire purchase £47,000 to furniture and equipment, amortisation and impairment of non- contracts was £8,038,000; of which and £443,000 to motor cars). financial assets, and are included within £7,652,000 relate to leasehold property The principal finance lease relates operating expenses in the consolidated and £386,000 to motor cars (2015: to Grant Thornton House. statement of comprehensive income. £8,268,000; of which £7,778,000
The future minimum finance lease payments are as follows: 2016 2015 2014 £’000 £’000 £’000
Not later than one year 1,399 1,291 1,287 Later than one year and not later than five years 5,789 5,460 5,425 Later than five years 70,125 71,400 72,675 Total future minimum lease payments 77,313 78,151 79,387
Finance charges (65,540) (66,318) (67,591) Present value of minimum lease payments 11,773 11,833 11,796
Finance lease liabilities are secured by the related assets held under finance leases. The lease agreements generally include fixed lease payments.
14. OPERATING LEASES The Group leases offices, motor cars, and IT equipment under operating leases. The future minimum lease payments are as follows: MINIMUM LEASE RECEIPTS DUE
WITHIN 1 TO 5 AFTER 1 YEAR YEARS 5 YEARS TOTAL £’000 £’000 £’000 £’000
30 June 2016 15,073 38,414 8,897 62,384
30 June 2015 14,238 34,281 15,969 64,488
Lease expense during the period amounts to £16,428,000 (2015: £14,513,000), representing the minimum lease payments. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 49
15. FINANCIAL ASSETS AND LIABILITIES
CATEGORIES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Note 5 provides a description of each category of financial assets and financial liabilities and the related accounting policies. The carrying amounts of financial assets and financial liabilities in each category are as follows:
LOANS AND AFS RECEIVABLES (FAIR VALUE) (AMORTISED COST) TOTAL 30 JUNE 2016 NOTES £’000 £’000 £’000
FINANCIAL ASSETS Other investments 7,950 - 7,950 Trade and other receivables 16 - 186,108 186,108 Cash and cash equivalents 17 - 11,404 11,404 7,950 197,512 205,462
DERIVATIVES OTHER (FV) USED LIABILITIES FOR HEDGING (AMORTISED COST) TOTAL 30 JUNE 2016 NOTES £’000 £’000 £’000
FINANCIAL LIABILITIES Non-current borrowings - 11,647 11,647 Amounts due to members - 53,680 53,680 Current borrowings - 28,825 28,825 Derivative financial instruments 127 - 127 Trade and other payables 20 - 51,373 51,373 127 145,525 145,652
DERIVATIVES LOANS AND (FV) USED AFS RECEIVABLES FOR HEDGING (FAIR VALUE) (AMORTISED COST) TOTAL 30 JUNE 2015 NOTES £’000 £’000 £’000 £’000
FINANCIAL ASSETS Other investments - 8,533 - 8,533 Derivative financial instruments 27 - - 27 Trade and other receivables 16 - - 180,450 180,450 Cash and cash equivalents 17 - - 24,927 24,927 27 8,533 205,377 213,937 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 50
OTHER LIABILITIES (AMORTISED COST) TOTAL 30 JUNE 2015 NOTES £’000 £’000
FINANCIAL LIABILITIES Non-current borrowings 14,482 14,482 Amounts due to members 50,175 50,175 Current borrowings 18,537 18,537 Trade and other payables 20 64,534 64,534 147,728 147,728
LOANS AND AFS RECEIVABLES (FAIR VALUE) (AMORTISED COST) TOTAL 1 JULY 2014 NOTES £’000 £’000 £’000
FINANCIAL ASSETS Other investments 10,179 - 10,179 Trade and other receivables 16 - 188,942 188,942 Cash and cash equivalents 17 - 20,633 20,633 10,179 209,575 219,754
OTHER LIABILITIES (AMORTISED COST) TOTAL 1 JULY 2014 NOTES £’000 £’000
FINANCIAL LIABILITIES Non-current borrowings 17,782 17,782 Amounts due to members 51,887 51,887 Current borrowings 19,914 19,914 Trade and other payables 20 53,202 53,202 142,785 142,785
A description of the Group’s financial instrument risks, including risk management objectives and policies is given in note 28. The methods used to measure financial assets and liabilities reported at fair value are described in note 28. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 51
AFS INVESTMENTS AFS investments comprise listed investments at market value held by Fulwood Insurance Limited and other investments in other Grant Thornton International Limited member firms. The carrying amounts at fair value of these bonds are as follows:
30 JUNE 2016 30 JUNE 2015 1 JULY 2014 £’000 £’000 £’000
FAIR VALUE Listed investments 7,872 8,433 10,042 Other investments 78 100 137 7,950 8,533 10,179
BORROWINGS Borrowings include the following financial liabilities:
CURRENT NON-CURRENT
30 JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 2016 2015 2014 2016 2015 2014 £’000 £’000 £’000 £’000 £’000 £’000
CARRYING AMOUNT AT AMORTISED COST: Bank loans and overdrafts 28,700 18,519 19,900 - 3,000 6,000 Other loans - - - - 27 - Finance leases and hire purchase contracts 125 18 14 11,647 11,815 11,782 28,825 18,537 19,914 11,647 14,842 17,782
BORROWINGS AT AMORTISED COST OTHER FINANCIAL INSTRUMENTS Details of the interest rates on the The carrying amount of the following borrowings at amortised costs are financial assets and liabilities is considered described in note 28. a reasonable approximation of fair value: trade and other receivables; cash and cash equivalents; and trade and other payables. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 52
16. TRADE AND OTHER RECEIVABLES
Trade and other receivables consist of the following: 30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 £’000 £’000 £’000
Trade receivables, gross 121,070 110,992 116,148 Allowance for credit losses (5,387) (4,521) (5,529) Trade receivables 115,683 106,471 110,619 Amounts recoverable on contracts 58,388 64,041 65,968 Fully and compulsory convertible debentures 3,734 3,181 2,924 Amounts due from members 8,303 6,757 9,431 Financial assets 186,108 180,450 188,942 Other receivables 13,519 12,849 8,109 Prepayments 13,018 14,283 12,888 Non-financial assets 26,537 27,132 20,997 212,645 207,582 209,939
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value. All of the Group’s trade and other receivables have been reviewed for indicators of impairment. The movements in the allowance for credit losses is presented below:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Balance 1 July 4,521 5,529 Amounts written off (uncollectable) 866 (1,008) Impairment loss - - Balance 30 June 5,387 4,521
An analysis of unimpaired trade receivables that are past due is given in note 28. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 53
17. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following: 30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 £’000 £’000 £’000
CASH AT BANK AND IN HAND: GBP 5,871 9,976 12,567 USD 5,045 13,705 7,241 Euro 488 1,246 825 11,404 24,927 20,633
18. EMPLOYEE REMUNERATION
EMPLOYEE BENEFITS EXPENSE Expenses recognised for employee benefits are analysed below:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Wages and salaries 201,127 190,985 Social security costs 23,072 21,049 Pensions – defined benefit plans 11 624 Pensions – defined contribution plans 21,900 18,289 246,110 230,947
EMPLOYEE NUMBERS The average number of full time equivalent members and employees during the year, all of whom were engaged in the Group’s principal activity, were as follows: 30 JUNE 2016 30 JUNE 2015 NUMBER NUMBER
Members (of whom 18 were fixed share - 2015: 25) 179 184 Fee earning employees 3,356 3,302 Non fee earning employees 1,094 975 4,629 4,461 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 54
Profits are shared among members in The profit attributable to the member The average profit per member, calculated accordance with agreed profit sharing with the largest entitlement was by dividing the profit for the financial arrangements. The average profit £1,510,777 (2015: £1,816,813). year before members’ remuneration and allocation in respect of the year’s results, profit shares by the average number Allocable profits take into account pension calculated by dividing allocable profits for of members, amounted to £381,000 and annuity payments rather than pension the financial year by the average number (2015: £426,000). and annuity charges and include sums of members, amounted to £344,000 allocated as interest, members’ motor The table below provides a reconciliation (2015: £397,000). expenses and capital profits but exclude between the average profit per member profits in certain subsidiary entities. calculated in accordance with IFRS and the average profit allocation per member.
