INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GKN PLC
Report on the Group financial statements Our opinion
In our opinion, GKN plc’s Group financial statements (the ‘financial statements’): • give a true and fair view of the state of the Group’s affairs as at 31 December 2015 and of its profit and cash flows for the year then ended; • have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.
What we have audited
The financial statements, included within the annual report and accounts (the ‘Annual Report’), comprise: • the Consolidated balance sheet as at 31 December 2015; • the Consolidated income statement and Consolidated statement of comprehensive income for the year then ended; • the Consolidated cash flow statement for the year then ended; • the Consolidated statement of changes in equity for the year then ended; and • the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information. Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited. The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the European Union.
Our audit approach Context
As a result of the acquisition of Fokker Technologies Group B.V. (‘Fokker’) in late 2015 we have included an additional area of focus in relation to the opening balance sheet accounting. The remaining areas we considered were consistent with the 2014 audit.
• Overall Group materiality: £18 million (2014: £22 million) represents 5% of profit before tax, adjusted for the change in fair value of derivative and other financial instruments.
Area of focus
• Following our assessment of the risks of material misstatement of the Group financial statements we performed audits of the complete financial information of 54 reporting units (2014: 56 reporting units), and specific audit procedures in a further 32 reporting units (2014: 24 reporting units) and at one large joint venture in China. • In addition, the Company and certain centralised functions, including those covering post-employment obligations, derivative financial instruments, UK and corporate taxation, goodwill and intangible asset impairment assessments were audited. • The components on which audits of the complete financial information and centralised work was performed accounted for 70% of Group revenue. • As part of our supervision process, the Group engagement team visited all significant components and a number of other component auditors in multiple locations in the Netherlands and the USA, as well as being responsible for all in scope UK reporting locations. Our assessment of the risk of material misstatement also informed our views on the areas of particular focus for our work which are listed below: • Assessment of the carrying value of the intangible and tangible assets relating to the A350 programme at Western Approach. • Risk of fraud in revenue recognition. • Assessment of the carrying value of goodwill and other relevant assets. • Assessment of the accounting position adopted on complex contractual obligations. • Assessment of the accounting position adopted on the opening balance sheet accounting for the Fokker acquisition.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).
GKN plc Annual Report and Accounts 2015