Given that the Group continues to make significant investment in acquisitions, accounting for business combinations is an area of focus due to the level of judgement involved.

Business combinations can involve judgements in relation to the value of assets and liabilities that are recognized on acquisition, particularly the allocation of purchase consideration to goodwill and separately identified intangible assets. Any misstatement made in the identification and/or valuation of acquired intangibles gives rise to an equal, compensating misstatement in goodwill.

Management relies on external valuation specialists to value significant intangibles acquired in business combinations. Where management has relied on such specialists, we assessed their independence and competency and tested the results of their work and found no material issues.

We used our own valuation experts to challenge the methodology and key assumptions used in determining the value of the customer relationships assets for the more significant acquisitions. We determined that the cash flows applied within the valuation models and the key assumptions such as the discount rates, growth rates, customer attrition and period for amortization, were appropriate.

The Group has defined benefits pension schemes (with material schemes in the US and the UK) with a net deficit of £84.1m at the current year end (2015: £40.0m), which is material in the context of the Consolidated balance sheet.

Management estimation is required in relation to the measurement of pension scheme obligations, and management employs independent actuarial experts to assist it in determining appropriate assumptions such as inflation levels, discount rates, salary increases and mortality rates.

Movements in these assumptions can have a material impact on the determination of the liability and, therefore, the extent of any surplus or deficit.

We used our own actuarial experts to satisfy ourselves that the assumptions used in calculating the US and UK pension scheme liabilities are appropriate, including confirming that salary increases and mortality rate assumptions were consistent with relevant national and industry benchmarks. We determined that the discount and inflation rates used in the valuation of the pension scheme liabilities were consistent with our internally developed benchmarks and, where available, with those disclosed in the published financial statements of other companies as at 31 December 2016. In each case we considered the assumptions made by management to be reasonable in light of the available evidence.

The Group has material goodwill balances of £1,191.5m (2015: £999.3m) and customer relationships intangible assets of £737.7m (2015: £632.7m) spread across multiple geographies and relating to multiple cash generating units (‘CGUs’).

In assessing whether the carrying amount of these assets has been impaired, management considers forecast cash flows of the individual CGUs which are identified on a market sector or geographical basis.

We focused on the CGUs with the highest goodwill and customer relationships intangible assets (the most material being North America, Rest of Continental Europe and France) as well as the CGUs where there were smaller goodwill and customer relationships intangible asset balances but lower levels of headroom. Management’s impairment assessment involves significant estimation, principally relating to short and long term revenue growth, future profitability and discount rates.

Due to the acquisitive nature of the Group and the magnitude of the aggregated related goodwill and customer relationships intangible assets, together with the subjectivity of the principal assumptions, a significant amount of audit effort was required, particularly as some of these assumptions are dependent on economic factors and trading conditions specific to overseas territories.

In our testing of management’s annual goodwill and customer relationships intangible assets impairment calculations, we used valuation experts to assist our evaluation of the key assumptions used by management.

We evaluated the reasonableness of the directors’ cash flow forecasts by comparing the assumptions made to internal and external data.

In particular:

• we compared short term revenue growth rates to the latest strategic plans and found them to be consistent;

• we determined that long term growth rates are generally consistent when compared to third party nominal GDP rates;

• we found the achievability of future margins to be plausible based on past and current performance and consistent with budgets;

• we challenged the discount rate used to determine the present value by assessing the cost of capital for the Company and comparable organizations and considered them to be reasonable; and

• we evaluated the reduction in the number of CGUs and reviewed the results of management’s ‘gateway’ test, being the impairment review performed under the previous CGU definitions and noted no indicators of impairment.

Furthermore, we obtained evidence to assess adequate historical accuracy in management’s forecasting process.

As described in Note 9 to the consolidated financial statements, management concluded that, based on their own sensitivity calculations, no reasonable change in assumptions would lead to an impairment of goodwill or other intangible assets.

Having ascertained the extent of changes in key assumptions either individually or collectively that would be required for goodwill and other intangible assets to be materially impaired, we considered such a change in those key assumptions to be unlikely.

We focused on this area as purchase volume based rebate income from suppliers is material to the consolidated financial statements.

Given a degree of estimation is involved in accounting for purchase volume based supplier rebates, we focused our audit procedures on the accuracy, occurrence and cut-off of these transactions and the valuation of amounts held on the balance sheet.

We evaluated the processes in place across the Group for the recognition of purchase volume based supplier rebates and found these to be consistently applied. We agreed the nature of a sample of rebate arrangements to contracts or other supporting agreements and agreed the rates indicated in the agreements with those used in the calculations. We also re-performed a sample of rebate calculations and assessed management’s estimates of purchases.

No material exceptions were noted from this testing.

Where appropriate, we also agreed the post year end settlement of year end receivable amounts included in the opening and closing Consolidated balance sheets to bank receipts, with no material exceptions noted.

The Group operates in a number of international territories with complex taxation rules and regulations. The interpretation of these complex regulations and the unknown future outcome of pending judgements by the tax authorities result in the need to provide against a number of uncertain tax positions.

We focused on this area because of the risk surrounding the level of estimation and judgement that is necessary in determining the provisions required, together with the importance of achieving adequate and clear disclosure related to judgmental tax matters.

We discussed with management their assessment of uncertain tax positions and used our taxation specialists to assist us in challenging the appropriateness of management’s judgements in relation to these positions. These procedures assisted in our corroboration of management’s position on the amount of significant tax exposures and the provisions and disclosures made in the financial statements.

In assessing the adequacy of the tax provisions, we also considered factors such as possible penalties and interest. Furthermore, we determined that the calculations were in line with the accounting standards and that the methodology and principles had been applied consistently.

We consider the current level of tax provision to be reasonable.