2016 2015 £’000 £’000
Average profit per member 381 426 Retirement annuities and other items (32) (27) Retained profits for the year in subsidiary entities net of consolidation adjustments (5) (2) Average allocable profit per member 344 397
PENSIONS AND OTHER EMPLOYEE OBLIGATIONS The liabilities recognised for pensions and other employee remuneration consist of the following amounts:
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 £’000 £’000 £’000
NON-CURRENT: Defined benefit liability (net) 110,991 137,800 106,939 Former members’ annuities (note 19) 23,350 25,571 26,540 134,341 163,371 133,479
CURRENT:
Other short term employee obligations 5,255 4,991 4,593
The current portion of these liabilities arises mainly from accrued holiday entitlement at the reporting date and is expected to be settled in the next 12 months. As none of the employees are eligible for early settlement of pension arrangements, the remaining part of pension obligations for defined benefit plans is considered non-current. The non-current portion of the defined benefit liability is presented net of plan assets. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 55
DEFINED BENEFIT SCHEMES The to act in the best interest of the pension INVESTMENT RISK The plan assets at Group operates two defined benefit fund and it is responsible for setting 30 June 2016 are predominantly equities, pension schemes for the benefit of the investment policies. The Group has debt instruments and property. The fair certain employees, the Grant Thornton no representation on the board of the value of the plan assets are exposed to Pensions Fund and the Robson Rhodes pension fund. the property market and equity markets Retirement Benefit Scheme. The assets (both in the UK and overseas). These plans expose the Group to actuarial of the schemes are administered by risks such as interest rate risk, investment LONGEVITY RISK The Group is required to trustees in funds independent from risk, longevity risk and inflation risk. provide benefits for life for the members the assets of the Group. of the defined benefit schemes. Increase INTEREST RATE RISK The present value The Robson Rhodes scheme in the life expectancy of the members of the defined benefit liability is calculated is significantly smaller than the will increase the defined benefit liability. using a discount rate determined by Grant Thornton scheme. Both schemes reference to market yields of high quality INFLATION RISK A significant proportion are closed to new members, and the corporate bonds. The estimated term of of the defined benefit liability is linked to Grant Thornton scheme was closed to the bonds is consistent with the estimated inflation. An increase in the inflation rate further benefit accrual with effect from term of the defined benefit obligation and will increase the Group’s liability. A portion 31 October 2014. The plan assets are it is denominated in sterling. A decrease of the plan assets are inflation-linked managed by a pension fund that is legally in market yield on high quality corporate debt securities which will mitigate separated from the Group. The board bonds will increase the Group’s defined some of the effects of inflation. of trustees of the pension fund is benefit liability, although it is expected required by its articles of association that this would be offset partially by an increase in the fair value of certain of the plan assets.
DEFINED BENEFIT OBLIGATION The details of the Group’s defined benefit obligation (“DBO”) are as follows:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Defined benefit obligation 1 July 435,203 379,779 Current service cost 9 627 Interest expense 16,258 16,829 Employee contributions 1 2 Remeasurements - actuarial gains from changes in demographic assumptions (10,342) (5,000) Remeasurements - actuarial losses from changes in financial assumptions 29,907 50,698 Remeasurement gains on the defined benefit obligation – experience (27,098) 5,019 Benefits paid (14,895) (12,751) Defined benefit obligation 30 June 429,043 435,203 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 56
PLAN ASSETS The reconciliation of the balance of the assets held for the Group’s defined benefit plan is presented below:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Fair value of plan assets 1 July 297,591 272,840 Interest income 11,131 12,141 Return on scheme assets excluding amounts included in interest expense 19,007 18,906 Employer contributions 5,458 6,453 Employee contributions 1 2 Benefits paid (14,895) (12,751) Administration fee paid from scheme assets 1 - Fair value of plan assets 30 June 318,294 297,591
The actual return on plan assets was £30,138,000 in 2016 (2015: £31,047,000).
Plan assets do not comprise any of the Group’s own financial instruments or any assets used by Group companies. Plan assets can be disaggregated into the following categories of investments:
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 TOTAL PLAN ASSETS £’000 £’000 £’000
Equities 135,481 166,509 130,115 Corporate bonds and fixed income 102,861 48,329 85,041 Diversified Growth fund 458 - - Alternative investments 35,743 23,239 23,661 Hedge account 11,053 - - Cash 1,207 23,004 1,635 Buy in policy* 31,491 36,510 32,388 318,294 297,591 272,840
* This asset is a bulk annuity contract which provides income to match exactly the benefits, in terms of timing and amount, due to scheme members who were 70 or more years old at the time of its purchase in February 2013. The asset is valued at the same amount as the present value of the scheme liabilities it matches and has the effect of de-risking the liabilities relating to that part of the scheme’s pensioner population.
All equity and debt instruments have quoted prices in active markets (Level 1). Fair values of property investments, as included in the alternative investments above, do not have quoted prices and have been determined based on professional appraisals that would be classified as Level 3 of the fair value hierarchy as defined in IFRS 13 Fair Value Measurement. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 57
The significant actuarial assumptions used for the valuation are as follows:
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 % % %
Expected return on assets - Robson Rhodes scheme 3.00 3.80 6.45 Expected return on assets - Grant Thornton scheme 3.00 3.80 5.85 Rate of general increase in salaries - Grant Thornton scheme n/a n/a 3.70 Rate of general increase in salaries - Robson Rhodes scheme n/a 3.70 3.70 Rate of revaluation of accrued and deferred pensions - Grant Thornton scheme 1.85 2.20 2.20 Rate of revaluation of accrued and deferred pensions - Robson Rhodes scheme 5.00 5.00 5.00 Rate of increase in pensions in payment - pre 1 July 2006 2.75 3.15 3.15 Rate of increase in pensions in payment - post 30 June 2006 1.90 2.25 2.25 Discount rate 3.00 3.80 4.50 Retail price inflation 2.85 3.20 3.20 Consumer price inflation 1.85 2.20 2.20 Mortality assumption S2PA Light S1NA Light PNXA00MC improvements with with 1% underpin, 1% long term trend* past and future*
*Mortality rates were assumed to follow the S2PA Light (2015: S1NA Light; 2014: PNXA00 series), incorporating the CMI_2014 projections with a long-term rate of improvement of 1% per annum for past and future years.
These assumptions were developed by management with the assistance of actuaries. Discount factors are determined close to each year-end by reference to market yields of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension obligation. Other assumptions are based on current actuarial benchmarks and management’s historical experience. The present value of the DBO was measured using the projected unit credit method. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 58
DEFINED BENEFIT PLAN EXPENSES Amounts recognised in profit or loss related to the Group’s defined benefit plans are as follows:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Current service cost 9 627 Net interest expense 5,134 4,679 Total expenses recognised in profit or loss 5,143 5,306
The current service cost is included in employee benefits expense. The net interest expense is included in finance costs. The asset ceiling reduces the carrying value of the surplus on the Robson Rhodes scheme to the value of future employer contributions still due to be paid under the current Schedule of Contributions. It is reconciled as follows:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Impact of asset ceiling at start of year 188 - Interest on asset ceiling 7 - Remeasurement of asset ceiling 47 188 Impact of asset ceiling at end of year 242 188
Amounts recognised in other comprehensive income related to the Group’s defined benefit plans are as follows:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Actuarial gain from changes in demographic assumptions 10,342 5,000 Actuarial losses from changes in financial assumptions (29,907) (50,698) Remeasurement gains / (losses) on the defined benefit obligation - experience 27,098 (5,019) Return on assets excluding amounts included in interest expense 19,007 18,897 Total remeasurement gains / (losses) on the defined benefit obligation 26,540 (31,820) Remeasurement losses on impact of asset ceiling (47) (188) Total income/(expenses) recognised in other comprehensive income 26,493 (32,008)
All the expenses summarised above were included within items that will not be reclassified subsequently to profit or loss in the statement of other comprehensive income. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 59
OTHER DEFINED BENEFIT PLAN In addition, on 29 March 2006, the On 2 July 2007, the LLP provided a INFORMATION A subsidiary entity, LLP provided a further guarantee to the guarantee to the trustees of the Robson Grant Thornton Services LLP (GT trustees of the Grant Thornton Pensions Rhodes Retirement Benefit Scheme Services), is the principal employer to Fund in connection with the contributions under which it has undertaken to pay both the Grant Thornton Pensions Fund payable to it by GT Services. The immediately, following a demand by the and the Robson Rhodes Retirement guarantee is to enable the trustees to trustees, any amount which becomes Benefit Scheme. Both schemes are provide a Type 1 Contingent Asset (as due and payable by GT Business Services defined benefit pension schemes. defined in section 6.1 of the document in respect of its guaranteed obligations. GT Services is the sole participating ‘Guidance in relation to contingent assets’ Such obligations are defined and limited employer of the active members of the issued by the Board of the Pension in the same way as those for GT Services GT scheme. Its immediate parent Protection Fund in September 2006) set out above. company, Grant Thornton Business to the Board of the Pensions Protection The expected employer contributions Services (GT Business Services) is the Fund. The guarantee was provided in to the scheme, including salary sacrifice sole participating employer of the active connection with the Pensions Protection component, in the year commencing members of the Robson Rhodes scheme. Fund Risk Based Levy and resulted in 1 July 2016 are expected to be £5.0m The IAS 19 obligations in respect of the a significant reduction in the amount (1 July 2015: £6.2m). schemes are set out above. The LLP pays of the Risk Based Levy chargeable by GT Services and GT Business Services the Pensions Protection Fund on the The obligations to the schemes are for the supply of employees to the LLP in pension scheme. The obligation is limited reflected in the respective balance accordance with the terms of a Supply of to all present and future obligations sheets of GT Services and GT Business Services Agreement between the LLP and and liabilities of GT Services to make Services as the participating employers. GT Services, such charges being sufficient payments to the scheme up to a maximum The obligations are not reflected in the to cover all of the employment costs of amount which, when added to the assets individual entity balance sheet of the the employees, including all pension of the scheme, would result in the scheme LLP because, apart from the contingent payments made by GT Services or GT being 105% funded on the date on which liability, no obligation or liability in Business Services to the scheme. any liability under the guarantee arises, connection with the scheme or the calculated on the basis set out in section contributions payable to it exist within On 28 June 2004, the LLP provided 179 of the Pensions Act 2004. the individual entity either to the scheme a guarantee to the trustees of the or the principal/participating employers Grant Thornton Pensions Fund under at the balance sheet date. which it has undertaken to pay immediately, following a demand properly served on it by the trustees, any amount which becomes due and payable by GT Services and which remain unpaid by GT Services for a period of not less than two months from the due date. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 60
The significant actuarial assumptions for the determination of the defined benefit obligation are the discount rate, the salary growth rate and the average life expectancy. The calculation of the net defined benefit liability is sensitive to these assumptions. The following table summarises the effects of changes in these actuarial assumptions on the defined benefit liability at 30 June 2016:
2016 2015 CHANGES IN THE SIGNIFICANT ACTUARIAL ASSUMPTIONS £’000 £’000
DISCOUNT RATE REDUCED BY 0.5% Increase in the defined benefit liability 37,238 36,500 RPI INCREASE BY 0.5% Increase in the defined benefit liability 32,591 39,900
The present value of the defined benefit obligation calculated with the same method (project unit credit) as the defined benefit obligation recognised in the statement of financial position. The sensitivity analyses are based on a change in one assumption while not changing all other assumptions. This analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in the assumptions would occur in isolation of one another as some of the assumptions may be correlated.
