FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
Key audit matter
How our audit addressed the key audit matter
Recoverability of the Company’s investments in Group undertakings (Company) Refer to Group Audit Committee Report, Company accounting policy 1.4 Investments in Group undertakings and note 2 to the Company’s financial statements – Investments in Group undertakings. The carrying amount of the Company’s investments in Group We performed the following audit procedures related to the recoverability of the Company’s investments in Group undertakings:
undertakings is significant and in excess of the market capitalisation of the Group. This gives rise to an indicator of impairment. The estimated recoverable amount of these balances is subjective due to the inherent uncertainty in forecasting trading conditions and discounting future cash flows. The effect of these matters is that, as part of our risk assessment, we determined that the carrying value of the cost of investment in subsidiaries has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole.
• Assessed the reasonableness and appropriateness of the assumptions used in the cash flows based on our knowledge of the Group and the markets in which the subsidiaries operate; • Assessed the reasonableness of the budgets by considering the historical accuracy of the previous forecasts; • Evaluated the current level of trading, including identifying any indications of a downturn in activity, by examining the post year end management accounts and considering our knowledge of the Group and the market; • Reviewed the methodology used in determining the discount rate applied, including engaging our valuation experts to assess the
appropriateness of the inputs into the discount rate; and • Assessed the adequacy of the Company’s disclosures.
Based on the work performed and the evidence obtained, we consider the carrying amount of the Company’s investments in Group undertakings to be appropriate.
Howwe tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate. Decisions regarding scoping require a significant degree of professional judgement based on quantitative and qualitative considerations, including the size and nature of business activities in each operating entity. The Group is predominantly based in the United Kingdom and writes business across four main product lines, being Defined Benefit risk transfers, Individual Annuities, Lifetime Mortgages and Long-term Care Plans. The Group consists of the Parent Company, Just Group plc, and a number subsidiary companies, of which the most significant are Just Retirement Limited and Partnership Life Assurance Company Limited, which conduct substantially all the insurance business on behalf of the Group. We have determined three components which were subject to full scope audits. This included Just Group plc, Just Retirement Limited and Partnership Life Assurance Company Limited. In addition, we performed a limited scope audit covering specific financial statement line items for a further three components. For the residual components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatements. Our scoping resulted in 92% coverage of consolidated Total assets, 99% coverage of consolidated Total liabilities and 85% coverage of consolidated Loss before tax. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group
Financial statements – Company
Overall materiality Howwe determined it Rationale for benchmark applied
£24,400,000 (2020: £24,900,000).
£12,574,000 (2020: £13,000,000).
1% of Total equity
1% of Total equity
Based on the benchmarks used in the Annual Report, we consider total equity to be the most appropriate benchmark for our materiality. It represents the residual interest that can be ascribed to shareholders after policyholder assets and corresponding liabilities have been accounted for and is aligned to the primary focus of the business and users of the financial statements, being the capital position of the Group. We compared our materiality against other relevant benchmarks, such as total assets, total revenue, and profit or loss before tax to ensure the materiality selected was appropriate for our audit.
In determining our materiality, we considered financial metrics which we believed to be relevant and concluded that total equity was the most appropriate benchmark. The primary use of the financial statements is to determine the entity’s ability to pay dividends and the users will therefore be focussed on distributable reserves, a balance captured using a total equity benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £4.8 million and £16.3 million.
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