Ferguson plc Annual Report and Accounts 2020
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Independent auditor’s report to the members of Ferguson plc
Report on the audit of the financial statements Opinion In our opinion: – the financial statements of Ferguson plc (the ‘Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the Company’s affairs as at July 31, 2020 and of the Group’s profit for the year then ended; – the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; – the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”; and – the financial statements have been prepared in accordance with the requirements of Companies (Jersey) Law, 1991. We have audited the financial statements which comprise: – the Group and Company income statements; – the Group statement of comprehensive income; – the Group and Company statements of changes in equity; – the Group and Company balance sheets; – the Group cash flow statement; – the notes to the consolidated financial statements 1 to 30; and – the notes to the Company’s financial statements 1 to 15. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non audit services provided to the Group and Company for the year are disclosed in note 4 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Company. While the Company is not a public interest entity subject to European Regulation 537/2014, the Directors have decided that the Company should follow the same requirements as if that Regulation applied to the Company. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Summary of our audit approach Key audit matters
The key audit matters that we identified in the current year were: – Valuation and existence of inventory; – Revenue recognition; and – First year adoption and reporting of IFRS 16
Materiality
The materiality that we used for the Group financial statements was $55 million which was determined on the basis of approximately 5% of profit before tax.
Scoping
We have performed a full scope audit at one component, being the USA, and on the consolidation process. We have performed audits of certain specified account balances at two components, Canada and UK and in two head office companies. Our components within the scope of our audit represent 100% of the Group’s revenue, 98% of the Group’s profit before tax and 99% of the Group’s net assets.
Significant changes in our approach
Our approach is consistent with previous year with the exception of: – a change in the level at which we set materiality, to be 5% of forecast profit before tax, whereas in the prior year it was determined to be approximately 5% of profit before tax excluding exceptional items and impairment of interests in associates; – a change in the scope of our audit work in the UK from a full-scope audit to an audit of certain specified account balances due to a reduction in the scale and significance of the UK business to the Group in the current year; – appropriateness of supplier rebates is no longer a key audit matter as the Group has further improved its estimation methodology in the current year and we no longer consider the accrual for tiered rebates to be overly prudent, reducing the level of required audit procedures; – inventory remains a key audit matter but it has been expanded to capture all of our procedures over valuation and existence in the current year, given the extent of our audit work in that area. It was previously just focused on the provision for slow-moving and obsolete inventory; – our audit of revenue has become a more significant area of audit focus in the current year as a result of our reduced materiality level, our evaluation of the design and implementation of controls and increased levels of substantive testing; and – the first year adoption and disclosure of IFRS 16 has required a significant level of audit effort auditing the initial adoption assumptions and the first year of reporting under this new standard.
Conclusions relating to going concern, principal risks and viability statement Going concern We have reviewed the Directors’ statement in Note 1 to the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements. We considered as part of our risk assessment the nature of the Group, its business model and related risks including where relevant the impact of the COVID-19 pandemic and Brexit, the requirements of the applicable financial reporting framework and the system of internal control. We evaluated the Directors’ assessment of the Group’s ability to continue as a going concern, including challenging the underlying data and key assumptions used to make the assessment, and evaluated the Directors’ plans for future actions in relation to their going concern assessment. We are required to state whether we have anything material to add or draw attention to in relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in the audit. We confirm that we have nothing material to report, add or draw attention to in respect of these matters.