19. PROVISIONS
All provisions are considered non-current. The carrying amounts and the movements in the provision account are as follows:
FORMER CLAIM PROPERTY MEMBERS’ PROVISIONS PROVISIONS ANNUITIES TOTAL £’000 £’000 £’000 £’000
Carrying amount 1 July 2015 12,609 2,646 25,571 40,826 New annuity obligations - - 123 123 Amortisation of discount - - 760 760 Settlement of obligations during year (2,098) (853) (3,369) (6,320) Change in assumptions and experience losses 2,179 - 265 2,444 Released to other comprehensive income (254) (525) - (779) Provided during year in other comprehensive income 980 1,249 - 2,229 Carrying amount 30 June 2016 13,416 2,517 23,350 39,283 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 61
Provisions recognised at acquisition date in a business combination are included in additions. The provision for claims is in respect of the estimated amounts for commercial settlements and professional indemnity claims. Property provisions are in respect of dilapidations and surplus properties. The nature of the claims and property provisions are such that the timing of the utilisation of those provisions is inherently difficult to predict. The provision for former members’ annuities is expected to be utilised as follows:
2016 2015 £’000 £’000
In less than one year 2,969 3,311 After one and within five years 8,151 8,857 After five and within ten years 5,948 6,357 After ten and within twenty-five years 5,905 6,535 In more than twenty-five years 377 511 23,350 25,571
20. TRADE AND OTHER PAYABLES
Trade and other payables consist of the following: 30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 £’000 £’000 £’000
CURRENT Excess payments received on account 21,699 26,274 27,407 Trade creditors 8,252 11,419 3,088 Social security and other taxes 15,376 15,237 17,218 Other creditors 3,455 3,961 2,282 Accruals and deferred income 66,723 48,457 54,300 Provisions for foreseeable losses 2,034 2,130 1,803 Amounts due to former members 2,591 7,643 3,207 120,130 115,121 109,305
Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 62
21. FINANCE COSTS AND FINANCE INCOME
Finance costs for the reporting periods consist of the following: 30 JUNE 2016 30 JUNE 2015 £’000 £’000 INTEREST EXPENSE FOR BORROWINGS AT AMORTISED COST:
Bank loans and overdrafts 1,469 1,184 Other borrowings at amortised cost 32 16 1,501 1,200 Interest expense for finance lease arrangements 1,422 1,501 Net interest expense on defined benefit liability 5,134 4,679 Unwinding of discount relating to former member annuity provisions 760 894 Unwinding of discount relating to property dilapidations - 68 760 962 8,817 8,342
Finance income for the reporting periods consists of the following: 30 JUNE 2016 30 JUNE 2015 £’000 £’000
Interest income from cash and cash equivalents 1,131 970 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 63
22. OTHER FINANCIAL ITEMS
Other financial items consist of the following: 30 JUNE 2016 30 JUNE 2015 £’000 £’000
Loss on sale of motor cars (384) (173) Fair value movement on foreign exchange collars (153) (131)
23. TAX EXPENSE
Taxation arises within the subsidiary undertakings of the group and represents: 30 JUNE 2016 30 JUNE 2015 £’000 £’000
Profits on ordinary activities before tax 72,238 81,964 (Profits)/losses of LLP’s not subject to corporation tax (53,341) (58,501) 18,897 23,463 Domestic tax rate 20.00% 20.75%
Expected tax expense 3,779 4,869 Profits taxed at zero percent or exempt from tax (661) (624) Pension cost charge less than pension cost relief (65) (965) Losses in subsidiary undertakings not relieved 444 125 Under/(over) provision from earlier years 489 (28) Total tax expense 3,986 3,377
Deferred tax expense recognised directly in other comprehensive income - -
No deferred tax asset has been recognised on the losses not relieved in subsidiary undertakings, as there is currently insufficient evidence that it would be recovered, due to the limited trading history of the associated subsidiaries. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 64
24. NON-CASH ADJUSTMENTS AND CHANGES IN WORKING CAPITAL
The following non-cash flow adjustments and adjustments for changes in working capital have been made to profit before tax to arrive at operating cash flow: 30 JUNE 2016 30 JUNE 2015 ADJUSTMENTS: £’000 £’000
Depreciation, amortisation and impairment of non-financial assets 4,449 3,928 Negative goodwill on acquisition - (195) Interest and dividend income (1,131) (970) Fair value gains on financial assets recognised in profit or loss 154 - Interest expense 3,683 3,663 Impairment of financial assets - 73 Gain on disposal of non-financial assets 384 173 Net interest on defined benefit liability 5,134 4,679 Current and past service costs 11 627 Result from equity accounted investments (3,083) - Total adjustments 9,601 11,978
30 JUNE 2016 30 JUNE 2015 NET CHANGES IN WORKING CAPITAL: £’000 £’000
Change in trade and other receivables (19,661) 451 Change in trade and other payables 10,034 1,220 Change in provisions (1,542) (187) Total changes in working capital (11,169) 1,484 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 65
25. MEMBERS’ INTEREST TOTAL LOANS AND MEMBERS’ OTHER DEBTS TOTAL REVALUATION TRANSLATION OTHER OTHER DUE TO/(FROM) MEMBERS’ RESERVE RESERVE RESERVES INTERESTS MEMBERS INTEREST £’000 £’000 £’000 £’000 £’000 £’000
At 1 July 2015 (388) 940 (97,195) (96,643) 43,406 (53,237) Members’ remuneration charged as an expense - - - - 6,162 6,162 Profit for the financial year available for discretionary division among members - - 62,090 62,090 - 62,090 Members’ interests after profit for year (388) 940 (35,105) (34,553) 49,568 15,015 Allocated profits in respect of the prior year - - (63,756) (63,756) 63,756 - Tax adjustments on payment of annuities to former members - - 667 667 - 667 Members’ capital introduced - - - - 7,350 7,350 Other amounts withdrawn by members - - - - 578 578 Drawings (including tax payments) - - - - (65,443) (65,443) Transfer of capital to former members’ balances - - - - (4,950) (4,950) Transfer of other amounts to former members’ balances - - - - (5,494) (5,494) Pension scheme actuarial loss - - 26,493 26,493 - 26,493 Movement in unrealised gains/ 66 - - 66 - 66 losses on investments
Exchange gains on translation of foreign operations - 977 - 977 - 977 Movement on members’ annuities - - - - 5 5 At 30 June 2016 (322) 1,917 (71,701) (70,106) 45,370 (24,736) Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 66
The loans and other debts due to/(from) members can be analysed as follows:
DUE WITHIN DUE AFTER DUE WITHIN DUE AFTER ONE YEAR ONE YEAR 2016 ONE YEAR ONE YEAR 2015 £’000 £’000 £’000 £’000 £’000 £’000
Members’ capital classified as a liability 42,975 - 42,975 40,575 - 40,575 Amounts due to members – profits 10,662 - 10,662 9,557 - 9,557 Provision for annuities in relation to current members - 36 36 - 31 31 Loans and other debts due to members 53,637 36 53,673 50,132 31 50,163 Amounts due from members included in trade and other receivables (note 16) (8,303) - (8,303) (6,757) - (6,757) 45,334 36 45,370 43,375 31 43,406
26. RELATED PARTY TRANSACTIONS The Group’s related parties include TRANSACTIONS WITH JOINT VENTURES TRANSACTIONS WITH THE DEFINED its associates and joint venture, key During 2016, Grant Thornton Debt BENEFIT PLAN The defined benefit management, post-employment benefit Solution Limited provided services plans are related parties. The Group’s plans for the Group’s employees and valued at £Nil (2015: £Nil). Their only transaction with the defined benefit others as described below. Unless outstanding balance of £70,000 (30 plans relate to contributions paid to otherwise stated, none of the transactions June 2015: £74,000; 30 June 2014: the plan, see note 18. incorporate special terms and conditions £Nil) is included in trade payables. and no guarantees were given or TRANSACTIONS WITH KEY MANAGEMENT received. Outstanding balances PERSONNEL Key management of the are usually settled in cash. Group are defined as members of the TRANSACTIONS WITH ASSOCIATES Partnership Oversight Board and the During 2016, Grant Thornton UK LLP Strategic Leadership Team. The LLP provided services to Aperture Debt does not divide profits amongst members Solutions LLP valued at £532,000 until after the financial statements (2015: not an associate). The outstanding have been finalised and approved by balance of £55,000 due from Aperture the members. The estimated profit Debt Solutions LLP is included in entitlement due to the partnership’s trade receivables. key management in respect of the current year totalled £7,555,000. The actual profit allocated in respect of the previous year was £9,068,000. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 67
