Annual report and accounts 2023 - Flipbook - Page 133
Strategic Report
5.1.
Corporate Governance
Accounts
Completeness and valuation of brand support discounts and cost accruals
Key audit matter description
Brand support discounts and cost accruals within trade and other payables of £12.3m (2022: £18.1m)
The Group incurs significant costs in agreeing sales discounts to support and develop its brands. Estimation is required
in determining the level of variable consideration recognised and the accrual for such sales discounts and costs where
promotions and brand support campaigns span the year-end and where settlement has not been fully agreed at year-end,
or where prior year claims arise, as the year-end accrual can depend on information not yet made available by the customer.
Further details are included within “Key Sources of Estimation Uncertainty” as disclosed in the accounting policies within note
1 to the financial statements.
Due to the high level of estimation involved, we have determined there is a potential for fraud through possible manipulation
of this balance.
Brand support discounts and cost accruals are included within note 22 to the financial statements.
The Audit and Risk Committee’s consideration in respect of the risk is included on page 86.
How the scope of our audit responded to
the key audit matter
The audit procedures we performed in respect of this matter included:
• Obtaining an understanding of and testing the relevant controls over the brand support discounts and cost accruals process;
• Meeting with the commercial teams to understand and challenge the brand support discounts in place, by assessing the
movements in the brand support accrual;
• Testing a sample of customers with characteristics of audit interest (customers receiving material brand support
investment, customers with material open promotions at year end, and flagship UK customers), assessing the accuracy
of current year accruals;
• Performing a stand back assessment on judgements made in the previous year, including examining a sample of accrual
releases and assessing the additional variable consideration recognised;
• Examining a sample of key commercial contracts and joint business plans to assess whether the composition of the
accrual is in line with the underlying commercial agreement;
• Obtaining confirmations directly from customers for a sample of open accruals. In cases where no confirmation reply
is received, we performed alternative procedures involving understanding the basis for the accrual and recalculating the
expected accrual based on related sales information;
• Selecting a sample of settlements and releases made after the year-end to determine the accuracy of the accrual;
• Understand ageing of the accrual and selecting a sample of balances of aged balances; and
• Assessing the appropriateness of the IAS 1 sensitivity disclosures made in the financial statements.
Key observations
We concluded that completeness and valuation of brand support discounts and cost accruals were appropriate.
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