NATS-Annual-Report-2015

Annual Report and Accounts 2015 | NATS Holdings Limited
Governance
81
Independent auditor’s report to the
members of NATS Holdings Limited
(continued)
Our assessment of risks of
material misstatement and
overview of the scope of
our audit
Risk
Our audit approach was developed by obtaining an understanding of the group’s activities, assessing
each component within the group and considering the overall control environment. We carried out full
scope audits on all significant components which covered 100% of the group’s revenue. We performed
limited procedures on the remaining components. Based on this understanding we assessed those
aspects of the group’s transactions and balances which were most likely to give rise to a material
misstatement. Below are those risks which we considered to have the greatest impact on our audit
strategy and our audit response:
How the scope of our audit responded
to the risk
Revenue recognition and the recoverability
of the regulatory assets:
The group generates revenue in relation to Airspace,
Airports, Engineering and Other services.
In determining the revenues recognised, management
makes key judgements about material revenue
adjustments that are recoverable in subsequent
accounting periods.
Pension scheme valuation:
The NATS Holdings Limited group operates a defined
benefit pension scheme, which is accounted for in
accordance with IAS 19 ‘Employee Benefits’ which
require complex calculations and disclosures.
Management make a number of judgements and
actuarial assumptions which have a significant impact
on the valuation of pension scheme assets and liabilities
and hence on the amounts shown in the consolidated
income statement and the consolidated statement of
comprehensive income.
This includes assessment in respect of recognition
of any retirement benefit asset under IAS 19.
We have reviewed each significant revenue stream to ensure it is appropriately
accounted for, and that we concur with the accounting policies applied.
We have reviewed and tested each of the revenue streams to ensure that the
revenue is being recognised in line with the group policy and in the case of NATS
Airspace to ensure that it is in line with the provisions of the air traffic services
licence, the regulatory charging mechanisms for the reference period and the
RP2 settlement.
We have specifically considered and challenged management over the
recoverability of the accrued income which at year end is split into four main
categories; Eurocontrol accrued income for March 2015; the risk sharing revenue
recognised due to low traffic volumes; the allowed inflationary adjustments; and the
unrecovered balance remaining from prior periods.
We have also reviewed individual judgements including the discount rate applied
to revenue adjustments.
We have reviewed the accounting treatment and disclosures and considered them
in light of the assumptions made under the most recent triennial valuation.
We have worked with our pension specialists to assess the validity of assumptions
applied, and performed a detailed review of the scheme actuary’s annual update
valuation report in conjunction with additional procedures.
In addition, we have performed audit procedures in order to substantiate the value
of the scheme assets. This included selecting a sample of investments held at the
balance sheet date and comparing their value to available market data.
Governance