27. CONTINGENT LIABILITIES The Group does not actively engage The Group’s objective is to maintain in the trading of financial assets for cash and to meet its liquidity requirements There were no unprovided contingent speculative purposes nor does it write for 30-day periods at a minimum. liabilities at 30 June 2016 (2015: None) options. The most significant financial This objective was met for the reporting other than those in connection with risks to which the Group is exposed periods. Funding for long-term liquidity guarantees given by the LLP relating to are described below. needs is additionally secured by an the defined benefit pension schemes as adequate amount of committed credit more fully described in note 18. LIQUIDITY RISK ANALYSIS Liquidity facilities and the ability to call upon risk is the risk that the Group might be additional members capital, in line unable to meet its obligations. The Group with the Membership Agreement. 28. FINANCIAL manages its liquidity needs by periodically INSTRUMENTS RISK undertaking reviews of short, medium and The Group considers expected cash RISK MANAGEMENT OBJECTIVES long term financing requirements as well flows from financial assets in assessing AND POLICIES The Group is exposed as continually monitoring working capital and managing liquidity risk, in particular to various risks in relation to financial usage. A significant part of the Group’s its cash resources and trade receivables. instruments. The Group’s financial assets funding is from members’ capital, which The Group’s existing cash resources and and liabilities by category are summarised is only repayable following retirement, trade receivables (see notes 16 and 17) in note 15. The main types of risks are and following the refinancing in December significantly exceed the current cash liquidity risk, credit risk and market risk. 2015, a revolving credit facility of £50m. outflow requirements. Cash flows from In addition, a further accordion trade and other receivables are all The Group’s financial risk management is credit facility of £30m was arranged in contractually due within six months. coordinated at its shared service centre, August 2016. Net cash requirements are in close cooperation with the Strategic compared to available borrowing facilities Leadership Team (SLT), and focuses on in order to determine headroom or actively securing the Group’s short to any shortfalls. This analysis shows that medium-term cash flows by minimising available borrowing facilities are expected the risks described below. The long term to be sufficient over the lookout period. financial management is the responsibility of the SLT, with oversight from the Partnership Oversight Board (POB), and ultimately the partners.
As at 30 June 2016, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:
CURRENT NON-CURRENT 1 TO 5 YEARS LATER THAN 5 YEARS 30 JUNE 2016 £’000 £’000 £’000
Bank loans and overdrafts 28,738 - - Finance lease obligations 1,399 5,789 70,125 Trade and other payables 118,096 - - Derivative financial instruments 127 - - 148,360 5,789 70,125 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 68
This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting periods as follows:
CURRENT NON-CURRENT 1 TO 5 YEARS LATER THAN 5 YEARS 30 JUNE 2015 £’000 £’000 £’000
Bank loans and overdrafts 18,572 3,020 - Other bank borrowings - 1,000 - Finance lease obligations 1,291 5,460 71,400 Trade and other payables 112,991 - - 132,854 9,480 71,400
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date. The bank loan was repaid in December 2015, as part of the refinancing of the Group’s banking facilities. In assessing and managing liquidity risks of its derivative financial instruments, the Group considers both contractual inflows and outflows. As at 30 June, the contractual cash flows of the Group’s derivative financial assets and liabilities are as follows:
CURRENT NON-CURRENT FOREIGN EXCHANGE COLLARS £’000 £’000
30 June 2016 1,000 1,000 30 June 2015 1,000 2,000
CREDIT RISK ANALYSIS Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk on receivables due from customers, cash at bank and listed investments. The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at 30 June, as summarised below:
30 JUNE 2016 30 JUNE 2015 £’000 £’000
CLASSES OF FINANCIAL ASSETS - CARRYING AMOUNTS: Listed investments 7,872 8,433 Other investments 78 100 Derivative financial instruments - 27 Cash and cash equivalents 11,404 24,927 Trade and other receivables 186,117 180,450 205,471 213,937 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 69
The Group continuously monitors defaults are obtained and used. The Group’s At 30 June the Group has certain trade of customers and other counterparties, policy is to deal only with creditworthy receivables that have not been settled identified either individually or by the counterparties. by the contractual due date but are not Group, and incorporates this information considered to be impaired. The amounts The Group’s management considers into its credit risk controls. Where at 30 June, analysed by the length of that all of the above financial assets that available at reasonable cost, external time past due, are: are not impaired or past due for each credit ratings and/or reports on of the 30 June reporting dates under customers and other counterparties review are of good credit quality.
30 JUNE 2016 30 JUNE 2015 £’000 £’000
Not more than 3 months 91,915 95,094 More than 3 months but not more than 6 months 16,462 7,819 More than 6 months but not more than 1 year 3,847 2,988 More than one year 3,459 570 115,683 106,471
In respect of trade and other receivables, areas. The Group has a policy of providing The credit risk for cash and cash the Group is not exposed to any significant for all debts to the extent that they are not equivalents is considered negligible, credit risk exposure to any single considered recoverable. The provision is since the counterparties are reputable counterparty or any group of also determined by reference to past banks with high quality external counterparties having similar default experience. Based on historical credit ratings. characteristics. Trade receivables information about customer default rates consist of a large number of customers management consider the credit quality in various industries and geographical of trade receivables that are not past due or impaired to be good. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 70
MARKET RISK ANALYSIS The Group bank borrowings on its revolving credit These changes are considered to is exposed to market risk through its facilities (1.1% over LIBOR); and members be reasonably possible based on use of financial instruments and capital (5.5% over Bank of England Base observation of current market conditions. specifically to interest rate risk and Rate). At 30 June 2015, the Group also The calculations are based on a change in currency risk, which result from both had an exposure to LIBOR based on its the average market interest rate for each its operating and investing activities. term loan, which was repaid as part of period, and the financial instruments held the refinancing in December 2015. at each reporting date that are sensitive INTEREST RATE SENSITIVITY The Group’s to changes in interest rates. All other policy is to minimise interest rate cash The following table illustrates the variables are held constant. flow risk exposures on long-term financing. sensitivity of profit and equity to At 30 June 2016, the Group is exposed to a reasonably possible change in changes in market interest rates through interest rates of +/- 1% (2015: +/- 1%).
BANK BORROWINGS MEMBERS CAPITAL £’000 £’000
30 June 2016 298 433
30 June 2015 211 441
FOREIGN CURRENCY SENSITIVITY To mitigate the Group’s exposure Foreign currency denominated financial The majority of the Group’s transactions to foreign currency risk, non-Sterling assets and liabilities which expose the are carried out in Pounds Sterling. cash flows are regularly monitored. Group to currency risk are disclosed Exposures to currency exchange rates This distinguishes the short-term foreign below. The amounts shown are those arise from the Group’s overseas sales currency cash flows requirements reported to key management translated and purchases, which are primarily from longer-term cash flows. Where into sterling at the closing rate: denominated in US dollars (USD) and the amounts to be paid and received Euros (EUR). The Group also holds in a specific currency are expected to an investment denominated in USD, largely offset one another, no further where the foreign exchange risk is action is undertaken; where they do not, managed through a series of foreign the surplus currency is converted to GBP. exchange collars.
