REG - ITV PLC - Final Results 2015 <Origin Href="QuoteRef">ITV.L</Origin> - Part 2

ITVAnnouncement

17/03/2016 10:00

- Part 2: For the preceding part double click  ID:nRSQ3544Sa 

considered the adequacy of the group's disclosures in respect of the sensitivity of the deficits to these.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
 their appropriateness.The valuation is considered to be a significant risk as, given the quantum of the pension deficit, small changes in the assumptions can have a material financial impact on the Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
 Royalty accruals £69 million (2014: £70 million)                                                                                                                                                                                                                
 The Group pays royalties directly to artists or producers for content used. The contractual terms of these agreements are varied and complex. The related IT systems can only address part of the processing, necessitating a significant manual element in     Among other procedures, we tested manual controls over the recording of royalty costs and the approval of royalty payments. We re-performed a sample of the Group's annual royalty calculations, agreeing key inputs to contracts and the underlying system data. In addition, for a sample of programs, we performed analytical procedures, comparing the royalty costs recorded in the financial statements to our expectation using participation percentages from the underlying contracts, and following up variances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
 calculating royalty accruals recorded by the Group. Overall the process is complex and the volume and variety of contracts being interpreted and accounted for combined with the manual nature of the process increases the risk of error.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
 
 
Royalty accruals £69 million (2014: £70 million) 
 
The Group pays royalties directly to artists or producers for content used.
The contractual terms of these agreements are varied and complex. The related
IT systems can only address part of the processing, necessitating a
significant manual element in calculating royalty accruals recorded by the
Group. Overall the process is complex and the volume and variety of contracts
being interpreted and accounted for combined with the manual nature of the
process increases the risk of error. 
 
Among other procedures, we tested manual controls over the recording of
royalty costs and the approval of royalty payments. We re-performed a sample
of the Group's annual royalty calculations, agreeing key inputs to contracts
and the underlying system data. In addition, for a sample of programs, we
performed analytical procedures, comparing the royalty costs recorded in the
financial statements to our expectation using participation percentages from
the underlying contracts, and following up variances. 
 
3 Our application of materiality and an overview of the scope of our audit 
 
The materiality for the Group financial statements as a whole was set at £29
million (2014: £25 million), determined with reference to a benchmark of Group
profit before tax, of which it represents 4.6% (2014: 4.1%). 
 
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding £1.5 million (2014: £1 million), in addition to other
identified misstatements that warranted reporting on qualitative grounds. 
 
The Group's principal operations are in the United Kingdom and only the core
UK operations (comprising Broadcast and Online, the UK Studios, Global
Entertainment and the central functions) are scoped in for Group audit
purposes. The Group audit team performed the audit of the core UK operations
as if they were a single aggregated set of financial information using
materiality of £25 million (2014: £23 million). The Group audit team performed
all of the audit procedures over the risks related to the acquisition of Talpa
Media. 
 
Although not in-scope for Group reporting purposes, in agreement with the
Audit Committee, specified audit procedures were also performed on two
entities in the US and one entity in the Netherlands by component auditors
simultaneously with the audit of the Group and UK operations. The Group audit
team set the materiality for specified audit procedures at £5 million for all
components. Together the above audit and these specified audit procedures
covered 92% (2014: 96%) of total Group revenue, 94% (2014: 99%) of Group
profit before taxation; and 88% (2014: 99%) of total Group assets. 
 
4 Our opinion on other matters prescribed by the Companies Act 2006 is
unmodified 
 
In our opinion: 
 
· The part of the Directors' Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006 and 
 
· The information given in the Strategic Report and the Directors' Report for
the financial year for which the financial statements are prepared is
consistent with the financial statements 
 
5 We have nothing to report on the disclosures of principal risks 
 
Based on the knowledge we acquired during our audit, we have nothing material
to add or draw attention to in relation to: 
 
· The Directors' statement of long term viability, concerning the principal
risks, their management, and, based on that, the Directors' assessment and
expectations of the Group's continuing in operation over the three years to 31
December 2018 or 
 
· The disclosures of the financial statements concerning the use of the going
concern basis of accounting 
 
6 We have nothing to report in respect of the matters on which we are required
to report by exception 
 
Under ISAs (UK and Ireland) we are required to report to you if, based on the
knowledge we acquired during our audit, we have identified other information
in the Annual Report that contains a material inconsistency with either that
knowledge or the financial statements, a material misstatement of fact, or
that is otherwise misleading. 
 
In particular, we are required to report to you if: 
 
· We have identified material inconsistencies between the knowledge we
acquired during our audit and the Directors' statement that they consider that
the Annual Report and financial statements taken as a whole is fair, balanced
and understandable and provides the information necessary for shareholders to
assess the Group's position and performance, business model and strategy or 
 
· The Audit Committee Report does not appropriately address matters
communicated by us to the Audit Committee. 
 
Under the Companies Act 2006 we are required to report to you if, in our
opinion: 
 
· Adequate accounting records have not been kept by the parent company, or
returns adequate for our audit have not been received from branches not
visited by us or 
 
· The parent company financial statements and the part of the Directors'
Remuneration Report to be audited are not in agreement with the accounting
records and returns or 
 
· Certain disclosures of Directors' remuneration specified by law are not made
or 
 
· We have not received all the information and explanations we require for our
audit 
 
Under the Listing Rules we are required to review: 
 
· The Directors' statements, in relation to going concern and longer-term
viability and 
 
· The part of the Corporate Governance Statement relating to the Company's
compliance with the eleven provisions of the 2014 UK Corporate Governance Code
specified for our review 
 
We have nothing to report in respect of the above responsibilities. 
 
Scope and responsibilities 
 
As explained more fully in the Directors' Responsibilities Statement , the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. A description of the
scope of an audit of financial statements is provided on the Financial
Reporting Council's website at www.frc.org.uk/auditscopeukprivate. This report
is made solely to the Company's members as a body and is subject to important
explanations and disclaimers regarding our responsibilities, published on our
website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into
this report as if set out in full and should be read to provide an
understanding of the purpose of this report, the work we have undertaken and
the basis of our opinions. 
 
Mark Summerfield (Senior Statutory Auditor) 
 
for and on behalf of KPMG LLP, Statutory Auditor 
 
Chartered Accountants 
 
15 Canada Square 
 
London 
 
E14 5GL 
 
2 March 2016 
 
This information is provided by RNS
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