SHORT TERM LONG TERM EXPOSURE EXPOSURE USD USD £’000 £’000
30 JUNE 2016 Financial assets 5,803 - Financial liabilities (1,960) - Total exposure 3,843 -
30 JUNE 2015 Financial assets 7,066 - Financial liabilities (1,192) - Total exposure 5,874 - Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 71
Given the limited exposure to short term Exposures to foreign exchange rates vary Exposure to foreign exchange differences foreign currency risk, and the foreign during the year depending on the volume resulting from the re-translation of the exchange collars in place for the long of overseas transactions. Nonetheless, asset and liabilities of the Group’s foreign term exposure, average market volatility the analysis above is considered to operations are charged or credited in exchange rates are not expected to be representative of the Group’s to other comprehensive income and result in material impacts on either exposure to currency risk. recognised in the currency translation profit or reserves. reserve in equity.
29. CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Group’s capital management The capital to net debt ratio is a key The Group manages the capital structure objectives are: covenant in the Group’s revolving and makes adjustments to it in the light credit facility. of changes in economic conditions and • to ensure the Group’s ability to the risk characteristics of the underlying continue as a going concern; and In addition, a targeted structure of assets. In order to maintain or adjust members capital to net debt (measured • to provide an adequate return the capital structure, the Group may at the lowest point in the Group’s to members. adjust the amount of returns to members, annual cash cycle) of 1:1 has been increase capital from the members, The Group monitors capital on the basis historically determined. or sell assets to reduce debt. of the total members’ interest, comprising Management assesses the Group’s reserves and loans and other debt due The amounts managed as capital by the capital requirements in order to maintain to / from members, as presented on the Group for the reporting periods under an efficient overall financing structure face of the statement of financial position. review are summarised as follows: while avoiding excessive leverage.
2016 2015 £’000 £’000
Total equity 70,106 96,643 Amounts due to members (53,673) (50,163) Cash and cash equivalents 11,404 24,927 Capital 27,837 71,407
Total equity 70,106 96,643 Amounts due to members (53,673) (50,163) Borrowings 40,472 33,379 Overall financing 56,905 79,859
Capital-to-overall financing ratio 49% 89%
The Group has honoured its covenant obligations, including maintaining capital ratios. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 72
30. FIRST-TIME ADOPTION OF IFRS
NOTES ON FIRST TIME ADOPTION OF IFRS Under IFRS lease incentives are spread deficit to derive a net interest cost which The following exemptions available on over the shorter of the lease term and is recognised in income. This has reduced transition under IFRS 1 First-time Adoption the period to the break clause. This profit before tax in the year ended 30 of International Financial Reporting has reduced profit before tax in the year June 2015 by £3,506,000. Standards have been taken: ended 30 June 2015 by £248,000, and Under previous UK GAAP, the fully reserves by £677,000 on transition. • Business combinations – pre transition and compulsory convertible debentures business combinations have not 3. OTHER ADJUSTMENTS Under previous were treated as an investment, under been re-visited; UK GAAP software costs were capitalised IFRS this financial asset carried at as tangible fixed assets (Property, plant amortised cost is included within trade • Designation of previously recognised and equipment). and other receivables. This has no impact financial instruments have been on profit before tax in the year ended 30 performed at transition; Under IFRS software costs are capitalised June 2015, or reserves on transition. as intangible fixed assets with a finite • Insurance contracts - the transitional economic life. This has no effect on Partner annuities were previously provisions of IFRS 4 Insurance contracts profit before tax in the year ended discounted at rates yielded by UK have been applied on transition; and 30 June 2015. 15 year gilts. • Investments in subsidiaries, joint Grant Thornton Debt Solutions Limited Under IFRS, these annuities have been ventures and associates have been was accounted for as a subsidiary in the discounted at the same rates as those valued using deemed cost from 2015 financial statements. used in the calculation of the Group’s previous GAAP. defined benefit pension schemes. Under IFRS Grant Thornton Debt Solutions 1. RESIDUAL VALUES Under previous UK This has reduced profit before tax Limited is accounted for as a joint venture. GAAP residual values were only reviewed in the year ended 30 June 2015 by This has increased profit before tax in the at the end of each reporting period when £865,000, and increased reserves year ended 30 June 2015 by £400,000. material, and measured at prices that by £3,139,000 on transition. There was no impact on the transition existed upon recognition. balance sheet. 4. ACQUISITION COSTS AND GOODWILL Under IFRS residual values are reviewed Under previous UK GAAP acquisition costs Under previous UK GAAP the exchange at least on an annual basis and measured were included within the capitalisation of differences on the retranslation of at current prices. goodwill. Under IFRS acquisition costs overseas subsidiaries was included within are charged directly against profits. 2. DILAPIDATIONS AND LEASE Members’ other interest, under IFRS these INCENTIVES The previous dilapidations are shown as a separate component of Under previous UK GAAP goodwill accounting policy was to charge equity. This has no effect on profit before was amortised to profit or loss over dilapidations to profit or loss over the tax in the year ended 30 June 2015. its expected useful life of ten years for final three years of the lease, or to the one substantial acquisition (although Under previous UK GAAP, the foreign next lease break date if this is earlier shorter periods were been deemed exchange collars entered into were and likely to be actioned. more appropriate for some not included on the statement of financial smaller acquisitions). Under IFRS dilapidations are recognised position. Under IFRS these are included as a provision as soon as they are on the statement of financial position. Under IFRS goodwill is not amortised but identified. This has increased profit This has reduced profit before tax in is instead subject to an annual impairment before tax in the year ended 30 June the year ended 30 June 2015 by review, details of the impairment testing 2015 by £24,000, and reduced reserves £131,000, and increased reserves are contained within note 11. by £671,000 on transition. by £158,000 on transition. None of the IFRS adjustments have Under previous UK GAAP lease incentives Under previous UK GAAP, the expected impacted on cash and cash equivalents were spread over the shorter of the rate of return on planned assets is taken either at the date of transition, or at 30 lease term and the period to the next to finance costs, under IFRS the net June 2015. However, the adjustments will rent review. interest cost no longer includes the have impacted on non cash adjustments, expected return on assets, instead a investing activities (notes 30.2 and 30.4) single discount rate is applied to the net and financing activities (note 30.3). Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 73
RECONCILIATION OF THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2014
AS PREVIOUSLY REPORTED 1 2 3 PER IFRS £’000 £’000 £’000 £’000 £’000
ASSETS NON-CURRENT Goodwill 12,506 - - - 12,506 Other intangible assets - - - 979 979 Property, plant and equipment 26,691 514 - (979) 26,226 Other long term financial assets 13,103 - - (2,924) 10,179 Non-current assets 52,300 514 - (2,924) 49,890
CURRENT Trade and other receivables 207,015 - - 2,924 209,939 Derivative financial instruments - - - 158 158 Cash and cash equivalents 20,633 - - - 20,633 Current assets 227,648 - - 3,082 230,730 Total assets 279,948 514 - 158 280,620 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 74
AS PREVIOUSLY REPORTED 1 2 3 PER IFRS EQUITY AND LIABILITIES £’000 £’000 £’000 £’000 £’000
EQUITY Members’ other interests – other reserves classified as equity (72,068) 514 (1,348) 3,516 (69,386) Translation reserve - - - (199) (199) Revaluation reserve (542) - - - (542) (72,610) 514 (1,348) 3,317 (70,127)
LIABILITIES
NON-CURRENT Loans and other debts due to members after more than one year 100 - - (20) 80 Pension and other employee obligations 106,939 - - - 106,939 Borrowings 17,782 - - - 17,782 Provisions 45,882 - 671 (3,139) 43,414 Non-current liabilities 170,703 - 671 (3,159) 168,215
CURRENT Loans and other debts due to members within one year Members’ capital classified as a liability 44,475 - - - 44,475 Other amounts 7,312 - - - 7,312 Loans and other debts due to members within one year 51,787 - - - 51,787
Borrowings 19,914 - - - 19,914 Trade and other payables 108,628 - 677 - 109,305 Current tax liabilities 1,526 - - - 1,526 Current liabilities 181,855 - 677 - 182,532 Total liabilities 352,558 - 1,348 (3,159) 350,747 Total equity and liabilities 279,948 514 - 158 280,620 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 75
RECONCILIATION OF THE CONSOLIDATED STATEMENT OF MEMBERS INTEREST AS AT 30 JUNE 2014
REVALUATION TRANSLATION OTHER TOTAL MEMBERS’ RESERVE RESERVE RESERVES OTHER INTERESTS £’000 £’000 £’000 £’000
As previously reported (542) - (72,068) (72,610) 1 - - 514 514 2 - - (1,348) (1,348) 3 - (199) 3,516 3,317 Per IFRS (542) (199) (69,386) (70,127) Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 76
RECONCILIATION OF THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2015 AS PREVIOUSLY REPORTED 1 2 3 4 PER IFRS £’000 £’000 £’000 £’000 £’000 £’000
Revenue 520,616 - - (72) - 520,544 Other external charges: client expenses and disbursements (24,259) - - - - (24,259) Net fees 496,357 - - (72) - 496,285 Other income 1,009 - - - - 1,009 Costs of sales (258,250) - - (516) - (258,766) Depreciation, amortisation and impairment of non-financial assets (8,446) 376 - - 4,140 (3,930) Other expenses (144,952) - (156) 184 (34) (144,958)
Operating profit 85,718 376 (156) (404) 4,106 89,640 Finance costs (4,707) - (68) (3,698) - (8,473) Finance income 970 - - - - 970 Other financial items 16 (189) - - - (173) Profit before tax 81,997 187 (224) (4,102) 4,106 81,964 Tax expense (3,377) - - - - (3,377) Profit for the year from continuing operations 78,620 187 (224) (4,102) 4,106 78,587 Members’ remuneration charged as an expense (9,517) - - (4) - (9,521) Profit for the year available for discretionary division among members 69,103 187 (224) (4,106) 4,106 69,066 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 77
COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 AS PREVIOUSLY REPORTED 1 2 3 4 PER IFRS £’000 £’000 £’000 £’000 £’000 £’000
Profit for the year available for discretionary division among members 69,103 187 (224) (4,106) 4,106 69,066 OTHER COMPREHENSIVE INCOME: ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY
TO PROFIT OR LOSS Remeasurement of net defined benefit liability (35,514) - - 3,506 - (32,008) ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT
OR LOSS Available-for-sale financial assets - reclassification to profit or loss 154 - - - - 154 Exchange differences on translating 1,184 - - (45) - 1,139 foreign operations
Other comprehensive income (34,176) - - 3,461 - (30,715) for the year, net of tax
Total comprehensive income for the year 34,927 187 (224) (645) 4,106 38,351 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 78
RECONCILIATION OF THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 AS PREVIOUSLY REPORTED 1 2 3 4 PER IFRS £’000 £’000 £’000 £’000 £’000 £’000
ASSETS NON-CURRENT Goodwill 8,970 - - - 4,106 13,076 Other intangible assets - - - 2,703 - 2,703 Property, plant and equipment 27,530 701 - (2,705) - 25,526 Other long term financial assets 11,714 - - (3,181) - 8,533 Non-current assets 48,214 701 - (3,183) 4,106 49,838
CURRENT Trade and other receivables 204,497 - - 3,085 - 207,582 Derivative financial instruments - - - 27 - 27 Cash and cash equivalents 24,927 - - - - 24,927 Current assets 229,424 - - 3,112 - 232,536 Total assets 277,638 701 - (71) 4,106 282,374 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 79
AS PREVIOUSLY REPORTED 1 2 3 4 PER IFRS EQUITY AND LIABILITIES £’000 £’000 £’000 £’000 £’000 £’000
EQUITY Members’ other interests – other reserves classified as equity (102,162) 701 (1,572) 1,732 4,106 (97,195) Translation reserve - - - 940 - 940 Revaluation reserve (388) - - - - (388) (102,550) 701 (1,572) 2,672 4,106 (96,643)
LIABILITIES
NON-CURRENT Loans and other debts due to members after more than one year 43 - - (12) - 31 Pension and other employee obligations 137,800 - - - - 137,800 Borrowings 14,842 - - - - 14,842 Provisions 42,457 - 647 (2,278) - 40,826 Non-current liabilities 195,142 - 647 (2,290) - 193,499
CURRENT Loans and other debts due to members within one year
Members’ capital classified as a liability 40,575 - - - - 40,575 Other amounts 9,557 - - - - 9,557 Loans and other debts due to members within one year 50,132 - - - - 50,132
Borrowings 18,565 - - (28) - 18,537 Trade and other payables 114,621 - 925 (425) - 115,121 Current tax liabilities 1,728 - - - - 1,728 Current liabilities 185,046 - 925 (453) - 185,518 Total liabilities 380,188 - 1,572 (2,743) - 379,017 Total equity and liabilities 277,638 701 - (71) 4,106 282,374 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 80
RECONCILIATION OF THE CONSOLIDATED STATEMENT OF MEMBERS’ INTEREST AS AT 30 JUNE 2015
REVALUATION TRANSLATION OTHER TOTAL MEMBERS’ RESERVE RESERVE RESERVES OTHER INTERESTS £’000 £’000 £’000 £’000
As previously reported (388) - (102,162) (102,550) 1 - - 701 701 2 - - (1,572) (1,572) 3 - 940 1,732 2,672 4 - - 4,106 4,106 Per IFRS (388) 940 (97,195) (96,643)
31. POST-REPORTING DATE EVENTS
No adjusting or significant non-adjusting events have occurred between the 30 June 2016 reporting date and the date of authorisation. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 81
10. STATEMENT OF FINANCIAL POSITION FOR THE PARENT ENTITY
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 NOTES £’000 £’000 £’000
FIXED ASSETS Goodwill 4 12,028 12,028 11,478 Other intangible assets 4 3,372 1,822 979 Tangible assets 5 26,413 25,305 26,002 Investments 6 22,008 2,482 2,549 63,821 41,637 41,008 CURRENT ASSETS Debtors due < 1 year 7 203,425 196,586 202,015 Debtors due > 1 year 7 4,026 3,544 3,178 Cash at bank and in hand 5,256 18,969 13,637 212,707 219,099 218,830
Creditors: amounts falling due within one year 8 (158,719) (142,575) (136,916) Net current assets 53,988 76,524 81,914 Total assets less current liabilities 117,809 118,161 122,922 Creditors: amounts falling due after more than one year 9 (11,647) (14,815) (17,782) Provisions for liabilities 10 (32,136) (34,327) (33,800) Net assets 74,026 69,019 71,340
Continues on following page Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 82
30 JUNE 2016 30 JUNE 2015 30 JUNE 2014 NOTES £’000 £’000 £’000
LOANS AND OTHER DEBTS DUE TO MEMBERS WITHIN ONE YEAR Members’ capital classified as a liability 11 42,975 40,575 44,475 Other amounts 11 10,662 9,557 7,312 LOANS AND OTHER DEBTS DUE TO MEMBERS IN MORE THAN ONE YEAR Other amounts 11 36 31 80 EQUITY Members’ other interests – other reserves classified as equity 11 20,353 18,856 19,473 Total equity and amounts due to members 74,026 69,019 71,340
The financial statements were approved by the Partnership Oversight Board and authorised for issue on 6 October 2016.
Sacha Romanovitch Simon Jones Chief Executive Officer Partner – Strategic Leadership Team
Registered no. 0C307742 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 83
11. STATEMENT OF CHANGES IN EQUITY FOR THE PARENT ENTITY
OTHER RESERVES EQUITY £’000 £’000
Balance at 1 July 2015 18,856 18,856 Allocated profits in respect of the prior year (63,756) (63,756) Tax Adjustments on payment of annuities to former members 667 667
Transactions with members (63,089) (63,089) Profit for the financial year available for discretionary division among members 70,748 70,748 Members’ remuneration charged as an expense (6,162) (6,162)
Total comprehensive income for the year 64,586 64,586
Balance at 30 June 2016 20,353 20,353 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 84
OTHER TOTAL MEMBERS’ RESERVES OTHER INTERESTS £’000 £’000
Balance at 1 July 2014 19,473 19,473 Allocated profits in respect of the prior year (65,601) (65,601) Tax Adjustments on payment of annuities to former members 734 734
Transactions with members (64,867) (64,867) Profit for the financial year available for discretionary division among members 73,771 73,771 Members’ remuneration charged as an expense (9,521) (9,521)
Total comprehensive income for the year 64,250 64,250
Balance at 30 June 2015 18,856 18,856 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 85
12. NOTES TO THE PARENT ENTITY FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES statement, standards in issue not yet • Presentation of comparative effective and related party transactions reconciliation of the number of The principal accounting policies adopted with both Key Management Personnel and shares outstanding at the beginning in the preparation of the parent financial eligible group entities and the presentation and at the end of the period statements together with the critical of comparative information in respect accounting judgements and key sources • The effect of future accounting of certain assets. of estimation are the same as those set standards not adopted out on pages 36 to 37 of the consolidated The financial statements have been INVESTMENTS Fixed asset investments financial statements. Any accounting prepared under the historic cost in subsidiaries and investments in joint policies in addition to those applied in the convention as amended for the revaluation ventures are shown at cost less provision preparation of the consolidated financial of derivative financial instruments. for impairment. statements are detailed below. These DISCLOSURE EXEMPTIONS ADOPTED policies have been consistently applied In preparing these financial statements throughout the year and the preceding 2. PROFIT AND the company has taken advantage of all year following the application of FRS LOSS ACCOUNT disclosure exemptions conferred by FRS 101. The true and fair override has been The LLP has taken advantage of 101. Therefore these financial statements taken in respect of the non-amortisation section 408 of the Companies Act do not include: of goodwill, which would otherwise 2006 as applied by the Limited Liability have been £3,974,000, due to the • A statement of cash flows Partnerships (Accounts and Audit) consideration that the goodwill has and related notes (application of Companies Act 2006) an indefinite useful economic life Regulations 2008 and has not included • The requirements of IAS 24 related in accordance with IFRS 3. its own profit and loss in these financial party disclosures to disclose related statements. The LLP’s profit for the year BASIS OF ACCOUNTING Grant Thornton party transactions entered into between was £64,584,000 (2015: £65,119,000). UK LLP meets the definition of a qualifying two or more members of the group as entity under FRS 100 (Financial Reporting they are wholly owned within the group Standard 100) issued by the Financial 3. ACQUISITIONS • Presentation of comparative Reporting Council. The financial Details of the LLP’s acquisition of reconciliations for intangible statements for Grant Thornton UK LLP the trade of Recovery Cost Auditing and tangible fixed assets have been prepared in accordance with Limited in the year ended 30 June FRS 101 (Financial reporting Standard • Disclosure of key management 2015 are included in note 8 of the 101) “Reduced Disclosure Framework”. personnel compensation Group financial statements. As permitted by FRS 101, the LLP has taken advantage of the disclosure exemptions available in relation to financial instruments, presentation of a cashflow Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 86
4. INTANGIBLE FIXED ASSETS GOODWILL SOFTWARE £’000 £’000
Cost At 1 July 2015 12,028 6,907 Additions - 2,161 At 30 June 2016 12,028 9,068
Amortisation At 1 July 2015 - 5,085 Charge for the year - 611 At 30 June 2016 - 5,696
Net book amount at 30 June 2016 12,028 3,372
Net book amount at 30 June 2015 12,028 1,822
Net book amount at 30 June 2014 11,478 979
The smallest cash generating unit (CGU) reviewed by the chief operating decision maker and expected to benefit from the goodwill on each acquisition has been identified. Goodwill is allocated across a number of CGU’s, none of which is considered individually significant in comparison to the total carrying value of goodwill. Details of the impairment testing are included in note 11 of the Group financial statements. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 87
5. TANGIBLE FIXED ASSETS LONG SHORT LEASEHOLD LEASEHOLD FURNITURE AND OFFICE MOTOR PROPERTY PROPERTY EQUIPMENT EQUIPMENT VEHICLES TOTAL £’000 £’000 £’000 £’000 £’000 £’000
COST At 1 July 2015 17,783 19,985 11,871 9,827 4,699 64,165 Additions - 1,563 1,039 675 2,294 5,571 Disposals - (385) (390) - (1,961) (2,736) At 30 June 2016 17,783 21,163 12,520 10,502 5,032 67,000
DEPRECIATION At 1 July 2015 6,947 11,325 9,424 9,059 2,105 38,860 Provided in the year - 1,635 681 458 767 3,541 Disposals - (385) (390) - (1,039) (1,814) At 30 June 2016 6,947 12,575 9,715 9,517 1,833 40,587
Net book amount at 30 June 2016 10,836 8,588 2,805 985 3,199 26,413
Net book amount at 30 July 2015 10,836 8,660 2,447 768 2,594 25,305
Net book amount at 30 July 2014 26,002
6. INVESTMENTS Investments comprise the following: 2016 2015 2014 £’000 £’000 £’000
Investments in subsidiaries 2,414 2,404 2,432 Investments in associates 19,516 - - Other investments 78 78 117 22,008 2,482 2,549 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 88
INTERESTS IN SUBSIDIARIES The movement in investments in subsidiaries is as follows: INVESTMENTS IN SUBSIDIARIES £’000
COST At 1 July 2015 2,432 At 30 June 2016 2,432
ACCUMULATED IMPAIRMENT At 1 July 2015 28 Reversal of impairment loss (10) At 30 June 2016 18
Net book amount at 30 June 2016 2,414
Net book amount at 30 June 2015 2,404
The reversal of the impairment loss follow the improved trading performance of the investment. A list of investments held by the LLP is set out in note 9 of the Group financial statements.
INTERESTS IN ASSOCIATES The movement in investments in associates is as follows: INVESTMENTS IN ASSOCIATES £’000
COST At 1 July 2015 - Additions in the year 19,516 At 30 June 2016 19,516
ACCUMULATED IMPAIRMENT At 1 July 2015 - Impairment loss - At 30 June 2016 -
Net book amount at 30 June 2016 19,516
Net book amount at 30 June 2015 - Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 89
7. D EB TO RS 2016 2015 2014 DUE < 1 YEAR £’000 £’000 £’000
Trade debtors 111,927 102,312 110,001 Amounts due from group undertakings 3,308 1,110 2,758 Amounts recoverable on contracts 56,845 62,311 63,935 Other debtors 12,262 10,786 6,179 Derivative financial instruments - 27 158 Amounts due from members 8,303 6,757 9,431 Prepayments and accrued income 10,780 13,283 9,553 203,425 196,586 202,015
2016 2015 2014 DUE > 1 YEAR £’000 £’000 £’000
Fully and compulsory convertible debentures 3,734 3,181 2,924 Prepayments and accrued income 292 363 254 4,026 3,544 3,178
8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2016 2015 2014 £’000 £’000 £’000
Bank loans 28,700 18,400 19,900 Excess payments on account 21,699 26,259 27,313 Trade creditors 7,557 10,339 2,113 Amounts owed to group undertakings 43,103 40,734 36,375 Taxation and social security 9,172 9,421 11,663 Obligations under finance lease and hire purchase contracts 125 18 14 Other creditors 1,807 3,574 1,767 Derivative financial instruments 127 - - Amounts due to former members 2,591 7,643 3,207 Provisions for foreseeable losses 2,034 2,130 1,803 Accruals and deferred income 41,804 24,057 32,761 158,719 142,575 136,916 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 90
9. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2016 2015 2014 £’000 £’000 £’000
Obligations under finance lease and hire purchase contracts 11,647 11,815 11,782 Bank loans (secured) - 3,000 6,000 11,647 14,815 17,782
Amounts falling due after more than five years are as follows: 2016 2015 2014 £’000 £’000 £’000
Obligations under finance lease and hire purchase contracts 11,442 11,444 11,447 11,442 11,444 11,447
The LLP’s future minimum finance lease payments are as follows: 2016 2015 2014 £’000 £’000 £’000
Not later than one year 1,399 1,291 1,287 Later than one year and not later than five years 5,789 5,460 5,425 Later than five years 70,125 71,400 72,675 Total future minimum lease payments 77,313 78,151 79,387
Finance charges (65,540) (66,318) (67,591) Present value of minimum lease payments 11,773 11,833 11,796
Finance lease liabilities are secured by the related assets held under finance leases. The lease agreements generally include fixed lease payments. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 91
10. PROVISIONS FOR LIABILITIES FORMER CLAIM PROPERTY MEMBERS’ PROVISIONS PROVISIONS ANNUITIES TOTAL £’000 £’000 £’000 £’000
At 30 June 2014 33,800 At 1 July 2015 6,110 2,646 25,571 34,327 New annuity obligations - - 123 123 Amortisation of discount - - 760 760 Settlement of obligations during year (567) (853) (3,369) (4,789) Change in assumptions and experience losses - - 265 265 Released to profit and loss account (254) (525) - (779) Provided during year in profit and loss account 980 1,249 - 2,229 At 30 June 2016 6,269 2,517 23,350 32,136
The provision for claims is in respect of the estimated amounts for commercial settlements and professional indemnity claims. Property provisions are in respect of dilapidations and surplus properties. The nature of the claims and property provisions are such that the timing of the utilisation of those provisions is inherently difficult to predict.
The provision for former members’ annuities is expected to be utilised as follows: 2016 2015 £’000 £’000
In less than one year 2,969 3,311 After one and within five years 8,151 8,857 After five and within ten years 5,948 6,357 After ten and within twenty-five years 5,905 6,535 In more than twenty-five years 377 511 23,350 25,571 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 92
11. MEMBERS’ INTEREST MEMBERS’ LOANS AND OTHER TOTAL OTHER INTERESTS – DEBTS DUE TO/ MEMBERS’ OTHER RESERVES (FROM) MEMBERS INTEREST £’000 £’000 £’000
At 1 July 2015 18,856 43,406 62,262 Members’ remuneration charged as an expense - 6,162 6,162 Profit for the financial year available for discretionary division among members 64,586 - 64,586 Members’ interests after profit for year 83,442 49,568 133,010 Allocated profits in respect of the prior year (63,756) 63,756 - Tax adjustments on payment of annuities to former members 667 - 66 Members’ capital introduced - 7,350 7,350 Other amounts withdrawn by members - 578 578 Drawings (including tax payments) - (65,443) (65,443) Transfer of capital to former members’ balances - (4,950) (4,950) Transfer of other amounts to former members’ balances - (5,494) (5,494) Movement on members’ annuities - 5 5 At 30 June 2016 20,353 45,370 65,723
The loans and other debts due to/(from) members can be analysed as follows:
DUE WITHIN DUE AFTER DUE WITHIN DUE AFTER ONE YEAR ONE YEAR 2016 ONE YEAR ONE YEAR 2015 £’000 £’000 £’000 £’000 £’000 £’000
Members’ capital classified as a liability 42,975 - 42,975 40,575 - 40,575 Amounts due to members – profits 10,662 - 10,662 9,557 - 9,557 Provision for annuities in relation to current members - 36 36 - 31 31 Loans and other debts due to members 53,637 36 53,673 50,132 31 50,163 Amounts due from members included in trade and other receivables (note 7) (8,303) - (8,303) (6,757) - (6,757) 45,334 36 45,370 43,375 31 43,406
Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 93
12. CAPITAL COMMITMENTS At the end of the year the LLP had capital commitments of £Nil (2015: £Nil) that were not provided for.
13. COMMITMENTS UNDER OPERATING LEASES The LLP’s future minimum operating lease payments are as follows: 2016 2015 £’000 £’000
Due within one year 15,073 1,208 Due between one and five years 38,414 16,126 Due after more than five years 8,897 47,154 62,384 64,488
The LLP’s operating leases primarily relate to motor vehicles and office space. There are no contingent rentals.
14. RELATED PARTY DISCLOSURES TRANSACTIONS WITH GROUP COMPANIES As permitted by FRS 101 related party transactions with wholly owned members of the Group have not been disclosed. TRANSACTIONS WITH ASSOCIATES During the year the Company entered into the following transactions with the Company’s associated undertakings. 2016 2015 £’000 £’000
Provision of services 532 -
Amounts owed by associated undertakings 55 -
Amounts owed to associated undertakings 70 - Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 94
15. TRANSITION TO FRS 101 The LLP has adopted FRS 101 for the On applying FRS 101 for the first time the • the LLP has elected to retain its first time having previously applied UK following transitional reliefs were adopted: interests in subsidiaries, associates GAAP that was effective before periods and joint ventures at the previous UK • the LLP elected to commence the commencing on or after 1 January 2015. GAAP carrying amount at the date capitalisation of borrowing costs on The date of transition to FRS 101 was of transition to FRS 101. the construction of qualifying assets 1 July 2014. The LLP has restated its at the date of transition to FRS 101 comparatives for the year ended 30 June 2015. • the LLP has elected not to restate business combinations that were entered into before the date of transition to FRS 101
TRANSITION TO FRS 101 - RECONCILIATIONS RESTATED LLP 30 JUNE 2015 1 JULY 2014 STATEMENT OF FINANCIAL POSITION £’000 £’000
Total Equity and amounts due to members under previous UK GAAP 63,785 68,877 EFFECT OF CHANGES TO: 1) Goodwill 3,869 - 2) Dilapidations (647) (671) 3) Lease incentives (925) (677) 4) Tangible fixed assets 701 514 5) Acquisition costs (69) - 6) Foreign exchange collar 27 158 7) Partner annuities 2,278 3,139 Sub-total – conversion adjustments 5,234 2,463 Restated shareholders’ funds 69,019 71,340 Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 95
CHANGES FOR FRS 101 ADOPTION 3. LEASE INCENTIVES Under previous 6. FOREIGN EXCHANGE COLLAR UK GAAP lease incentives were spread Under previous UK GAAP, the foreign 1. GOODWILL Under previous UK GAAP over the shorter of the lease term and the exchange collars entered into were not goodwill was amortised to profit or loss period to the next rent review. Under FRS included on balance sheet. Under IFRS over its expected useful life of ten years 101 lease incentives are spread over the these are included on the statement of for one substantial acquisition (although shorter of the lease term and the period financial position. This has reduced profit shorter periods were been deemed more to the break clause. before tax in the year ended 30 June appropriate for some smaller acquisitions). 2015 by £131,000, and increased Under FRS 101 goodwill is not amortised 4. TANGIBLE FIXED ASSETS – RESIDUAL reserves by £158,000 on transition. but is instead subject to an annual VALUES Under previous UK GAAP residual impairment review. This accounting values were only reviewed at the end of 7. PARTNER ANNUITIES Partner annuities treatment represents a departure each reporting period when material, and were previously discounted at rates from the Companies Act 2006 (see measured at prices that existed upon yielded by UK 15 year gilts. Under IFRS, accounting policy). recognition. Under FRS 101 residual these annuities have been discounted values are reviewed at least on an annual at the same rates as those used in the 2. DILAPIDATIONS Under previous UK basis and measured at current prices. calculation of the Group’s defined benefit GAAP dilapidations were charged to profit pension schemes. This has reduced profit or loss over the final three years of the 5. ACQUISITION COSTS Under previous before tax in the year ended 30 June 2015 lease, or to the next lease break date UK GAAP acquisition costs were included by £865,000, and increased reserves by if this is earlier and likely to be actioned. within the capitalisation of goodwill. £3,139,000 on transition. Under FRS 101 dilapidations are Under FRS 101 acquisition costs are recognised as a provision as soon charged directly against profits. as they are identified. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 96
13. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GRANT THORNTON UK LLP
We have audited the financial statements of Grant Thornton UK LLP for the year ended 30 June 2016 which comprise the Statement of Financial Position, the Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 101 “Reduced Disclosure Framework”.
RESPECTIVE RESPONSIBILITIES OF liability partnership’s members as a body SCOPE OF THE AUDIT OF THE FINANCIAL MEMBERS AND AUDITOR As explained in accordance with Chapter 3 of Part 16 STATEMENTS A description of the scope more fully in the Statement of Members’ of the Companies Act 2006 as applied to of an audit of financial statements is responsibilities in respect of the financial limited liability partnerships by the Limited provided on the Financial Reporting statements set out on pages 13 and 14 Liability Partnership (Accounts and Audit) Council’s web-site at www.frc.org.uk/ the members are responsible for the (Application of Companies Act 2006) auditscopeukprivate. preparation of the financial statements Regulations 2008. Our audit work has and for being satisfied that they been undertaken so that we might state give a true and fair view. to the limited liability partnership’s members those matters we are required Our responsibility is to audit and express to state to them in an auditor’s report an opinion on the financial statements in and for no other purpose. To the fullest accordance with applicable law and extent permitted by law, we do not accept International Standards on Auditing (UK or assume responsibility to anyone other and Ireland). Those standards require us than the limited liability partnership to comply with the Auditing Practices and the limited liability partnership’s Board’s Ethical Standards for Auditors. members as a body for our audit work, This report is made solely to the limited for this report, or for the opinions we have formed. Grant Thornton UK LLP Annual Report for the year ended 30 June 2016 97
OPINION ON THE FINANCIAL STATEMENTS MATTERS ON WHICH WE ARE REQUIRED In our opinion the financial statements: TO REPORT BY EXCEPTION We have nothing to report in respect of the • give a true and fair view of the state of following matters where the Companies the limited liability partnership’s affairs Act 2006 requires us to report to you if, as at 30 June 2016 and of its profit for in our opinion: the year then ended; • adequate accounting records have • have been properly prepared in not been kept, or returns adequate for accordance with United Kingdom our audit have not been received from Generally Accepted Accounting Practice branches not visited by us; or including FRS 101 “Reduced Disclosure Framework”; and • the financial statements are not in agreement with the accounting • have been prepared in accordance records and returns; or with the requirements of the Companies Act 2006 as applied to limited liability • we have not received all the information partnerships by the Limited Liability and explanations we require for Partnership (Accounts and Audit) our audit. (Application of Companies Act 2006) Regulations 2008. WILLIAM NEALE BUSSEY (SENIOR STATUTORY AUDITOR) FOR AND ON BEHALF OF MAZARS LLP CHARTERED ACCOUNTANTS AND STATUTORY AUDITOR TOWER BRIDGE HOUSE ST KATHARINE’S WAY LONDON E1W 1DD
6 OCTOBER 2016 2016 Grant Thornton UK LLP All r ht re er ed
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